The University of Groningen and Hanze University of Applied Sciences have invested at least 1.5 million euros in public funds in housing for students. The question is whether that is allowed. The issue has attracted the attention of the education inspectorate.
The room shortage is increasing rapidly in Groningen in 2015. There are more new students than the housing market can handle. Reason for the municipality to work with the Hanze and RUG to realize additional living spaces in a short time. Local regulations are relaxed and various housing providers are connected through the management company Stichting Student Housing (SSH); four traditional housing associations and a private investor.
The risk lies with the RUG and Hanze
In 2018, some of the parties will meet again when the number of registrations, mainly from foreign students, exceeds the number of available living spaces in Groningen. This time, SSH and the housing cooperatives and Ploeg ID3, another private investor and developer, are joining in. who is developing the Suikerunie site for (too?) much money on behalf of the municipality. The investor can buy 250 residential containers (the Sugar Homes) and place them on the Suikerunie site. The problem is money.
Just like in 2015, a solution is being found for this. SSH again rents an x number of rooms from the housing association for a fixed period. It doesn’t matter whether they are occupied, the housing associations and investors will get the money anyway. The risk with the guarantee lies with the RUG and Hanze. A similar agreement is being made with the party behind the Sugarhomes. If the occupancy rate drops below 67 percent, the RUG and Hanze will step in.
1.5 Million euros
The municipality also helps. The zoning plan for the Suikerunie site will be adjusted so that short-stay living becomes possible and the investor will receive a loan of 6,000 euros through the city hall to purchase the containers. The remainder of the investment for the 250 containers will be completed with a loan from the bank. The RUG and Hanze guarantee the interest and repayment obligations.
The arrangement has worked out well for a long time. No student sleeps on the street, the houses are full, so SSH does not have to rely on the guarantee. But then corona breaks out and foreign students return home en masse. Some complexes have no problems with the occupancy rate, for example the containers on the Suikerunie site have also been rented out during corona times, while others are struggling with vacancy. SSH calls on the guarantee. This will cost the RUG and Hanze at least 1.0 million euros over the two corona years, reports Dagblad van het Noorden on November 11, 2020.
Education Inspectorate
The question is whether this is a legally sound construction. The education inspectorate has announced that it is examining the guarantees of the RUG and Hanze. “The signals are known. We are examining whether there is reason for further investigation,” says Daan Jansen, spokesperson for the education inspectorate. According to Dennis van Tilborg, lawyer specialized in the social domain, open and digital government, educational law and economic administrative law at AKD Advocaten, there is sufficient reason to doubt the legal validity.
The university is generally only allowed to use public money for its core tasks, says Van Tilborg. “The core tasks of a university are education and research. It is only allowed under very strict conditions for public funds to be spent by a university on private activities (such as student housing).”
Public money
Judging from the annual reports published by the RUG over that period, the money comes from public funds. The spokesperson for the RUG confirms this: “We have a certain degree of duty of care for international students. That is why we – like a number of fellow universities and colleges – use a limited part of our public resources.”
According to the lawyer, the RUG and Hanze are thus acting in violation of the conditions laid down by the minister ‘Policy rule on investing public resources in private activities’. “It contains the seven conditions that must be met. This construction does not seem to meet at least three or four of them.”
Doubts about legal validity
The first possible obstacle, Van Tilborg believes, is that the guarantee has no demonstrable added value for the statutory tasks of the educational institutions. “Perhaps the university can substantiate this by pointing out the positive effect that the guarantee has. I have not yet read such substantiation in the annual accounts, but that should be the case.”
The RUG and Hanze see this differently, the spokespersons said in a joint response. “Providing education to international students is part of our core task, and as institutions we have a caring task towards this group of students. We see it as our social mission to (also) help international students with their housing. It is necessary that this target group is also well served, because international student exchanges contribute to our knowledge and regional economy.”
To substantiate this claim, the educational institutions refer to the student housing action plan 2022-2030. “That plan has been signed by the Ministries of BKZ and OCW. It states that, given the special housing needs, international students require (guaranteed) housing immediately upon arrival. The agreements we have with Sugar Homes and SSH are in line with this plan. We therefore see these (possible) costs as costs incurred in the context of our public task.”
Unfair competition
According to Van Tilborg, the other conditions are more difficult to defend. It is therefore important that an investment must not lead to unfair competition. “Some distortion of competition does not seem to me to be ruled out in advance. The entrepreneur has no risk in the investment or in the operation. This way, everyone can and wants to do business.”
The RUG and Hanze also seem to be missing out on the complete transparency that Van Tilborg believes is required for such investments. “The university must be fully transparent about investments with public funds in the management report. Consider the size of the amount, risks, possible changes and what the added value is compared to the statutory core tasks of the educational institutions. The summary passage from the annual report does not meet these transparency requirements.”
The spokespersons for the RUG and Hanze do not elaborate on this point in their response.
Even more doubts
Regardless of the conditions, the lawyer reports that it is also important that the university is an administrative body. ‘Guarantees provided by administrative bodies should (in principle) be regarded as subsidies. This means that the guarantee (if it has been provided by the University itself) must be based on a legal basis. Based on the available information, I cannot assess whether those conditions have been met.”
Finally, Van Tilborg thinks that there may be a scarce subsidy with associated obligations. “It is quite possible that several parties were interested in such a guarantee. In that case, the university was in principle obliged to organize some form of competition before the guarantee was provided. That doesn’t seem to have happened either.”
The RUG and Hanze do not address this in their rebuttal either.