Akademiska Hus has long been a thorn in the side of many in the higher education sector. While universities and colleges are running large deficits, the state-owned real estate company is making billions in profits that are sent back to the state.
Akademiska Hus the dominant real estate company
Almost the entire state holding of university properties is collected in the company Akademiska Hus. Akademiska Hus is located in 15 locations and accounts for approximately 60 percent of the university's premises supply. In some locations, Akademiska Hus owns in principle all university properties, while in other locations they are one of several different landlords. However, several universities do not have any premises at all from Akademiska Hus, for example:
- Dalarna University
- Halmstad University
- Kristianstad University
- Mid Sweden University
- Mälardalen University
- Linnaeus University
- Jönköping University
- With several…
Akademiska Hus is not the only state-owned landlord that rents to the higher education sector, but it clearly dominates the market. The Swedish Property Board rents premises to eight higher education institutions, at a total cost of SEK 163,184,000 in 2024. This corresponds to just under 1,4 percent of the higher education institutions' premises costs.
Akademiska Hus rent setting and yield
So what about Akademiska Hus' profits?
This is largely influenced by the required rate of return determined by the owner, i.e. the state. Akademiska Hus has a target of 6 percent return on operating capital over a business cycle. Operating capital refers to the company's total assets minus cash and cash equivalents and financial assets. However, operating capital is sensitive to changes in the value of the properties, for example linked to changes in interest rates, which means that it can vary over time in a way that does not always reflect changes in operating costs or income.
However, there are other measures of return. The direct return refers to the operating surplus as a percentage of the total market value, excluding buildings under construction and expansion reserves. The operating surplus is in turn a measure of the difference between revenues and operating costs.
| Market value of properties | Rental income | Operating surplus | Direct return | Return on operating capital € | Utdelning | |
| 2022 | SEK 115.371 million | SEK 6.845 million | SEK 5.143 million | 4,8% | 6,3 | SEK 2.905 million |
| 2023 | SEK 114.600 million | SEK 7.511 million | SEK 5.336 million | 4,9% | 1,7 | SEK 2.218 million |
| 2024 | SEK 114.883 million | SEK 7.860 million | SEK 5.856 million | 5,4% | 3,8 | SEK 2.473 million |
Table 1: Academic House financial results 2022-2024
The rent is intended to function in a market-based manner. It is questionable whether Akademiska Hus is really operating in a normal and well-functioning market; it is difficult for higher education institutions to move even if rents are increased. The supply of suitable premises may be very limited in the immediate area and it is not always practical or politically possible to move the entire operation to another location. However, this is not unique to Akademiska Hus, but also applies to higher education institutions that rent from other property owners.
But price is only part of the equation. High premises costs only become a problem if they are not covered by the grants universities receive from the state via the state budget.
Price and salary conversion and premises costs
The price and salary increase in the state budget is intended to compensate higher education institutions and other authorities for increased costs. The increase basically consists of three parts: Salary costs, other administrative costs, and premises costs.
Wage index is common to all authorities and is based on the cost trend for white-collar workers in the manufacturing industry (labor cost index) minus a productivity deduction.
Index for other management costs follows the consumer price index (CPI).
Local cost index however, differs between different authorities. The conversion rate for premises costs is used in cases where authorities do not have leases that can be renegotiated during the current budget year. For authorities with leases that can be renegotiated, appropriation-specific conversion rates are used. The conversion rates are calculated by Financial Management AgencyFor universities and colleges, a common weighted conversion figure is reported, which is shown in the table below.
| For fiscal year | Weighted conversion rate for university and college premises costs |
| 2023 | 5,57% |
| 2024 | 9,41% |
| 2025 | 7,88% |
| 2026 | 2,45% |
Table 2: Weighted conversion rate for higher education institutions' premises costs 2023-2056. Cost increases were unusually high in 2023–2025 due to high inflation (ESV) and this is therefore reflected in the conversion rate.
Within the price and wage conversion there is a productivity deduction, which gives rise to a comprehensive depletion of university resources. This deduction only affects the wage index. Neither the premises cost index nor the index for other administrative costs is covered by the productivity deduction.
The higher education sector is thus compensated when premises costs increase (at least in theory, although it is not entirely simple to verify).
The increase is weighted together into an index based on the proportion of the authorities' expenses that are used for each cost. An authority that, for example, has high personnel costs and low premises costs will receive an increase where the salary index has a greater impact than the rent index.
However, for the higher education sector, a separate higher education index is calculated, which means that the allocations are increased by the same percentage for all higher education institutions. This means that the increase can be “wrong” for two reasons:
- Higher education institutions that experience larger percentage rent increases may be at a disadvantage, as the increase is based on an average rent increase for the entire sector.
- Higher education institutions that have relatively high premises costs as a proportion of total costs are disadvantaged. The rent index is significantly higher than the salary index, but the weighting is the same for all higher education institutions.
The fact that certain higher education institutions are disadvantaged certainly means that other higher education institutions are advantaged – namely those higher education institutions that have smaller percentage rent increases and a lower proportion of premises costs.
Higher education institutions' premises costs as a share of total costs
Over time, the share of premises costs in the total costs of higher education institutions has decreased. The same applies if you only look at total costs and premises costs for education. This is not necessarily because premises have become cheaper or because higher education institutions are more space-efficient – rather, it can probably be interpreted as other costs, especially personnel costs, having increased faster.
| Education, the kingdom | 2004 | 2023 |
| Total cost | 19 443 572 | 33 994 276 |
| Premises cost | 3 259 005 | 5 324 787 |
| Share of premises costs | 16,8% | 15,7% (–1,1) |
Table 3: Higher education institutions' costs for education at the undergraduate and postgraduate levels in 2004 and 2023.
| The whole business, the kingdom | 1999 | 2023 |
| Total cost | 34 042 256 | 89 037 486 |
| Premises cost | 4 732 575 | 11 365 671 |
| Share of premises costs | 13,9% | 12,8% (–1,1) |
Table 4: Higher education institutions' costs including both education and research in 2004 and 2023.
What would happen if the rent was changed?
There are often demands that Akademiska Hus change its rent-setting model and that the profit requirement be abolished. This is something that SFS also supports. However, there is rarely any discussion of how this would affect the system as a whole, and not least the higher education institutions that have other landlords.
If the rent setting changes for the higher education institutions that rent from Akademiska Hus, in the form of rents being pushed down in the long term, this will have an impact on the indexation for all higher education institutions. The indexation is linked to the rent increases. In other words, if rents were to decrease, the allocation increase in the higher education index would have been lower. However, other commercial landlords, who account for approximately 40 percent of the university's premises supply, would still have the same profit requirements as today. For the higher education institutions that do not rent from Akademiska Hus, the rent increases would thus continue according to the same market principles as before, but the allocation increase would be lower. These higher education institutions would be the losers.
Two wrongs don't make a right. The most appropriate thing would probably be to both review Akademiska Hus's rent-setting model and adjust the principles for the allocation calculation so that they better correspond to each university's actual costs. However, only addressing rent-setting without reviewing the allocation calculation would have an uneven impact across different universities.
Another, perhaps more radical solution, would be to abolish the profit requirement and at the same time collect a larger proportion or all of the university premises within Akademiska Hus. In this way, it would be possible to develop a new model for setting rents that benefits all universities equally. The question is whether such a proposal would be particularly popular with today's critics of Akademiska Hus, or for that matter the other property companies that rent premises to universities and colleges.
What would a new model for calculating funding look like, which compensates for each institution's unique premises costs? That is too big a question for this blog post. The higher education index needs to be the same for all institutions because it is used to calculate the compensation amounts per full-year student and full-year performance. If different institutions were to follow different indices, the compensation per student would therefore vary from institution to institution. That is not necessarily wrong, but it would challenge a fundamental principle of today's resource allocation system. Hopefully, that issue can be the subject of a separate investigation.