An aerial image shows Daisy Hill with the additions of Oswald and Self Halls during the construction process on Wednesday, July 15, 2015.

University of Kansas students living and dining on the KU campus should expect about a 5% increase in prices next year.

While that price increase will be meaningful — it will push the price of KU’s average housing and dining plan to about $11,000 per year — future plans for KU dormitory living may be even more dramatic.

KU’s chief financial officer, Jeff DeWitt, told the Kansas Board of Regents this week that the university has major decisions to make about its housing program. The student housing department is expected to lose about $1.2 million this school year, and is budgeting to lose about $2 million in the next school year.

To add to the complications, KU likely will need to decide soon whether to build a new dormitory, which would cost tens of millions of dollars. DeWitt said he expects answers to start emerging in the next several months on how to efficiently operate housing and dining operations in the future.

“Probably over the summer we will have a plan that says where do we need to build, what are we going to tear down, how are we going to maintain it, and what type of rates do we need to have to keep it affordable,” DeWitt said.

The problem in housing is not a lack of people wanting to live on the KU campus. Numbers presented to the Regents on Wednesday showed KU has a nearly 97% occupancy rate in its dormitories this school year, and expects to have a 98% occupancy rate next school year. As the Journal-World reported in August, KU is leasing apartments at three off-campus locations to house students who are part of the largest freshman class in KU history.

While KU is making money off of the large freshman class through tuition and other such fees, that’s not the case with student housing. The lease rates that KU is paying for off-campus housing are hurting KU’s ability to run the housing division profitably.

That is one of the big reasons why KU is considering whether it needs to build a new dormitory. Increasing maintenance costs on old dormitory buildings also have KU wondering whether a new dormitory building would be more cost effective. KU likely would tear down some aging student housing — the Jayhawker Tower buildings are a strong possibility — if it built a new dormitory.

Taking on debt to build a large dormitory, though, could be risky. While KU’s enrollment increased this school year, that has not been the long-term trend. Nationally, college enrollment also is expected to decline in the coming years as the population of high school-aged students has dropped due to low birth rates during the Great Recession of 2008-2009. Those demographics create a chance that KU could build a new dormitory building and then see a decline in enrollment.

But DeWitt said it is clear that the current situation is not sustainable. KU’s student housing division has reserve funds that allow the division to operate at a loss currently. But by the end of next year, those reserve funds are budgeted to drop to $6.8 million, which is the equivalent of 60 days worth of expenses in the department. Last school year, the division had about $10 million in reserves, equal to about 105 days of expenses. DeWitt said he does not believe it is prudent for the housing reserve funds to drop below a 60-day cushion.

However, simply raising rates enough to make student housing profitable may not be feasible either. DeWitt told Regents it likely would require at least a 10% increase in housing rates for the division to break even. But, that only works if the higher prices don’t drive students away from the dorms and into private housing. DeWitt said KU’s research indicates a 5% price increase is in line with how many private apartments are adjusting their rates. A 10% increase, though, would make KU uncompetitive in several situations.

Such a large rate increase also could have a difficult time winning approval from the Kansas Board of Regents, which is required. It is uncertain whether the 5% rate increase will win approval.

Regents at their meeting on Wednesday expressed concern about not just KU’s planned increases, but increases proposed at the other five Regents universities in the state.

“Where is the tipping point where we truly are getting out of bounds with what is affordable for Kansas families?” Regent Cynthia Lane asked. “Is there any guidance on how we think about that?”

Regents did not take any final action on the proposed rate increases, but rather are scheduled to do so next month. Regents staff members are expected at that meeting to present information on average Kansas incomes and how the room-and-board costs at state universities have grown in comparison with those incomes, among other data.

KU’s proposed increase of 4.9% for its middle-of-the-road dorm and dining package was the second-highest rate increase proposed by the six Regents universities. KU’s total package price of $10,922 for the school year also was the second-highest of the universities. Here’s a look at details for each school and the two-person room rates with a limited dining option plan:

• Wichita State: $11,620, up 2.3%

• KU: $10,922, up 4.9%

• Emporia State: $10,310, up 4.1%

• Kansas State: $10,290, up 4.4%

• Fort Hays State: $9,079, up 3.5%

• Pittsburg State: $8,964, up 6.0%

KU Chancellor Douglas Girod told the Regents he understands the concerns over keeping room-and-board prices affordable, but he also urged the Regents to look widely at the data. For example, the rates above are for just one category of housing and dining plans, which the Regents categorize as a “modest two-person room with limited dining options.” Girod noted that KU does offer lower-cost options through its scholarship halls, which are proposed to start at about $3,200 per year next school year. Some dining halls don’t require a meal plan, and those that do have room-and-board rates that can total about $8,700 for a year.