The university has started looking at options to explore potential development of the site, including purpose-built student accommodation, the letter said.
The building is heritage-listed, making demolition nearly impossible.
The university previously wanted to develop the site by building a multimillion-dollar gateway to the campus above, Te Huanui, made up of “world-class teaching and research facilities surrounded by lively civic spaces”.
But the university is going back to the drawing board due to “a range of factors, including our current financial situation”, the letter said.
It comes after Wellington City Council voted last month to remove the heritage listing of the flats, opening up the option for demolition of the derelict building.
Bishop has signalled support for removing heritage listings, saying the city shouldn’t be a museum.
Victoria University of Wellington Students’ Association president Marcail Parkinson welcomed the university’s new plans.
“I think it’s really exciting to see that the university is conscious that we have a housing crisis in Wellington.”
VUWSA has campaigned for four years on student accommodation being built on the site, she said.
Wellington Central MP Tamatha Paul said there was nothing students needed more than affordable housing.
Paul has long advocated for the site to be turned into student housing and said it would be a “missed opportunity” not to.
“If we want more young people in the city, and if the university wants to get its enrolment numbers back, then the obvious solution is affordable student housing on The Terrace”, she said.
The university’s chief operating officer, Tina Wakefield, said: “We have taken on board positive comments about the potential for student accommodation on the site, and this is one of the options we are considering while we await the minister’s decision”.
Ethan Manera is a multimedia journalist based in Wellington. He joined NZME in 2023 and is interested in politics, local issues, and the public service. Ethan is always on the lookout for a story and can be emailed at ethan.manera@nzme.co.nz or messaged on X (formerly Twitter) @ethanjmanera