Hey Chris, I think I saw your posts about this over on SkyscraperPage. Such a thing has been proposed before (a downtown residence), but contrary to the opinions of Mac "outsiders" (har har) that believe the students want this and Mac is somehow standing in the way, I've gotta tell you - they probably don't. Given the option to live on campus or in Westdale, most really wouldn't prefer to live farther away in downtown.
I know the people on that forum are urban-life evangelists, but sometimes reality just sort of has to be applied. First off, if such a downtown residence was going to happen, it'd never go over well with first years - they overwhelmingly want to be on campus for the convenience and all the amenities. So, even if it was geared towards upper years, it's probably not going to be cheaper than other options. If a building like the Terraces on King was actually bought and run by the university, they'd likely be charging at least the same sort of rates for it as they do for the suite-style residence on campus (Keyes), which is by far the most expensive (see here:
http://housing.mcmaster.ca/Residence...ions/Fees.html). If it was privately owned, perhaps the prices would be more competitive, but can it beat the typical $400 a month for a room in a student house in Westdale?
I think it all comes down to the fact that a downtown residence may be close to everything you need to live, but it just isn't close enough to campus to win students over. If the LRT ever gets built that equation may change, but that'd have to be reevaluated in a few years' time. On top of that, there's a pretty big sense amongst students (deserved or not) that downtown is pretty sketchy, so while it would serve the purposes of those pushing for urban renewal, I get the sense that it really wouldn't serve students all that well.