The rent gouging and lack of affordable housing near Universities is indeed a huge problem that brings an enormous additional cost to students as well as those working at Universities who don't have tenure or high salaries. Thanks for bringing this to attention
This is a super interesting post. Would be really interesting to see the extent to which the private housing costs exceed the cost of campus living, and to what extent this reflects markups, or differences in amenities. Consistent with this post, my university has seen an explosion in this kind of housing near campus, largely as a result of massive enrollment increases and modest expansion of university-run housing. But its not clear to me whether the high rents charged reflect higher amenity values, or students' lack of better nearby options.
Thanks for the comment, David. Actually, on-campus housing can sometimes be more expensive than private housing. This is due to the fact that dorms provide other services, like RA, and also because on-campus housing only generates 9 months of rent (vs. 12 months in off-campus market). So, many on-campus housing needs to charge a higher rent to maintain basic operation. This is also a big reason that drives students to go to the private market.
I would say that the high rents in PBSA reflect both amenities values and an undersupplied housing market. The supply-demand gap further incentives developers to add rich amenities, since they don't need to worry about vacancies.
This is a good point. Not sure we have the numbers, but it would be interesting to see of we could find some kind of correlation between rising on-campus housing prices and these. I do know that even on-campus housing has been changing in recent years to reflect tastes of students (fewer triple or even double rooms). These aren't the brink boxes of yesteryear.
The points made in the original article you provided via Shanshan are very interesting. The very rapid in-person enrollment growth at Purdue since 2013 also fits as an example. As David alluded to in his comment, Purdue has also seen numerous furnished off-campus apartments built to try offset the massive enrollment growth, which has not been simultaneously met with the necessary level of on-campus university-owned dorms. Even with the massive increase in apartment beds (which is still happening with ongoing private construction), the rapid enrollment growth has indeed resulted in dorm rooms that were meant as singles and doubles being turned into doubles and triples.
The rent gouging and lack of affordable housing near Universities is indeed a huge problem that brings an enormous additional cost to students as well as those working at Universities who don't have tenure or high salaries. Thanks for bringing this to attention
While I appreciate the research that went into this piece, it seems that the trends you describe are downstream of the NIMBYism that pervades college towns everywhere (including Chapel Hill, where I live). It might be hard to suss this out, but my sense is that residents of college towns used to have a symbiotic relationship with students, as residents either worked at the university, rented property to students, or ran businesses that relied on student spending. Now, many college towns are inhabited by rich alumni who have no direct relationship with the university, and see students as a net negative. Hence, NIMBYism and the deforming of the housing market such that the only thing that is (politically) possible to build are the high-end student-focused apartments discussed in your piece.
"trends you describe are downstream of the NIMBYism..." Yes, 100%. Pretty much every other week I post some story from a college town where there are fights between locals and some dorm project. Even a couple weeks ago, I saw one where the town would not permit ADUs because of "density." Meanwhile, it was 2 blocks from a 30K student university: https://www.collegetowns.org/p/anthony-bourdain-hotel-burns-sad. So yes, just like in the broader housing market, big business is simply taking advantage of the environment NIMBYism creates.
I do think 2 issues are happening: 1) colleges have been growing, creating more friction in the town they inhabit. 2) towns themselves have become wealthier, as you mention. I will cover the second one eventually with a full article. That being said, there has long been some town vs. gown tension between universities and locals. I almost named the Substack Town and Gown actually!
I appreciated this piece. An observation, and a question.
1) I am a commercial real estate dr eloped by day. A higher cap rate for student rental (compared to multi family) suggests an overall lower willingness to invest. (Lower cap rates are good for your sale price; higher cap rates mean more cash flow). I can hazard a guess which is that it’s either still seen as novel/risky, or there is a greater concern over depreciation/obsolescence given the student population.
2) Without endorsing this particular development/investor approach, if there is a major enrollment increase, how would we build enough housing? In particular, large amounts of upfront capital are required, and public funds are specifically in short supply. I’m wondering if there is a viable, smaller scale more distributed student housing growth model?
Hi Seth, thanks for reading! 1) The issue is that there is a massive haves vs have nots in terms of student enrollment. The places covered in the piece are flagship state universities, which are the exact kind of places that are bursting at the seams in terms of enrollment. So there are still risks, certainly, but even with the enrollment cliff coming, many of those places still have positive outlooks versus smaller/ regional/liberal arts colleges.
2) I think the major issue is one that we are seeing in the regular non-student housing market: there are fewer smaller developers and projects are often massive. This sort of goes against a Strong Towns approach, which I generally subscribe to. Now, part of that reason is so much regulation, red tape, and other issues mean that only the larger developers can even play the game. Ideally, the model has a broad range of players rather than one standard. We have been moving towards one, and that means projects are massive and expensive.
Curious how you view these trends as a developer yourself.
The rent gouging and lack of affordable housing near Universities is indeed a huge problem that brings an enormous additional cost to students as well as those working at Universities who don't have tenure or high salaries. Thanks for bringing this to attention
Thank you! Great topic from our guest writer this week. It is tough for a lot of people within each college community.
This is a super interesting post. Would be really interesting to see the extent to which the private housing costs exceed the cost of campus living, and to what extent this reflects markups, or differences in amenities. Consistent with this post, my university has seen an explosion in this kind of housing near campus, largely as a result of massive enrollment increases and modest expansion of university-run housing. But its not clear to me whether the high rents charged reflect higher amenity values, or students' lack of better nearby options.
Thanks for the comment, David. Actually, on-campus housing can sometimes be more expensive than private housing. This is due to the fact that dorms provide other services, like RA, and also because on-campus housing only generates 9 months of rent (vs. 12 months in off-campus market). So, many on-campus housing needs to charge a higher rent to maintain basic operation. This is also a big reason that drives students to go to the private market.
I would say that the high rents in PBSA reflect both amenities values and an undersupplied housing market. The supply-demand gap further incentives developers to add rich amenities, since they don't need to worry about vacancies.
This is a good point. Not sure we have the numbers, but it would be interesting to see of we could find some kind of correlation between rising on-campus housing prices and these. I do know that even on-campus housing has been changing in recent years to reflect tastes of students (fewer triple or even double rooms). These aren't the brink boxes of yesteryear.
The points made in the original article you provided via Shanshan are very interesting. The very rapid in-person enrollment growth at Purdue since 2013 also fits as an example. As David alluded to in his comment, Purdue has also seen numerous furnished off-campus apartments built to try offset the massive enrollment growth, which has not been simultaneously met with the necessary level of on-campus university-owned dorms. Even with the massive increase in apartment beds (which is still happening with ongoing private construction), the rapid enrollment growth has indeed resulted in dorm rooms that were meant as singles and doubles being turned into doubles and triples.
I guess I was more meaning new dorms rather than tossing an extra bed in old dorms. Certainly what the private companies are offering is private space, even if very tiny. That is certainly preferable now to old dorm models. An example and floor plan: https://vervewestlafayette.com/facing-the-challenges-of-on-campus-housing-at-purdue/
The rent gouging and lack of affordable housing near Universities is indeed a huge problem that brings an enormous additional cost to students as well as those working at Universities who don't have tenure or high salaries. Thanks for bringing this to attention
While I appreciate the research that went into this piece, it seems that the trends you describe are downstream of the NIMBYism that pervades college towns everywhere (including Chapel Hill, where I live). It might be hard to suss this out, but my sense is that residents of college towns used to have a symbiotic relationship with students, as residents either worked at the university, rented property to students, or ran businesses that relied on student spending. Now, many college towns are inhabited by rich alumni who have no direct relationship with the university, and see students as a net negative. Hence, NIMBYism and the deforming of the housing market such that the only thing that is (politically) possible to build are the high-end student-focused apartments discussed in your piece.
"trends you describe are downstream of the NIMBYism..." Yes, 100%. Pretty much every other week I post some story from a college town where there are fights between locals and some dorm project. Even a couple weeks ago, I saw one where the town would not permit ADUs because of "density." Meanwhile, it was 2 blocks from a 30K student university: https://www.collegetowns.org/p/anthony-bourdain-hotel-burns-sad. So yes, just like in the broader housing market, big business is simply taking advantage of the environment NIMBYism creates.
I do think 2 issues are happening: 1) colleges have been growing, creating more friction in the town they inhabit. 2) towns themselves have become wealthier, as you mention. I will cover the second one eventually with a full article. That being said, there has long been some town vs. gown tension between universities and locals. I almost named the Substack Town and Gown actually!
Nice work on this piece…
We've got some great guest authors here on College Towns!
I appreciated this piece. An observation, and a question.
1) I am a commercial real estate dr eloped by day. A higher cap rate for student rental (compared to multi family) suggests an overall lower willingness to invest. (Lower cap rates are good for your sale price; higher cap rates mean more cash flow). I can hazard a guess which is that it’s either still seen as novel/risky, or there is a greater concern over depreciation/obsolescence given the student population.
2) Without endorsing this particular development/investor approach, if there is a major enrollment increase, how would we build enough housing? In particular, large amounts of upfront capital are required, and public funds are specifically in short supply. I’m wondering if there is a viable, smaller scale more distributed student housing growth model?
Hi Seth, thanks for reading! 1) The issue is that there is a massive haves vs have nots in terms of student enrollment. The places covered in the piece are flagship state universities, which are the exact kind of places that are bursting at the seams in terms of enrollment. So there are still risks, certainly, but even with the enrollment cliff coming, many of those places still have positive outlooks versus smaller/ regional/liberal arts colleges.
2) I think the major issue is one that we are seeing in the regular non-student housing market: there are fewer smaller developers and projects are often massive. This sort of goes against a Strong Towns approach, which I generally subscribe to. Now, part of that reason is so much regulation, red tape, and other issues mean that only the larger developers can even play the game. Ideally, the model has a broad range of players rather than one standard. We have been moving towards one, and that means projects are massive and expensive.
Curious how you view these trends as a developer yourself.
So interesting.