Surge in Student Housing Rents Outpaces Multifamily Rentals

The escalation in rental fees for off-campus purpose-built student housing is surpassing the growth rates of neighboring residential units. At educational institutions already grappling with housing shortages, students are increasingly feeling the financial strain.

Student housing properties situated in close proximity to campuses and tailored to student needs are witnessing substantial year-over-year spikes in rental costs.

The period between November 2022 and May of this year marked the inaugural instance when average rental expenses for purpose-built student housing outpaced those of conventional multifamily housing. Consequently, some students are discovering that apartments designed explicitly for them are now beyond their financial reach.

Recent data from RealPage, a real estate software firm, indicates that student housing rental hikes outstripped those of multifamily housing during this seven-month duration. While student housing rents exhibited an average annual increase of 8.8 percent, multifamily rental costs only rose by 4.5 percent.

This trend appears to align with the return of students to in-person classes following the closures resulting from the COVID-19 pandemic in 2020 and 2021. Following a period of stagnation throughout the pandemic, year-over-year rental escalations for both student and multifamily housing resumed in early 2021. However, while multifamily rental prices surged initially, they have since decelerated noticeably, while student housing rents continue their upward trajectory.

These statistics offer a partial explanation for the tumultuous landscape of student housing leading up to the fall semester of 2023. Some institutions are struggling to secure accommodations for their students mere weeks before classes commence. Measures include urging students to reside in nearby hotels or on neighboring campuses, and in extreme cases, like Middlebury College, offering students incentives to take a semester off in the hope of alleviating housing demand by spring.

RealPage economist Carl Whitaker suggests that rental trends in student housing are essentially mirroring patterns that conventional multifamily real estate experienced several months prior. He anticipates that the divergence between these two markets will balance out by no later than 2025.

Whitaker explains, “What we’re observing in student housing is essentially a delayed version of what occurred in the conventional sector.” Nonetheless, the surge in growth is anomalous for student housing, a sector traditionally regarded as steady and gradual. Whitaker notes that between 2010 and 2020, rents for purpose-built student housing typically increased by only around two percent annually.

Peter Blutreich, involved in partnership facilitation at Rent College Pads, a platform dedicated to aiding students in locating off-campus housing, highlights several factors contributing to elevated rental rates for student housing. The pandemic-induced closures and high material costs resulted in delayed construction of both off-campus and on-campus housing. Consequently, when students returned to campus in 2021 and 2022, their housing options were notably limited. Furthermore, some colleges have expanded their incoming freshman classes beyond pre-pandemic levels, necessitating a greater number of students to seek off-campus living arrangements.