With the fall semester in flux for college students, the ripple effects are far-reaching — for college towns that heavily depend on residents to infuse capital in their downtown storefronts, restaurants and real estate.
In many ways, the off-campus housing market was well equipped to weather the coronavirus pandemic and its aftermath.
“The multi-family market was extremely robust going into [the coronavirus] and student housing has had solid tailwinds. There has been relatively static demand that was predictable — a set number of seats in the university, and so long as the supply doesn’t dramatically change year to year, you can count on getting heads in beds,” UCLA finance and real estate lecturer Paul Habibi told Yahoo Finance.
In addition to teaching students about real estate, Habibi is an investor himself; he owns and manages several properties across the country, including multi-family apartments adjacent to UCLA’s campus, making him a landlord to hundreds of students. The university is located in the affluent West Los Angeles neighborhood of Westwood, nestled in between Bel Air, Beverly Hills, Santa Monica and Brentwood.
“There’s really solid rental value per square foot with housing for students — higher density within each unit, higher propensity to pay rent. You make more on student housing than outside of the student market,” he added.
Habibi gave the example of charging one person or couple $3,000 per month for a two-bedroom unit down the street in Brentwood, whereas he would be able to charge nearly double for an identical unit right next to the university because pricing is per bed.
‘Pre-leasing makes things a bit more steady’
At the start of the coronavirus crisis, cities and states implemented temporary eviction moratoriums across the country, leaving some property owners struggling to pay their property taxes, insurance and utility costs and maintenance fees. Landlords of multi-family units near college campuses, particularly in densely populated cities, have managed to navigate the economic downturn relatively well.
Students often lock down their off-campus apartments months before they actually head to campus, and historically, there’s very little fluctuation in the number of students who enroll at any given college one year to the next.
“Pre-leasing makes things a little bit more steady than market rate apartments. Students are renting by the bed, and leases are tied to school years. Just being tied to the schedule makes it much more predictable than other markets,” said Ben Kasdan, principal at KTGY Architecture + Planning, which has designed 29 on- and off-campus housing projects spread across Connecticut, Pennsylvania, Florida, Wisconsin, Indiana, Louisiana, Wyoming, Oregon, California and Arizona.
“I was a little bit surprised by how normal most of the student housing developers are seeing their markets. In April, most of them were getting better rent payments than usual — in the 95% range. Pre-leases were all on track for the next school year… the way they would usually be,” explained Kasdan.
Off-campus housing developer DMG Investments echoed a similar sentiment about the unique nature of the college housing market.