Most first-year college students will only reside in a dorm room for a year or two. Then they quickly face the daunting task of finding an apartment. That comes with the need to find the right place, find enough money for a security deposit, and moving in. So, knowing trends in the apartment market is a good idea, even a year or two in advance.
One trend will likely hit you where it hurts: your pocket. Consider the following:
Availability
- Don’t expect colleges to build enough dorms to match student demand.
Why not? Many universities face funding cutbacks for the state. That can mean less money available for “capital projects” like building new dorms. Second, schools that consider borrowing money to fund dorms face higher interest rates (i.e., it costs the school more to borrow money). Third, the schools that seek to expand the land area for more housing face zoning laws from the cities in which they operate. Those laws can restrict or prevent the building of rental properties. There are also “density” restrictions on the number of renters in a dwelling.
Affordability
- “Moody’s Analytics recently warned of an “affordability crisis” for college students. Since 2019 apartments close to college campuses are rising at a higher rate than apartments generally. [1]
Why? Because smart private equity entrepreneurs see an opportunity. If dorms do not fill the demand for student housing, specialized student housing at a higher price can be built to meet the need.
So instead of ugly old dorms, companies like American Campus Communities and Campus Apartments provide privately owned student housing with “fresh, gleaming properties conveniently near campus, with amenities including pools, gyms, and study lounges designed to lure students.”[2]
Forecast
As one analyst stated: “All this means heftier rent bills for students who are already navigating rising tuition costs and a growing mountain of student loans.”[3] Put another way, “The start of the 2022 academic year brought “never-before-seen rent growth” for student housing.[4]
This begs the question: Who gets hurt by rising student housing costs offered by private equity firms”?
Answer: Those who can least afford to pay the higher price.
“Since parents are often the ones footing the bill…many are willing to pay more to ensure their children have access to the comforts and prime locations that these buildings offer.” [5] I
If you are applying to the University of Texas – Austin, take a look at the new high-rise apartments near West Campus, particularly Waterloo, a 19-story tower called Villas on Rio. They advertise “vacation-style amenities” such as a full spa and a sky lounge with sweeping views of the city. The Mark Austin is another. They tempt students with a two-story gym, and a bowling alley, and last but not least – tanning beds.
The point is this: There are some students and parents from certain zip codes that have this luxury money. And there are the majority of students and parents who do not.
Often, those in the latter category are students of color. It means they better start planning and saving sooner or manage their expectations for housing amenities. It also means students should prepare for the possibility of moving further away from campus, where apartment prices can be more affordable. That also means it may be more important to have a car or pick an apartment with easy access to public transportation to accommodate the commute. Don’t be discouraged. This is not the first or last time students of color face bigger challenges than others. There are plenty of examples of overcoming the hurdles. Planning ahead is just part of the plasma.
[1] James Rodriguez, America’s biggest private-equity firms are screwing over college students.
https://www.businessinsider.com/luxury-college-dorms-student-housing-cost-crisis-rents-wall-street-2023-9 (September 20, 2023). Last visited September 22, 2023.
[2] Id.
[3] Id.
[4] Id.
[5] Id. The passage is based on an interview with Carl Whitaker, the director of research and analysis at RealPage Market Analytics, a real-estate-software company.