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Much of the rental market is facing an ongoing and widespread slowdown, but the next two years look to be a bright spot for student housing, according to a new report from rental data firm RealPage.
The market for purpose-built student housing — that is, off-campus housing created with the intention of being rented by college students — is undergoing price increases, driven in part by a return to pre-pandemic normalcy on campuses nationwide that is adding demand to the sector.
“What driving today’s strength? A boost to enrollment provided by students who took a gap year in 2020/2021, rising on-campus housing costs, and a break in construction at some campuses that were teetering on overbuilt…has pushed leasing activity into record territory,” said Carl Whitaker, director of research and analysis for RealPage.
Thirty of the 175 campuses RealPage tracks already have more than half their off-campus units leased for the upcoming fall semester. Four schools are pre-leased at 90 percent for the next school year, according to the report.
Rent growth reached 4 percent for the fall 2022 leasing season, the report reads. That’s the highest in the past decade.
“From a strictly momentum-based perspective then, it’s difficult to see how the Fall 2023 leasing season runs out of much steam (barring a true black swan style event),” the report notes.
The report is a stark contrast to recent data showing that the demand for new leases on apartments turned negative at the end of 2022, the first time it reached that point since the Great Recession.
There’s a strong demand for off-campus housing given the number of newly created units hasn’t kept up with changes in enrollment for many universities in recent years, the report reads.
The report wasn’t all peachy looking out past 2024, and it includes several what it called a ‘critical headwind.’
The growth rate for people ages 18 to 24 has slowed. That causes unknowns for long-term performance in the market after the ongoing surge ends.
Rising tuition costs are also a possible upcoming risk for enrollment and therefore student housing demand in the future, according to the report.
If the ongoing slowdown in demand for rentals causes vacancy rates to rise, it might create competition for investors who own student housing, since students could simply rent conventional housing instead of purpose-built student housing, the report notes.