Student Housing Enters Negative Rent Growth

Student housing had managed to survive the early days of the pandemic with relatively flat rent growth. That changed in December. After months of deceleration, student housing rent growth fell below -1%, according to a new report from Yardi. In December, student housing rent growth dropped to -1.3% year-over-year.

Yardi notes that this was a stark change for the market. Prior to the pandemic, student housing had enjoyed healthy rent growth that consistently came in at 3%. Still, the decrease in student housing rents still pales in comparison to market-rate multifamily housing, which has seen more significant decreases in rents. According to Moody’s Analytics, apartment rents fell by 2.8% at the end of the year. By the end of the fourth quarter, they had already fallen 1.8%, well above the end-of-the-year decrease in rents.

Surging coronavirus cases during the pandemic sealed the industry’s fate, driving rent negative growth. However, universities with no in-person classes had the most significant decrease in student housing rents. The list includes George Washington University, Georgetown University, the University of California-Riverside and the University of Utah. However, some universities that held partial in-person education weren’t necessarily exempt. Student housing markets near Texas A&M University-Corpus Christi and the University of Wisconsin-Milwaukee also experienced significant decreases in rental rates.

Many student housing owners have given up on the 2020-2021 school year and have started to look ahead to Fall 2021; however, pre-leasing activity has already started for the fall semester, but is currently trailing behind fall 2020 pre-leasing year-over-year by 2.8%. So far, markets with public universities are driving the pre-leasing activity. The University of New Hampshire-Main Campus has 25.6% year-over-year growth in activity, the University of Louisiana at Lafayette has 25.3% year-over-year growth, the University of Georgia has 24.5% growth, Pennsylvania State University-Main Campus has 24.2% growth and Saint Louis University has 20.8% growth for pre-lease occupancy. This trend also shows increasing demand for more affordable university systems, compared to private universities.

Due to the vaccine distribution, Yardi expects leasing activity will pick up as we near the fall semester. In addition to the vaccine, universities have better plans to accommodate in-person learning. Improved leasing will also support improved rent growth later this year. In addition, many colleges will have limited dorm room capacity, driving more students to off-campus housing. For these reasons, Yardi has a bullish outlook on the 2021 fall semester.