Student Housing Vacancy Rates Drop to Seven-Year Low

Improved vacancy rates and rising rents highlighted a strong year for the student housing sector despite the challenges it was presented by COVID-19, according to Moody’s.

Last year, many colleges and universities closed their campuses to students and staff and switched from in-person classes to remote learning. Since then, the landscape has changed with the lowering of COVID-19 rates and the increased availability of its vaccine. 

Looking at the national level, the student housing sector showed significant growth during the Fall 2021-Fall 2022 school year. The sector saw vacancies drop 200 basis points for properties that rent by the unit to 500 basis points for properties that rent by the bed. While asking rents grew by 2.9% for properties that rent by the bed and grew 4.2% for properties that rent by the unit.

Inventory Should Pick Up

With the expectation of inventory levels to pick up for the next school year, Moody’s expects to see increases in both vacancy rates as well as rental rate growth in part due to newly constructed properties and the rent premium that they will demand.

Occupancies Made a Strong Comeback

Coming into the fall 2021 school year, there were concerns over how colleges and universities would respond to the rising concerns over the Delta Variant and if students would return to campus. At the national level, student housing properties rebounded to record levels. Vacancy rates for properties that rent by the bed decreased 500 basis points from 7.9% to 2.9% while properties that rent by the unit decreased 200 basis points from 3.5% to 1.5%. 

Both vacancy rates are the lowest recorded for their respective rent type since at least 2014 when Moody’s Analytics REIS began tracking the specialty sector. 

Vacancy declines were observed across all US regions. For properties that rent by the bed, the largest vacancy decline occurred in the West region which declined by 700 basis points to 2.3% while the least decline occurred in the South Atlantic region which declined by 400 basis points to 3.4%. 

For properties that rent by the unit, the largest vacancy decline occurred in the West region which declined by 400 basis points to 1% while the least decline occurred in the Midwest which declined by 80 basis points to 1.9%.

Rents Continued Their Climb

Along with a strong decline in vacancy rates, asking rents also made a strong recovery in fall 2021. Before the fall 2020 school year, where properties that rent by the bed and by the unit had their weakest growth, asking rents were rising an average of 3.3% per year for by the bed and by the unit properties.

In comparison, at the national level for the fall 2021 school year, asking rents for properties that rent by the bed increased 2.9% while properties that rent by the unit increased by 4.2%.

At the regional level asking rents increased across all US regions. For properties that rent by the bed, the largest rent growth occurred in the Northeast region which increased by 4.3% while the weakest growth occurred in the Southwest region which increased by 1.5%. 

For properties that rent by the unit, the largest rent growth occurred in the South Atlantic region which increased by 5.8% while the weakest rent growth occurred in the Midwest region which increased by 2.6%.