Study Links Student Housing Rents to Broader Market Trends

Increases in rents for purpose-built student accommodation is tied to broader US rental market trends, according to the National Multifamily Housing Council’s (NMHC) Research Foundation.

A study by the NMHC examined the purpose-built student housing market’s role in overall escalating college costs. It found that student-specific factors such as enrollment levels and tuition have little effect on student housing rent prices. Instead, the same affordability factors driving rents in the broader conventional market are driving rents in the student housing sector.

“Perceptions of rising costs are real,” said Chris Bruen, NMHC’s senior director of research. “But this research suggests they are caused by the same forces affecting housing costs overall: the US. has a severe housing shortage. This means students compete with other residents for a limited housing supply in markets where prices are already increasing.”

The purpose-built student housing market emerged in the 1990s as an alternative to university dorms and other traditional types of private market housing and has since become an increasingly important source of housing for university students. However, recently public concerns over the rising costs of attending college have led to increased scrutiny on what role the emergence of the purpose-built student housing sector has played in those escalating costs.

Affordability of student housing in fact has been declining over the past decade, NMHC noted, with costs increasing even more in inflation-adjusted terms.

From 2013-2020, real rent per bed for purpose-built student housing has increased by 24%, outpacing both income and tuition increases. HMHC studied the determinants of rents for this type of housing, evaluating the relative roles of demand from enrollment increases and competition with the multifamily market. Researchers concluded that purpose-built student housing and nearby student-competitive housing are highly integrated with local multifamily markets. As a result, the same factors increasing rents nationally also have raised costs in the purpose-built student market.

The report discounts the impact of rising enrollment figures, saying on average one new bed is built for each new student enrolled, which means there are no supply versus demand issues. However, there is a strong link between rent-per-bed in the student housing market and affordability in the broader market. Overall, a 10% increase in local rents is associated with an 8% rent increase in purpose-built student housing, according to NMHC’s research.

This means policies that make housing affordable in general will also make housing less expensive for students. Rents are higher in areas with greater regulatory barriers and legal constraints on new construction, for example.

“If policymakers want to improve housing affordability for students, they should focus on removing barriers to new housing production and streamlining regulations,” said Mark Obrinsky, NMHC’s chief economist.