The student housing business has matured a lot of over the past five years, and that has created a tremendous opportunity for owners and managers. Exciting and profitable times lie ahead for those who are ready.
A phenomenal number of student housing firms now take a more professional approach to owning and managing their properties. This is the most important trend in student housing over the past five years. These firms now demand meaningful data on the performance of student housing properties and the pipeline of new developments, both nationally and in their particular markets. Research firms have ramped up their efforts to provide this information, providing data that is critical to decision-making for student housing firms at all levels of professionalism.
Also over the last five years, the "money people" have come to recognize that student housing is an attractive asset class that performs well in tough economic times. Five years ago we were in the second year of the “Great Recession,” but the economic impact to the student housing sector was minimal compared to the overall U.S. real estate market. Student housing is also thriving despite more recent concerns. So far, I do not see online learning or the issue of student debt having meaningful impact on the sector. Application and enrollment numbers have continued to rise despite concerns about the affordability of a college education, perhaps because the students who entered college over the past five years were often able to pay the high cost of tuition because of decisions made ten or twenty years earlier by their parents. We may have to wait another ten or more years to discover whether the Great Recession has any effect on how much the parents of more recently born children save for higher education.
Overall, I believe student housing will remain attractive five years from now. To be successful in tomorrow’s market, firms must continue to change and improve their methods in making deals, developing new communities and operating more effectively than the competition.
Firms will continue to evolve in their thinking as they build properties that meet the needs and desires of the modern student. Keeping up with technology will be critical. The growing number of public-private partnerships with universities has also opened up a whole new avenue of demand for both development and management. I foresee that innovative student housing firms will begin to develop or redevelop conventional apartment communities to attract some of the younger adults who have recently graduated from college. These firms know what these young professionals are used to and how they want to live.
I am, however, extremely troubled by further potential federal government intrusion into higher education. At the moment, community colleges seem to be rejoicing at the prospect of the federal government providing free education for community college. But how will they feel when the government imposes all kinds of cost restrictions and regulations? The same holds true for the proposal to rank colleges on some kind of cost/value system? This proposed system sounds potentially useful, but I think any ranking would be filled with far too many assumptions and faulty value judgments. Everyone knows that a degree from the “Ivies,” near “Ivies,” and most state schools is a slam dunk investment that will help the average graduate earn much more over time than the cost of tuition. Other schools will have to justify the cost of their tuition compared to the likely value of the education they provide in increased earnings -- and that should be done without any interference by the federal government.
Jim Arbury is the Vice President, Student Housing for the National Multifamily Housing Council (NMHC)