There’s good news and there’s bad news when it comes to demand for student housing.
Here’s the good: More Americans are going to college than ever. In fact, university and college enrollments have grown significantly in the past decade. From 2009 to 2011 alone, enrollment increased 11 percent. Add to a growing number of college students the fact that the average college student is spending a longer period of time in school (almost five years now).
But here’s the bad: It’s getting more expensive, which could ultimately affect enrollment numbers. Consequently, more students and/or their families are incurring large amounts of debt to pay for their education. Some of the more troubling statistics discussed during several conference sessions included takeaways from a recent report on student debt from the Pew Research Center, which shows that one out of five American households has student loan debt, owing on average $27,000.
That percentage is higher for younger people; roughly 40 percent of households headed by people under 35 have student debt. More interesting is that while a greater percentage of lower-income earners have student debt, the highest-wage earners, as a group, owe significantly more on average-to the tune of roughly 12 times more. Moreover, student loan delinquencies are on the rise, particularly for more recent graduates.
K.C. Conway, executive managing director of market analytics for Colliers International, said student debt trends are just the tip of the iceberg. “If you look at federal-level debt, state-level debt, parent-household debt, it’s on an unsustainable trajectory,” he said.
As a result of these debt loads, enrollment trends are already showing students increasingly flocking to large public universities, where they can get a quality education and in-state tuition.
“The higher echelon schools can set what they want the enrollment to be; it just depends on how long they want the wait list to be,” added Randy Churchey, president and CEO of Education Realty Trust. “The second-tier school is where we have seen enrollment declines because students have trouble finding financing.”
This trend means that many student housing providers are finding the most opportunities-both off and on campus-with large state universities with tens of thousands of students. And while off-campus student housing may be the industry’s bread and butter, many large student housing firms are focusing more on on-campus housing deals. Not only are many universities dealing with aging on-campus housing stock, they are also juggling the limits of their own balance sheets and need to move forward on other academic priorities.
For Dan Bernstein, EVP and chief investment officer for Campus Apartments, this adds up to growing opportunities for public-private partnerships between student housing firms and state universities. “There are very few companies that actually have the experience, track record and patience to deal with the process,” he said. “But if you look at the flip side, you deal with state budget cuts; as public-private partnerships evolve, it becomes a more viable solution. But it is somewhat limited because some schools want to keep their powder dry for more academic projects.”