A new study from the National Multifamily Housing Council (NMHC) Research Foundation delves into the impact that the purpose-built student housing market is having on escalating college costs.
Authored by Jack Liebersohn, an assistant professor of economics at the University of California, Irvine, and Jason Lee, an economist studying competition and banking, the “Affordability in Purpose-Built Student Housing” report finds that student-specific factors, such as enrollment levels and tuition, have had little impact on rising student housing rents. What has been found is that the same affordability factors that are driving rents in the broader apartment market are having the same effect on purpose-built student housing.
The purpose-built student housing market, which emerged in the 1990s, has become an increasingly important source of housing for students as an alternate to dorms and other private-market housing.
One of the key findings of the study is that student housing has become less affordable since 2013. When benchmarked against median income or tuition, the housing costs have increased more in inflation-adjusted terms, just like conventional rental housing.
In addition, on average, one new bed is built for each new student enrolled, which means that rising enrollment levels also are not pushing rents higher.
However, the researchers did find that a significant association does exist between rent-per-bed in the student housing market and affordability measures in the broader market. A 10% increase in local rents is associated with an 8% rent increase in purpose-built student housing.
The overall trend of rising costs was found to be consistent across regions. But, just as in the broader apartment market, regional variations have been seen, with higher rent increases observed in the Northeast.
“Perceptions of rising costs are real,” said Chris Bruen, senior director of research at the NMHC. “But this research suggest they are caused by the same forces affecting housing costs overall: The U.S. 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 study also showed that rents are higher in areas with greater regulatory barriers and constraints on new construction.
“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. “NMHC/National Association of Home Builders research finds regulations account for an average of 40.6% of all multifamily development costs.”
