NMHC: Student Housing Adapting to a New Normal

July 27, 2021

Demographic changes, remote learning, and rising tuition—colleges and universities are facing the headwinds of systemic changes to the way they do business, and the student housing industry must be ready to adapt.

To better understand the challenges and opportunities that colleges face and their effect on the student housing market, the National Multifamily Housing Council (NMHC) and NMHC Research Foundation partnered with Eigen 10 Advisors for an in-depth study of enrollment trends at an array of different colleges and universities around the United States. The results show an overall confidence in the industry, but also the importance that data-informed investments will have on returns. 

Demand is Steady, Despite Economic Conditions

The foremost finding of NMHC’s research showed that overall demand for student housing historically remains strong through recessions, and the impacts of COVID-19 will likely follow suit. A substantial population in the college-aged pipeline signals that seats at colleges and universities will be filled for the decade to come, as signaled by other positive trends as well, including more people than ever before earning four-year and advanced degrees. 

Shifting Demographics

Though colleges will draw from a significant pool of students, research showed that the overall population of college-aged students will shrink over the next 15 years, something that the industry has been preparing for and which will put downward pressure on overall enrollment trends and the student housing market. The exception will be in areas with high percentages of Black and Hispanic students—groups with an overall positive trend in enrollment growth over the past decade. 

Traditional Learning is Here to Stay

Despite nearly two academic years of distance learning, NMHC found that remote education will likely become complimentary to being on a campus rather than the new normal. Polling found that majorities of people planning to attend four-year public schools said that they were unhappy with e-learning, were ready to attend in-person classes, and were ready to live on or near campus. 

It’s the Economy

A look at the 2008 recession hints that student housing may be insulated against some recession effects because of typically rising post-secondary enrollment rates during economic downturns. During periods of high unemployment in 2008, enrollment rates of college-aged students increased by nearly 5%. Similar numbers are likely coming out of COVID-19. 

The financial impacts of a recession on tuition and fees remains concerning. After 2008, colleges and universities increased tuition and fees but did not increase financial aid at nearly the same rate, putting upward pressure on tuition rates.

Impact of Enrollment

Research shows that enrollment is also much steadier at public and nonprofit four-year universities as opposed to their private and for-profit counterparts, likely because their lower tuition rates alleviate financial pressures. It also shows that enrollment by age varies by institution type, and public four-year institutions own the largest slice of post-secondary enrollment, with public two-year schools taking second place. 

Geographic Impact

Location is perhaps the critical factor for enrollment trends in schools. Of the 19.8 million students enrolled in higher education institutions, 50% are enrolled in just 9 states, and 75% are enrolled in the top twenty states. Concentrated trends are only supposed to increase going forward, with 22% of people ages 5 to 19 living in just California and Texas, partly a result of large Hispanic populations in the areas. 

What it Means for Student Housing Property Investors

All indicators point to continuous, significant demand for student housing over the next decade. Truly successful investments will be in housing areas that maximize the potential of variables analyzed in this study. For example, investments in four-year institutions with competitively priced tuition in demographically favorable areas are smart investments. Investors should be wary of regions in which enrollment trends are on the decline. 

Investors should also wait to see the outcome of e-learning. Though COVID-19 made it omnipresent as an alternative, and it is likely that in-person enrollment will resume to its normal self, and with it will come housing needs. 

Finally, investors should look favorably upon cost-efficient and affordable housing options, public-private partnerships being a key example. With affordability likely to become even more of a critical factor in college decision making, it will prove advantageous in the competition for a smaller pool of college-aged students. 

To download NMHC’s report on student housing, click here