The Real Cost of Luxury Student Housing in U.S. College Towns

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When Blake-Leigh Kibbit moved off campus her sophomore year of college, she received enough financial aid to continue living close to the Florida State University campus in Tallahassee’s College Town, a popular neighborhood whose steep rent prices reflect its prime location.

Upon graduation, Kibbit was offered a full-time job in the city, but her entry-level salary would not allow her to stay in or near downtown Tallahassee because of the high cost of living throughout the area. Instead, she moved 6.5 miles north to the Plantations at Pine Lake, and though she’s happy about the money she’s saving on rent, she is frustrated that finances have driven her far from the center of town.

“I thought living in College Town was a taste of what I could expect when I was making my own money,” Kibbit said. “But the reality is that the average post-grad cannot afford downtown prices without outside help.”

Across U.S. college towns, luxury student housing is gentrifying (often called “studentifying”) cities with amenity-filled, privately owned complexes. The trend is driving students who can’t afford to reside there far from campus, and also raising the cost of living for city residents.

The reality is that the average post-grad cannot afford downtown prices without outside help.

Nationwide, 2016 was the sixth consecutive year where student housing transaction volume reached an all-time high. From 2015 to 2017, more than 40 university towns saw their first properties built specifically for students with bed/bath parity, says Forbes.

According to a study from Ball State University, college students are willing to pay an average of 16 percent more for an apartment within a one-mile radius from campus.

“Being within one mile of campus suggests the benefit of being within reasonable walking distance, while being outside four miles begins to segregate students from the ‘university district,’ other college friends and easy use of the campus facilities,” said BSU residential property management professor Carla Earhart.

The population in college neighborhoods grows as student enrollment rises, which a 2014 study found is not as rapid of an increase as traditionally gentrified areas. However, university-sponsored housing typically does not meet this demand of higher enrollment—leaving many to seek housing off campus.

For instance, in 2017, University of Virginia students compiled a report stating that while enrollment has increased by about 4,700 over the past 25 years, the university has only added 700 beds. This has allowed private student housing developers to take advantage of the unmatched demand in Charlottesville, often displacing lower income residents, according to the report.

Catalyst Apartments in Tallahassee's College Town, near Florida State University.
The lobby inside Tallahassee's Catalyst Apartments near Florida State University.
The resort-style pool at Catalyst Apartments, located in Tallahassee, Florida,…
A photo of FloCo Fusion Apartments in Dinkytown, near the…
A corner view of Nine East 33rd, a student housing…
A photo of Nine East 33rd, a student housing complex…

As the quantity of luxury student housing increases, interest in older housing stock decreases, and landlords are forced to lower prices or renovate to compete, causing overall real estate prices to decrease. Meanwhile, when property is reassessed in surrounding areas, property valuations and taxes may increase, displacing lower-income residents.

In 2015, a study commissioned by Michigan’s Washtenaw County Office of Community and Economic Development found that Ann Arbor’s property values have the potential to grow past the point of affordability, as the median rate for rent in the city has increased rapidly (14 percent between 2010 and 2015). This dilemma is a reality for many University of Michigan students who leave Ann Arbor and relocate to nearby cities like Ypsilanti, 8 miles from the university town, in favor of affordable rent, according to an article by Michigan Daily.

Similarly, a recent regional housing study commissioned by the McLean County Planning Commission in Illinois found that high student housing rental rates in university towns like Champaign and twin cities Normal and Bloomington drive up the cost for non-student and family renters.

One scenario: Apartments are often rented per bed as opposed to per bedroom, meaning two people (even a couple) cannot split the cost of a one-bedroom apartment, which drives away many interested candidates. But city representatives are scrambling to find solutions.

As elected officials, as a community development department, as economic development, we need to be approving projects that provide affordable housing…

“As elected officials, as a community development department, as economic development, we need to be approving projects that provide affordable housing …,” Bloomington Mayor Tari Renner told The Pantagraph.

The Ann Arbor report found that if Michigan’s housing divide is left untouched, economic inequality will bombard the county’s residents with imbalances in income, education and opportunity. Ypsilanti and similar areas will face a nosedive in property values due to high turnover rate and “degrade beyond a point of no return.”

After the report’s release, Ann Arbor City Council members voted 10-1 on a set of new affordable housing goals, which includes creating 2,800 new affordably priced rental units by 2035. The council also promised to grow demand for market-rate housing in the Ypsilanti area by 4,187 units.

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