Student Housing Trends – What Does COVID-19 Mean for Gen Z Student Life?

Student housing withstood the last financial crisis. But the pandemic has brought changes to the sector, from reduced density to increased costs.

Student housing has been a clear choice for many investors seeking portfolio resilience. In the last financial crash from 2007-2009, the sector thrived. Student housing is traditionally high-density, with many purpose-built student housing communities having four to six beds per unit. Landlords as much as double rentals per square foot if they rent by the room. Students sign one-year leases so rents can be raised annually, depending on local regulations. Because leases are often backed by parents as co-signers, there are fewer defaulters.

Student housing has historically played a significant role in the real estate markets of university towns and neighborhoods. Universities typically only provide on-campus housing for a fifth of their students. That means as much as 80% of the student body needs to be accommodated off-campus. In weak markets, student housing can save single-family homes that might otherwise be abandoned. In tight markets where the housing supply is low, student housing can displace lower-income households.

However, a combination of the enduring outcomes of the pandemic and the traits of a Gen Z student body may affect returns for investors in the student housing sector. What do investors need to know?

A Shift to Single Rooms

Privacy has become a highly valued commodity since the pandemic. As a result, micro-units, studio, single- and double-bedroom apartments are becoming preferred student accommodation. They replace the conventional four- to six-person apartments that have, to date, been popular in the US student housing market.

Housing shortages may make it challenging for some institutions to abandon their current shared room facilities. As a start, many have reduced the number of people per room and have gotten rid of shared bathrooms.

Collaborative Spaces Need to be Rethought

Student housing has come a long way since the original dorm concept it started as. To woo students, modern facilities make an effort to be lively, sustainable, and engaging. They offer collaborative spaces to promote peer connections and academic success, incorporating technology-enabled lounge areas, sports and recreation facilities, kitchens, and eateries.

Unfortunately, shared amenities like these may need to be rethought post-COVID. New designs will most likely see the incorporation of additional entrances and noncontiguous corridors to reduce congestion. In addition, communal spaces will need to be reconfigured to support social distancing and cater to sanitation precautions.

While it’s still unclear exactly how all concerns will be met, we know that solutions are needed. A recent survey that looked at the challenges students faced in 2020 found that almost half of the students surveyed battled with stress, anxiety, and loneliness. At the same time, just over 20% had trouble keeping up academically. When student housing isn’t conducive to residents’ healthy living and academic endeavors, it is less desirable.

Transport Looks Different

Since the outbreak of the pandemic, many people have been wary of using public transportation for fear of infection. Previously this might have meant an increase in the number of private cars on campus. However, Gen Z’s concern for the environment, their relative lack of wealth, the emergence of rideshare services like Uber, and other alternative transportation options seem to counter this. As a result, the number of students bringing cars to campus is declining.

Walking and cycling (including e-bikes) have also increased in popularity because of their potential to improve health and boost the immune system. The air droplets that can spread COVID-19 are also dispersed more rapidly in the outdoors.

The combined outcome of these trends is that student housing landlords may not be required to provide parking for their young residents, depending on local laws. In urban locations, this can free up expensive real estate for redevelopment to meet the new post-COVID requirements.

A Greater Regulatory Burden

On campuses, student housing buildings generally have student paraprofessionals who play the role of resident assistants or RAs. RAs give parents peace of mind by serving as a responsible older figure who is available to support students. They also perform various administrative, institutional, and community-related jobs. In single-family homes run as student housing, the landlord can sometimes carry out elements of this “semi-parental” role.

Post-COVID, RAs’ (or landlords’) duties have increased to include enforcing COVID-related rules and regulations, like wearing masks and social distancing.

Investing in student housing hasn’t been without challenges in the past—students will be students, after all. They may be less careful with the property and more likely to damage it. Many landlords have to deal with unhappy neighbors kept awake by late night parties. In addition, in many municipalities across the country, there are zoning restrictions on student housing to regulate rentals and maintain the character of family neighborhoods.

Now, investors must also factor in the impact of COVID on rental returns. They may be impacted not only by reduced density, but also from potentially declining demand for the on-campus experience. With online classes more available than before, students now have more reasons to stay at home with their families and save on rent.