State of the student housing market
All around Georgia Tech’s campus, elegant 20-story glass-covered buildings are popping up left and right. The prices are as sky-high as their rooftop pools. But what is driving rising student rental rates?
Nationally, student housing rents are increasing more than housing targeted towards non-students. A 2023 report by Real Page Analytics found that student housing rents increased 8.8% year over year, while multifamily rents increased only 4.5% year over year.
Similar trends are also apparent in Atlanta. Local real estate expert David Hadddow graduated with a master’s in City Planning from Georgia Tech; founded his own real estate consulting firm, Haddow & Company, and lectures part-time at Georgia Tech. Haddow estimates that 14 student housing high-rise buildings have been built around Tech, Georgia State University, and the Savannah College of Art and Design’s Atlanta campus since 2019, which totals to about 10,500 new beds in the last four years. Interestingly, nine of these high-rise buildings surround Georgia Tech’s campus.
Haddow said that the student housing units cost an “average of $3.53 per square foot. I can tell you that’s higher than [non-student] high-rise apartments in Atlanta.” He noted that they often come furnished, which may explain some of the high per-square footage cost. He also remarked that the cost to buy land and the lack of availability in Midtown and Downtown Atlanta may be part of the explanation. He continued that the high land costs “force you to build a high rise versus a mid-rise building. And when you build a high-rise it’s very hard to do that inexpensively.” Though this provides a helpful insight into the market, there may be more to the story of high student rents in Atlanta.
Universities and their role in private housing development
Tony Zivalich, Georgia Tech’s Associate Vice President of the Real Estate Department, spoke about the role of the Institute and the private market in the provision of student housing. According to Zivalich “it kind of gets into this natural situation where it’s not like we purposely want to turn students away. It’s just the reality — our ability to deliver additional capacity is not there.” Despite enrollment steadily increasing over the past years, Georgia Tech just recently announced its first new construction of on-campus dorms since 2005.
Zivalich continued: “so I think there will always be a market for the private sector, in and around our campus. And as we continue enrollment growth, I think that is going to increase, not decrease.”
Consequently, Georgia Tech is dependent on private firms to provide student housing near campus, as the university lags in accommodating its increasing enrollment.
“The bottom line,” Zilvach said, “is, given how tight the student housing market is … the private market will continue to respond. They do better because student housing is fairly profitable, and these student housing developers, they’re able to sit down, and you know, they’re able to make a pretty healthy return on their investments.” Consequently, Georgia Tech expects private developers to create student housing more quickly than the university itself can, and it becomes relatively easy for private developers to profit by charging high rents.
According to Jean-Paul Addie, an Associate Professor at Georgia State’s Urban Studies Institute, “the university is not acting as the primary developer, but development opportunities are leveraging the presence of students in and around the city.” Although a university may be unable to provide adequate housing, private developers use the presence of students as an opportunity for profit, increasing the development of luxury student apartments around campus.
Moreover, universities benefit from luxury living spaces for their revenue, as these spaces can often attract more international and out-of-state students. Addie stated that “the market is being generated in a way which is going to help [universities] attract higher fee-paying students to come in.” The more luxury spaces that appeal to higher-paying out-of-state and international students, the more of these types of students the university can expect to enroll, increasing the bottom line for the university itself.
Although nicer student living conditions may not seem like such a bad thing, the issue is that high prices do not always correlate to high quality. Developers don’t have the incentive to create quality.
“You’re here for your four years,” said Addie. “Is there an impetus to create quality lasting housing, because the expectation is that you’re going to get the turnover?”
Although student apartment reputation has the potential to impact rents that can be charged, Addie hasn’t “seen any kind of significant kickback on the rejection of these types of places.”
In terms of solving this affordability crisis, Addie said that “in general with housing, building more stuff doesn’t solve the affordability price problem.” Without regulation or action by the universities, he said, the private market is unlikely to develop quality housing at lower price points.
Developers capitalize on Zell Miller scholarship savings
The private developers themselves play a pivotal role in increasing student housing costs. LV Collective, the group behind the Whistler, which began leasing this fall, responded to a few questions via email. When asked about affordability, a spokesperson answered that “larger floorplans that accommodate more residents per unit can offer lower rates per person, while smaller floorplans that accommodate only one or maybe two residents typically command a higher rate per person.” The Whistler is one of the most expensive buildings near campus, with a three-bed three-bath renting for approximately $1,500 per person per month in mid-November 2023.
Another developer, Mack Reese, graduated from Georgia Tech with both his bachelor’s and master’s degrees in management. He went on to manage Gateway Ventures, a commercial real estate development firm. His firm built the Square on Fifth apartments, the first luxury student high-rise apartments around Georgia Tech, in 2015. Reese chose to develop luxury student housing when office buildings were no longer giving their expected returns on investment and shifted to a new area with a higher expected profit margin. According to Reese, “the office market then wasn’t very good … so we then decided to build a student apartment building.”
As of mid-November, three-bed three-bath apartments start at $1,575 per bed, according to Square on Fifth’s website. Reese said that the Zell Miller and HOPE scholarships are part of what allows developers to charge high prices.
“I think a lot of parents reward their children, who are good students, by letting them live in nice housing that is expensive because they don’t have to pay tuition,” he said.
Many local Georgia Tech students come from middle to upper-class families who have been able to save for their children’s college tuition. When these students stay in the state and maintain the requirements for keeping their state scholarships, families don’t have to pay tuition. This leaves families with 529 savings funds that can be used to pay higher rent. Developers capitalize on these savings and charge higher prices at student apartments than they would be able to at apartments not designed for students.
With universities dependent on private developers who capitalize on unused college savings, many questions arise for the future. Where does this leave students who don’t have families able to pay $1,500 a month, and will the rents continue to increase at this rate?