Spiking foreclosure rates and slumping home values may increase concerns that a recession is on the way, but the housing market isn’t entirely on the decline – and it may be partly because of college students.
Recent reports from BusinessWeek and the Atlanta Journal-Constitution have deemed student-marketed apartment complexes and residence halls “recession resistant.”
Many college housing managers have said the USF area is no exception.
“I come from the conventional housing market – that’s my background – and calling college housing ‘recession resistant’ is so true. The market here is completely different,” said Stephanee Heitkamp, who has been the property manager of Campus Club apartments since February and has worked in the housing industry for the past eight years. “There’s much more of a security base in student housing that makes it more favorable.”
RealtyTrac, a foreclosure-tracking company, reported foreclosures increased by 57 percent nationwide during the month of March, and bank repossessions climbed by 129 percent. In Hillsborough County, that adds up to 1,736 foreclosures, though that number may be inflated since Tampabay.com reports that the company counts every foreclosure filing on a single property.
The state of apartment housing in general, however, isn’t as dire. Bloomberg.com states that RealFacts, a housing research company, reported a dip in the nation’s average apartment occupancy rate of half of one percent over the past year, bringing it to 92.6 percent. In Tampa, the overall apartment occupancy rate surpasses the national average at 94 percent, though M/PF YieldStar research shows that number has remained stagnant from September through December.
Though these numbers seem high, RealFacts said only percentages over 95 percent favor landlords more than renters. While conventional housing strives for an 85 to 90 percent occupancy rate, Heitkamp said the bar is much higher for college housing, where complexes fight to be 100 percent occupied at all times.
“Since we cater to students only, we know that market well and tailor the services we offer to their needs,” she said. “Focusing on just this group makes it easier to do well, rather than trying to please a variety of lifestyles.”
Marketing toward such a specific niche in the community is just one of the multiple layers of insulation that college housing has protecting it from the decline other areas of housing have faced. Property and leasing managers cited an array of reasons why their companies were faring better than they were last year, despite being located in what mortgage insurer PMI ranked as the ninth-riskiest housing market in the country.
“We end the month with almost zero delinquencies, meaning that by the end of the month, everything is paid,” Heitkamp said. “A lot of that is because of parents, since they’re often the guarantors. Having multiple people responsible for the lease ensures that it gets paid. A resident may say, ‘OK, I don’t have much money, so I won’t pay this bill this month,’ but if you know you’re going to be affecting someone else’s credit if you don’t, it makes you pay a little more attention to getting that bill taken care of on time.”
Meanwhile, Avalon Heights has had four times as many people renew their leases this year compared to last year, which property manager Cathy Bryan said may be due in part to financially strapped students not wanting to spend the application fees, security deposits and other charges associated with moving into a new apartment.
A nail-biting year aheadThough the college housing market has been dubbed “recession resistant,” that doesn’t mean it is immune to the effects of a slowing economy. Some complexes are feeling the side effects of a looming recession.
“We’ve seen a small percentage of people having problems,” said Michael Samples, marketing and property leasing manager for The Pointe. “I think a lot of it has to do with the shift in financial aid. Ten years ago, parents helped out their kids a lot more when it came to rent payments, and now we’re in a society where students borrow against their future. More students are paying their own way now, and rely on scholarships and loans to cover the cost of rent.”
Some complexes are waiting to figure out the effects of a slowing economy on their business, as they won’t know the full effects of the poor state of the economy until the end of summer.
“Right now, we’re 129 renewals and 25 new leases ahead of last year, but it’ll be interesting to see what happens in June through August, during the freshman orientations,” Bryan said. “Last year we didn’t get the big rush of freshmen moving in like we did in years past. Because of that, this year will be a nail-biter.”
Similarly, 42 North – formerly Breckenridge apartments – has experienced some jitters recently about attracting the attention of incoming freshmen, but for a different reason.
“We had a slight disadvantage going into this year, because last year we had a 60 percent renewal rate and most of those residents had lived here for more than two years, so we knew that many of them would be graduating and moving out,” 42 North general manager Kim Lewis said. “I was nervous at the thought of finding so many new people, especially since USF is admitting fewer students because of budget cuts.”
Cashing in on a competitive advantageUtilities-included rental rates, by-the-room leasing and fully furnished rooms are three perks of college housing, which Lewis said gives college housing an edge over traditional apartments.
“Off-campus student housing is a good halfway point,” she said. “You have enough independence where your boyfriend can come over and he doesn’t have to leave by some designated curfew or check in at the building, and unlike conventional housing, you only have one check to pay to cover all of the costs of an apartment. It’s less stressful.”
Some complexes have found that some recession-related issues can be an advantage to their businesses. At Avalon, Bryan said she noticed more students interested in ending their commutes to campus because of rising gas prices.
“I think the economy has caused more people to look into living closer to campus,” Bryan said. “There’s talk about gas going up to $3.75. For a young person who may have a part-time job while going to school full-time, putting that much money into a car just to get to class can be difficult, especially when there are so many other things to spend money on.”
Catering to the needs of one specific niche will keep students from making other living arrangements, no matter the state of the economy, Lewis said.
“We offer student-oriented conveniences that traditional housing doesn’t, which appeal to students,” she said. “As long as there are colleges, there will be a demand for college housing.”