Student Housing Headwinds

If you’ve been listening to this show for a while you will know that I’m a proponent of the law of supply and demand. To me, the law of supply and demand is a little like gravity. If you choose to try and fool gravity, you’re probably going to end up on the losing end of that bargain. It’s the same with supply and demand. 

On today’s show we are looking at three forms of downward pressure being exerted in the student housing arena. I’m going to make the simplifying assumption that over the next year or two, the amount of supply of student housing is not going to change dramatically. The real issue is on the demand side. 

This is a segment that quite frankly has been under pressure from simple demographics. Birth rates are down and the number of students enrolling is down. 

There are a number of new borrowing limits that affect government sponsored student loans in the latest tax legislation that was signed on July 4.

During times of falling domestic demand for a university education, many schools try to make up the shortfall with foreign students. But here too  we are seeing falling numbers of international students coming to the US for university. 

This is another headwind for student housing. Layer on top of these headwinds the fact that some student housing providers had financed their properties at much lower interest rates than today’s market rates. These properties will face substantially higher debt service costs when it comes time to refinance their existing debt. 

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