News & Insights
Photo courtesy of: Greg Land
Market-rate housing affordability issues were once reserved for expensive coastal regions along with major metro markets. Sadly, though, in communities large and small across the country, housing affordability – and scarcity – are now a major concern.
And college campuses are not immune to this. Many are feeling the strain, and in other cases it is perilously close to being described as an existential threat.
“Housing costs are unsustainable for a large portion of our clients,” said Matt Bohannon, Vice President at Brailsford & Dunlavey and the head of the firm’s Southern California office and its west region higher education practice group. “Furthermore, with construction costs and interest rates in the position that they are now, development feasibility is the hardest part of the process.”
Affordability has crept into all aspects of college and university housing, and has even trickled down to the K-12 market. In this feature article, Brailsford & Dunlavey examines issues ranging from graduate housing, staff/workforce affordability, the additional stress caused by the vacation rental market, and housing insecurity and homelessness in community colleges and in K-12.
Many major universities, public and private, are combating affordability concerns by providing graduate, non-married, student housing for the first time. Vanderbilt, Emory and the University of Texas, in the high-priced markets of Nashville, Atlanta and Austin, respectively, partnered to provide university graduate housing to stay competitive in attracting the best and brightest candidates – and to keep students from needing a car due to moving much further away from campus to find reasonable rents.
But now schools in smaller college towns, where affordability typically has not been top of mind, are also exploring more university-provided graduate housing. B&D expects to see state flagships far from the major metro markets moving aggressively in this market, and often through public-private partnership development structures.
Beyond graduate students, more attention is being paid to schools needing to provide affordable housing for their various workforces, including administrators, educators and staff. “Recruiting and retaining employees, in addition to ensuring students can live in the immediate communities surrounding these schools, is yet another difficulty being exacerbated by current housing market trends,” Bohannon noted.
The type of housing and amenities must be aligned with its target market. These facilities and communities still must be attractive and desirable. “Suppose the goal is to provide family housing, which leads to a marginally different response than a single student product. An institution must consider childcare, playgrounds, and other exterior space access in such cases. These may include costs beyond initial construction that college, universities, and K-12 districts must consider,” he noted.
This workforce housing challenge is acutely visible at the K-12 level, especially in many of our biggest cities. Similar to affordability concerns for other public service professions, such as police and fire department personnel, teachers and staff often struggle to live and where near their schools, and commutes of 60 miles or longer are becoming the norm.
“One element of market adjustment that needs evaluation is density and development that will create more supply, while targeting the right type of units,” Bohannon added, while noting that this is easier said than done. “There is limited funding outside of what can be done through project-based financing, and cities often do not have the funds. There is typically no state funding for housing, and significant public institutions have to balance out all other costs, while often determining housing to be the least necessary to fund. So local governments rely on profit-driven private entities to come in and support these projects, opening the door to these potential P3s.”
Another phenomenon driving this affordability, and scarcity, issue is the booming vacation rental market. Research indicates the percentage of investors that have taken on those properties, such as Airbnb and Vrbo, rather than allowing them to be available for the local market or local home ownership, has shifted the dynamic of these locations.
“In Santa Barbara, CA, we saw 400 or so units that are off the market because of vacation rentals,” Bohannon said. “Thus, the traditional rental market has pretty much been completely taken away from local families.”
Finally, at the community college and K-12 levels, where housing affordability is often intertwined with food insecurity and even homelessness, the issues can be even more complex.
“Is it a mission of a K-12 district to provide affordable housing for their employees, and similarly, is it in a community college’s mission to provide housing for students who need it,” Bohannon asks. “I like to talk about affordable housing, not just as a project of affordable housing units, but as a college or K-12 district’s response, which needs to be considered an ecosystem.”
“In 2015, we worked with Orange Coast College, a local community college in Southern California, to develop housing,” he noted. “Back then, only 12 out of 114 community colleges in the state had housing, and they were predominantly in larger geographic regions. But in the last ten years we’ve started seeing a resurgence of that interest.”
One solution being analyzed is the desired strengthening of town-gown relationships between cities and towns and the schools located there. Both parties need to closely examine the students in their community who need access to more affordable units and utilize grants to help these students.
Bohannon also points out a silver lining to the narrative of higher education housing affordability.
“There’s a passion aspect, a lot of school administrators are rising up and saying this is something we need to do, we have a responsibility,” he said. “So to a client, there’s great hope and synergy in terms of what this can do. How can this be supportive of our communities, and what can it do to help them grow? Advisors must be diligent in thinking of what this means from our community level, the district level, the leadership level of a board, state leadership, the city, the county, and all others. We must look at all of these stakeholders and consider where we can have partnerships and where we can be creative. The outcome must align with our college or university, or K-12 clients’ strategic framework, to find a solution to house our community members.”
