On college campuses, the kinds of housing brochures that litter walkways and bulletin boards appeal to a very specific, albeit familiar, set of desires. Advertisements for the Callaway House dorms at the University of Texas, for example, encourage prospective residents — and their parents — to "get the lifestyle you want" and to “exceed your expectations.” The apartment-style complex includes granite countertops, a rooftop swimming pool, a hot tub, and a 2,400-square-foot fitness center. Monthly rent is $1,650 per student for a two-bedroom. The dorm, which mimics the design of modern luxury condos in New York and San Francisco, represents the new normal in college housing around the country: expensive and exclusive.
Thanks to a boom in activity from private developers, the college experience for a number of students has undergone a dramatic transformation. In Athens, Georgia, University of Georgia students living at The Standard — which is operated by the for-profit company American Campus Communities — enjoy private balconies and flat screen TVs loaded with premium channels like HBO. A two-bedroom at The Standard rents for $889 a month. University of Michigan students who live at The Varsity in Ann Arbor have access to a rooftop sky lounge and free on-site tanning beds, all for $1,220 per month for a two-bedroom. At The Suites in Lubbock, Texas, competitive Texas Tech students can live in a two-bedroom and unwind on a full-size beach volleyball court, all for about $720 a month.
These dorms borrow more than just amenities from luxury condos in urban centers. As the price of attending college increases, low-income students are finding themselves left out of the equation when it comes to the type of on-campus housing that gets developed. In other words, colleges are gentrifying, and it’s having the same effect on schools that it does in cities.
Speaking to The Daily Texan in 2015, University of Texas senior Lorena Lopez described the difficulty of finding housing near campus: "We saw a bunch of apartments, but it was just really pricey. Nothing there was under $800 or $700 a month." Like many students who can’t afford the privately developed dorms near their school, Lopez moved farther out — a 45-minute bus ride to the neighborhood Riverside, to be exact. “Here, I’m paying $555,” she told the paper.
In 2016, it was projected that 20.5 million students enrolled in four-year colleges, an increase of 5.2 million since fall 2000. At the same time, colleges and universities face significant budget crunches. Over 95 percent of states in the US spend less on their public colleges and universities than they did before the Great Recession. Looking to fill the gap between their aging supply of dorms and the growing student populations, cash-strapped colleges have turned to private developers. For the schools, these private companies alleviate a major burden by not only building new dorms but operating them entirely independent from the university. Speaking to The New York Times about a private development at the University of Kentucky, Angela S. Martin, the treasurer of the school, said, "This is their core business. They can build it cheaper. They can build it faster, and they can operate it leaner than we can. This is not the university’s core business."
Ignoring, for a moment, the average proportion of student tuition that goes directly toward room and board, one could argue that it is precisely a university’s core business to provide housing for students in as much as it is the school’s responsibility to foster a community on its campus that encourages equal access to educational resources like libraries and computer labs. Nonetheless, business for the college housing industry is growing. Investors poured an estimated $4.5 billion into dorm properties last year, up from $3 billion the year prior.
There are a few major companies in the industry that account for much of that investment. A Tennessee-based firm called Education Realty Trust (now known as EdR) is one of a growing number of developers focused exclusively on "high-quality" college dorms, providing similar amenities to those at Callaway House. This year, EdR signed deals with a number of major universities like the University of Kentucky and the University of Pittsburgh, and now owns 86 housing communities at 53 colleges and universities in the US. Peak Campus, the second largest privately owned student housing management company in the US, currently manages 94 buildings valued at more than $3 billion.
The biggest player in the college housing business, however, is the publicly traded American Campus Communities, an Austin-based company that manages more than 350 student housing communities and reported upward of $300 million in profits last year. That number continues to rise as ACC swallows up the competition, too. American Campus Communities’ CEO, Bill Bayless, told Forbes that "the student housing industry has highly fragmented ownership and is ripe for consolidation."
These companies are all classified as real estate investment trusts, or REITs. Designed for long-term, institutional buildings like hospitals and shopping malls, REITs operate like a financial asset, using investor money to develop a building, quickly, and dividing the profits from rent and other fees among a group of shareholders. For college dorms, this means that there is a financial incentive to turn as much of a profit in these units as possible.
Schools generally charge higher rates for on-campus housing than what a student can find off campus. However, even among higher cost on-campus options, a great deal of variance in pricing exists. There is, on average, a 36 percent difference in the cost between the least expensive versus the most expensive option for on-campus housing. So when a private developer partners with a school and develops amenity-rich (highly profitable) top-tier housing, they ignore the need for more affordable dorm options on campus.
At the Castilian in Austin, for example, students can share a room in a two-room suite for $1,190 a month per student (ACC offers a $600 discount for students who pay for an entire semester up front). A shared room at the university-run Jester dorms goes for roughly $100 less per month. Students who can’t make it into the few lower cost (albeit, older) dorms available, and who also can’t afford the new high-end facilities, are left with no choice but to move farther away from campus. Compare, for example, both Castilian and Jester to the average $750 cost per student for apartments listed on craigslist. And while on-campus properties include utilities, the high estimate of $230 a month for utilities in Austin still makes The Castilian and Jester roughly $200 pricier than the average off-campus unit.
It is a familiar situation at schools around the country: As cranes litter the skylines of American universities, the conditions on the ground have become increasingly difficult for students. According to Census data, the percentage of students from low-income families enrolling in college straight out of high school has dropped since 2008, from 56 percent to 46 percent. The price of tuition has indeed increased at a number of schools, but so has the amount of grant aid for low-income students. Between the ’08-09’ and ’13-14’ school years, federal student aid grant funding increased from $82 billion to $123 billion, making the drop in low-income attendance all the more confounding. Some experts point to the hidden costs of attending college, the factors like housing, food, and transportation that are difficult to calculate from year to year, as contributing factors.
A team of researchers from the Wisconsin Hope Lab recently conducted a two-year study of first-year students’ experiences navigating the hidden costs of college across four public universities. In an email, one of the researchers on the study, Frank Vernon, said that in addition to just being flat-out more expensive than cheaper options farther away from campus, privately owned, amenity-rich dorms are often advertised, or are thought of, as being places for specific kinds of students: "students with disposable time and income for socializing, partying, and otherwise taking advantage of ‘the college experience’: an experience typically afforded to students from well-resourced backgrounds."
"This sets up two big barriers from the outset," he wrote. “These residence halls appear to be more expensive by having a higher sticker price, and they also appear to be designed with a certain kind of student in mind; one that low-income students may not identify with.”
Yasir Masood, who graduated from the University of Texas in 2015, described trekking to the Castilian dorms to eat. He told me over the phone that the food at the dorm was "significantly better" than the options at other dorms. He also noticed a trend among the students who lived at these properties.
"There’s a certain type of kid that lives at Castilian or Callaway House. And it’s not to say rich kids don’t live in regular dorms or vice versa," he said. “But being inside of there you can really tell that these places were designed for a type of kid who only wants to be around students like them.”
According to Bloomberg, which this year reviewed 94 student housing complexes across the country, 55 percent of private dorms come with on-site tanning salons and 45 percent with beach volleyball courts, while only 38 percent come with dedicated study rooms. It’s clear that the developers who specialize in these properties are catering to the desires of students who can afford to shell out the extra money to live at a 24/7 spring break playhouse. According to a paper published in 2013 by University of Michigan researchers, lower ability and higher income students have a greater willingness to pay for these amenities.
In an email, a representative for EdR described a thorough vetting process that each proposed building goes through: "Before EdR bids on a project, we perform an exhaustive market study to attain a solid picture of what rents the market will bear for the on-campus units proposed."
During that bid process, the rep wrote, a school may have specific requirements concerning affordability that would need to be addressed. Everything from the design of the building to the types of amenities offered are discussed at length with a university beforehand. "Often the financing structure is such that cash flow the university receives from operations can be funneled back into programs that help defray the cost of housing for low-income students."
In 2010, the city of Austin’s University Neighborhood Overlay (UNO), an organization founded to provide a system to create a more livable and pedestrian-friendly environment near the University of Texas, proposed increased affordability requirements for a new development EdR was building.
A representative from the company wrote in a letter to the City of Austin that an increase in "the affordability requirements of UNO would… decrease the probability of additional projects, which I can only assume is counterproductive to the city’s goal of providing more affordable housing."
EdR’s position isn’t unlike the developers in major American cities who opt to pay hefty fines instead of building more low-income units. As long as profit remains the central motivation, prioritizing students with less money seems unlikely. And while there is evidence that forward-thinking design can create more equitable housing options for students, it appears as though the amenity-rich model has taken hold of the industry.
"I think that’s really problematic entering your college experience being able to basically look down on everyone from your rooftop swimming pool," Masood said. “At 18 or 19 years old, that has to have some sort of effect on where you see yourself in society.”
