A once-lucrative market is in the throes of COVID-19 confusion
Once upon a time—2019, to be exact—real estate experts were touting the stability and strength of the off-campus housing market. Long overlooked, the student housing sector was enjoying tremendous growth—reaching an investment volume of $11 billion, a number which had “more than tripled since 2014.”
The great appeal of entering this sector comes down to two key items. First, the variety of properties, from single condos and duplexes to multi-family properties, means there is something for every investor level. Second, off-campus housing has a history of stability. University enrollment tends to remain consistent in times of market volatility and during economic downturns.
As long as there are students, there is always a need for housing.
When the economic hiccup is pandemic
Experts could never have predicted college life in 2020 and the drastic change in education during the COVID-19 pandemic, however. As large and small group gatherings were discouraged and/or forbidden, as businesses shut their doors, and as cities quarantined, universities and colleges followed suit. Classes were canceled. Dorms evacuated. Students returned home to live with their families and resume coursework in an online world.
Many students in off-campus housing faced a particularly tough challenge. Without access to university services and with the loss of both off- and on-campus jobs, many of them returned home. Others worked out plans to quarantine with a friend. Either way, apartments—with leases ending at the end of the spring term or in August—became nothing more than storage units away from home.
Financial consequences and an uncertain fall semester
The result has been a significant financial challenge for both students and landlords. Many owners and property managers worked with renters to waive late fees and pointed them toward assistance resources. However, many students still have to pay rent on what is essentially a vacant property. And at the moment, the fall 2020 semester will most likely not provide answers that will satisfy all parties.
By April, many students were already making housing arrangements. Leases set to begin in September 2020 have already been signed and deposits made—but as the summer months progress, there remains a giant question mark about what else COVID-19 will deliver, especially as states and cities begin the delicate task of re-opening.
The re-opening process, as of this writing, is still new. With anti-mask and anti-social distancing protests growing, it has yet to be seen if these movements or the phased re-openings will result in a second wave of infections before the start of the fall term.
Universities, reeling financially from the on-campus housing refunds of the spring semester, will have to weigh re-opening with remote instruction. Efforts to start classes will require a redesign of the college experience. Some of these changes and issues will likely include:
- Limiting enrollment in courses and lecture-hall seminars.
- Implementing single-occupancy dorm life.
- Canceling overseas study programs.
- Grappling with a loss of international students reluctant to attend college in a nation with more COVID-19 cases and deaths than any other country.
For owners of off-campus housing, this uncertainty can roll either way. If colleges remain closed and resume online courses, the need for off-campus housing will again be at a minimum. Broken leases, cancellations, and sublets are sure to follow. But if classes resume, the combination of single-dorm occupancy and U.S. students now unable to study abroad may help spur demand for off-campus living arrangements.
The prospects for investors interested in the off-campus housing market
While no one really knows which way the COVID-19 wind will blow, each university is making its own decisions on approaching the fall 2020 semester. As long as there are students, there will be some need for off-campus housing—either for this term or in academic years to come. And there are a few key issues for investors to keep in mind:
- Many students are first-time renters, which means they may not have the references and credit histories often required before leasing. Similarly, college students may not have a basic understanding of proper rental management, and they have a reputation for placing a lot of wear and tear on a property. In other words, this can add up to a more challenging property management experience.
- It’s not uncommon for parents to co-sign leases, and the impact of this can have benefits and drawbacks. Some parents may be absent while others micromanage, and many offer the financial stability that ensures compliance with the terms of the lease. No matter the case, a landlord can expect to be dealing with multiple parties for a single unit.
- COVID-19 has highlighted the need for greater maintenance of common areas, such as pools, fitness centers, lobbies, and mailboxes.
- This is an opportunity for landlords to review leases. Under the present health crisis, it may be wise to consider a no-party clause (or to limit the number of guests) in light of social distancing guidelines and to protect the lessee and other tenants, as well as the overall condition of the property.
Morris Southeast Group is in this with you
Like many of you, Morris Southeast Group is looking forward to the day when COVID-19 will be history. Until that happens, we must adapt to conduct business in this new normal. And our team is here for you. To learn more about what Morris Southeast Group can do for you now and in the future, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.
Tags: COVID-19, Financial consequence, quarantined, social distancing guidelines
