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The Rise in Private Student Housing

August 12, 2014
The Rise in Private Student Housing

College enrollment has exploded in recent years, but campuses and college towns have struggled to keep up with the sharp increase of incoming students. The lure of student housing for builders is simple: as college enrollment explodes, jumping up 38% to 20.4 million from 1999 to 2009, and as kids stay in college longer to graduate, the need for on-campus and near-campus housing has never been greater.

We recently finished 33 Degrees North in Denton, Texas, with Fountain Residential Partners. In a recent interview with GlobeSt.com, Fountain President Brent Little explained that when it comes to selecting a campus to build near, the main concern is how much demand for student housing exists in the area. Additionally, the amount of existing inventory is another factor. For example, there may be a surplus of four bedroom units, but the market is lacking in one and two bedroom product. It is important to take into account what type of product is already available in the marketplace. Another large factor to consider, which is often overlooked at first glance, is barriers to entry.

Public universities across the country are increasingly turning to the private sector to build and finance on-campus dormitories due to tightened state budgets coupled with demand for a college education at its peak. Private companies are investing their own money in these deals, an attractive option to universities that lack capital and want to avoid debt financing altogether.

More colleges have also entered into public-private partnerships to address concerns about maintaining their aging stock of student housing and put more resources to their core mission, academics. While some institutions have met the increased demand for housing by utilizing their own resources for construction, many institutions are limited financially or legally from expanding their campus housing.

According to New Mexico State University housing director Julie Weber, “[t]raditional funding for housing construction comes from revenue bonds, which require the self-sustaining housing department to take on debt, which then means higher housing rates for students.” Public-private partnerships can help keep rents low. Additionally, private companies can also build student residences more quickly without the restriction of university procurement codes.

One of KWA Construction’s first student housing projects was a privately-funded student living community for Austin College in Sherman, Texas. In order to provide upper classmen with housing options on campus rather than having to find housing elsewhere off campus, a group of Austin College alumni banded together to make their alma mater better by engaging KWA to build two projects for upperclassmen simultaneously. These projects became The Village on Grand and The Flats at Brockett Court.


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