October 14, 2019
An Introduction to Luxury Student Housing in Canada
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If you’ve ever had the privilege (or discomfort) of living in student housing, you know that at best you can hope for a clean room that might fit a double or queen-sized bed. While the rooms may be comfortable (and some even have closets) you didn’t expect much. You were there for a short period of intense learning, and the potential issues of your living situation provided camaraderie with your fellow students, if not feelings of sumptuousness.
With the new rise of “luxury” housing for students, those discomforts could turn into elation – if you’ve got the money for it. Touted as a new stream of income for investors, a new choice for parents, and a new level of comfort for students, luxury student housing is popping up all over Canada. Its detractors, though, say it’s nothing more than gentrification pushed onto academia.
A Familiar Newness
These luxury buildings and units are very similar to other luxury developments in terms of their space, amenities, and look. There may be granite or marble countertops – quartz if you want an economy option. You may find a swimming pool and hot tub. The prices are similar, too, with luxury student housing ranging from 20 to 80
Perhaps this is why real estate investors and REITs (real estate investment trusts) like them so much: they are familiar. Investors know how to build for luxury and don’t mind doing it because luxury buyers tend to care less about the dollars spent and more about the “value” received.
Luxury student housing also addresses a key concern in the student housing business: that students will trash the place, not caring because it’s cheap and they are only there for a few years at most. A feature on luxury housing in the Globe and Mail put it succinctly: you’re not renting to students at these prices. You’re renting to parents. And that usually means higher quality tenants.
Demand drivers and detractors
In the student housing world, there are four main constituents: students and parents, schools, investors, and student housing advocates.
Students and parents
Parents usually want the best for their kids, and luxury student housing looks like a dream compared to dreary, cement-walled dorms. That alone can be enough of a motivating factor to fork out the extra cash.
Students, on the other hand, want the best they possibly can get. Amenities aside, many schools are known for slumlords charging high rents in unsafe areas of town. The thought of a clean, new building close to campus is appealing – and for obvious reasons.
Schools face increasing pressures from two sides that make them (perhaps unwilling) supporters of new development, luxury or not.
First, universities are being pressured to act like businesses. Tuitions are
Given the promises of housing that many universities offer, losing surplus funds from the government means they may not be able to afford to build their own residences. That means schools either have to back out on their promises, something that would harm their brand, or partner with private developments.
Add in the second factor – a huge influx of international students to Canada demanding on-campus housing – and suddenly private developers for student housing become all but necessary.
Put simply, investors love luxury developments. Add the fact that student housing provides basically guaranteed demand from renters who are not in a position to dictate terms of the lease, and luxury student housing is a great money maker. Further, investors have a huge arbitrage opportunity. They can buy or build in inexpensive small university towns but charge rents more commonly seen in Toronto because of the “luxury” appeal of the building.
Student Housing Advocates
The lone group solidly against luxury student housing, student housing advocates argue that many students cannot find proper housing as it is. Add in the rise of luxury buildings that house fewer students at higher costs, and advocates see them as emptying the supply of buildings that could be used to more affordably house students.
Student housing advocates also argue that increased amenities like those in luxury student housing further commoditize education, making university something to purchase and tuck away instead of a learning foundation for a lifetime.
The Luxury of Choice
In response to concerns, investors say it’s the free market. If people didn’t want more options, those options would not be built. Advocates disagree, citing a university’s obligation to house and educate students, not eat up supply with optionality for the wealthy.
In between the two sides of the argument – between profit and obligation – lies the question of a university’s place in society. If comfort is desired and could make education easier for those that can afford it, is it bad? On the other side of the equation, what does the rise of luxury student housing spell for the future of subsidized student housing? And doesn’t learning to live in a less-than-luxurious student abode build character in the long run anyway? Building resilience in students is surely a good thing — perhaps that, as much as anything, is being called into question as developers offer palatial comforts to students in luxury housing.
Stefan Palios is an entrepreneur, writer and speaker who writes for CourseCompare, Canada’s marketplace for education. Students living on-campus and off can visit CourseCompare to explore top-rated project management courses, Python courses, machine learning courses, coding courses, management courses and more.