Demand spikes for student housing, but rents dip
The market for housing for college students in the Reno area is firming up, and some investor are beginning to pay attention.
“Rentals are definitely stronger today than they were one year ago,” says Kevin Sigstad of RE/MAX Premier Properties. “Registration at both UNR and Truckee Meadows Community College has gone up. It seems to be counter cyclical. As the economy declines, as jobs are lost, particularly for young people, they tend to go back to school and with that, off-campus housing demand increases.”
All is not rosy, though. Student rents have become more competitive. And many students whose families live in the greater Reno-Sparks area have chosen to move back home or move in with friends.
“We did see a dramatic run-up in vacancy rates last year, somewhere in the 15 percent range,” Sigstad says. “But vacancy rates are falling. Unfortunately, rental rates have also come down. This is despite the fact there has been no new construction, no new multifamily units, built within the university zone.”
Rents, he says, have dropped by as much as 25 percent. One reason is that students have become smarter about their living arrangements, many banding together to rent a house where five or six of them can reside during the academic year. Sigstad says many such students will choose to sign a one-year lease because many are afraid of losing that housing during the summer months when they are not in school.
The university itself leases out off-campus housing in property it has acquired over the years. It owns some multifamily units, duplexes and single-family dwellings. Overseeing the student leasing activities is Troy Miller, UNR’s director of real estate.
“Once we pick up a property, we look to see if it can be transitioned into a dwelling that can accommodate several students,” Miller says. “For example, if we acquire a single-family home that has a couple of bedrooms, but also has a good sized family room, we can convert that family room into a couple of other bedrooms.”
The university, says Miller, owns 36 structures that can accommodate 58 individuals. Pricing varies with each piece of property. Some units rent for $350 a month while a few can fetch $600 a month. Students typically pay the equivalent of one or two months’ rent as a security deposit and Miller says the school typically has not had any major damage issues.
“Of course, you are likely to have the problem student now and then, but for the most part, they are respectful,” he says.
Like examples cited by Sigstad, Miller says vacancy rates for UNR’s off-campus properties soared to 20 to 25 percent last year, but have since recovered and now are running closer to 5 percent. “We’ve seen clusters of students who will go together and find houses at lower rental rates,” he says. “A four-bedroom house could be rented last year for well below the rental market and often that would leave a vacancy in our one and two bedroom units. That has since corrected because some of those homes that became rentals because owners could not sell them have now begun to sell.”
Investors are also nibbling around to see if there are properties available that would generate cash flow from students choosing to live off-campus.
“I just met with an investor last week and they are hunting for good returns near the university. There are good properties out there,” Sigstad says. “And interest rates are at an all-time low.”
On-campus dormitories, meanwhile, will house about 2,000 UNR students as the semester begins Aug. 23.
Typically, the residence halls are fully occupied by the time the fall semester begins. But last year saw fewer freshmen students move into the halls than college officials had estimated. It may have been an anomaly, they say, caused by tough economic times.
“We did have a decrease in our freshmen at the residence halls,” says Rod Aeschlimann, director of residential life, housing and food services for the university. “We did not see much of a change in our local population who chose to live in the halls, but we did see a significant drop from students who were coming in from the Las Vegas area.”
Aeschlimann believes the residence halls will fill up this season and one reason is that the university intends to add an additional bed to each room in the newest dorm, Argenta Hall. “Argenta’s capacity has been at 500 students,” he says, “but by adding an additional bed, could be expanded by 250.” This would also reduce the overall student cost from $6,100 to $4,750 for the academic year.
The cost savings has not been lost on parents.
Months into the pandemic, many states and regions are in stages of recovery, some slower than others — and Reno-Sparks is in a much better position than most, says Sacramento financial analyst Sanjay Varshney.