Student Housing: The Contrarian Play Smart Investors Are Making

Let me cut straight to the chase: student housing isn't glamorous, but it's profitable. While you're reading articles about "the death of commercial real estate" and watching investors fight over scraps in oversupplied markets, student housing is delivering returns that would make your typical multifamily investor green with envy.

I've been watching this space for years, and the confluence of factors happening right now—from supply constraints to demographic shifts—is creating opportunities I haven't seen since the last cycle. But like any good investment, it comes with risks that will separate the smart money from the wannabes.

Here's what caught my attention: the U.S. student housing market is projected to grow from $22.8 billion in 2025 to $33.27 billion by 2030. That's a 7.85% compound annual growth rate in a sector most investors ignore.

The transaction data tells the real story. In 2024, only 138 student housing properties totaling 73,900 beds changed hands for $5.2 billion total volume. Compare that to the conventional multifamily feeding frenzy, and you're looking at a market with actual scarcity value.

$5.2 billion - Total transaction volume

138 properties - Total properties sold

73,900 beds - Total bed count traded

43% decrease - Sales volume vs. 2022 (excluding major portfolio sales)

This isn't a market in distress—it's a market with limited inventory and increasing demand. The kind of setup that creates wealth for those paying attention.

Let's talk performance, because that's what separates real opportunities from marketing hype:

5.5-6.5% - Current cap rates (vs. 4.5-5.5% conventional multifamily)

9.8% - Total returns (CBRE 2024 PBSA Index)

17% - Average cash-on-cash returns (2022 data)

6% - Average rent growth (2023-2024 leasing season)

10%+ - Rent growth in select markets (some exceeded 20%)

Those aren't typos. Student housing is delivering cap rates 100+ basis points above conventional multifamily, with total returns approaching 10%. In today's compressed yield environment, that spread is gold.

The University of Tennessee saw 21.3% rent growth. University of Mississippi hit 19.4%. These aren't isolated incidents—they're indicators of a supply-demand imbalance that's getting worse, not better.

I'm not here to sell you fairy tales. Student housing has legitimate advantages and real challenges. Here's the unvarnished truth:

The key is understanding these challenges upfront and pricing them into your underwriting. The investors making money in this space aren't the ones looking for easy passive income—they're the ones willing to do the work for superior returns.

Here's what's happening right now that creates opportunity:

Supply is constrained. New deliveries dropped to just 3% of total inventory in 2025, down from the historical 5%+ range. For context, 2013 saw 10.4% new supply. Developers got spooked by overbuilding a decade ago and pulled back hard.

Enrollment is recovering. Ninety-two universities tracked by Yardi Matrix saw 1.8% enrollment growth in fall 2024, up from 0.2% the previous year. The big state schools are taking market share from smaller private institutions that can't compete on value.

Interest rates are creating opportunity. Many investors are accepting negative leverage on acquisition, betting on rent growth to carry them to positive returns. This is separating serious players from tourists.

The sweet spot? Large state flagship universities with growing enrollment and limited new supply. Think major SEC schools, Big Ten universities, and other institutions with strong academic reputations and robust enrollment trends.

Here's the kicker most investors miss: after years of demographic headwinds, the trends are about to reverse.

UCAS projects higher education applications could rise 31% by 2030 compared to 2022 levels. That's not a gradual increase—it's a demographic wave that's going to hit university towns like a freight train.

Meanwhile, the supply pipeline remains anemic. We're looking at a structural imbalance that could persist for years. The universities I'm tracking have current demand for 1.49 million beds with net additions of less than 9,000 annually. Do the math.

International students are returning post-COVID, and despite immigration policy uncertainty, the U.S. remains the premier destination for global higher education. These students typically pay full tuition and need housing—perfect tenants for student housing investors.

If this opportunity interests you, here's how to approach it intelligently:

Target the right markets. Focus on major state universities with 20,000+ enrollment and consistent growth trends. Avoid markets seeing massive conventional multifamily development—they create pricing pressure.

Understand the business model. This isn't buy-and-forget real estate. Budget for higher management costs, seasonal vacancy reserves, and annual turnover expenses. If you can't handle 15-20% vacancy factors in your underwriting, this isn't for you.

Consider purpose-built vs. conversion. Purpose-built student accommodation (PBSA) commands premium rents but requires significant capital. HMO conversions offer lower entry costs but need regulatory compliance and renovation capital.

Partner with professionals. Student housing requires specialized property management, legal expertise, and market knowledge. Don't try to DIY this one.

Student housing isn't for everyone, but for investors willing to understand the business model and execute properly, it's offering returns that are increasingly rare in today's market. The combination of supply constraints, demographic recovery, and institutional investor underrepresentation creates a window of opportunity.

Just remember: in real estate, the best opportunities are usually the ones that require more work, not less. Student housing fits that profile perfectly.

This analysis is based on current market data and trends. Past performance doesn't guarantee future results. Always conduct your own due diligence and consult with qualified professionals before making investment decisions.

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Book Shelf from Brett Vogeler: amazon.com/author/bvogeler

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