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Coronavirus Tests Strength of Campus Student Housing Investments

By Rusty Tweed

Coronavirus Tests Student Housing Investments

In the wake of the coronavirus pandemic, causing the incredible amount of school closings involved, the campus student housing market is in a real struggle for survival. Even prior to the pandemic, the student housing sector has been in decline for several years due to a disproportionate amount of building relative to total enrollment.

Now, college students have been sent home due to the discouragement of mass gatherings and in-person classes. This movement has brought student housing to the brink of collapse. It is estimated that, if colleges don’t resume on-campus activity in the fall of 2020 school year, student housing properties won’t fully recover until 2022. This tacks on to the pessimistic outlook that an economic recovery from the coronavirus will take several years, rather than months.

In terms of mortgage lenders for student housing, the problem becomes even more serious. It is projected that coronavirus has affected more than $13 billion of student housing loans that have been packaged in commercial mortgage-backed securities. This trend is in conjunction with a growing student loan delinquency rate that has climbed to a shocking 10.77%, the highest in any sector.

Fannie Mae and Freddie Mac Grant 3-Month Forbearance

In response to this troubling statistic, Fannie Mae and Freddie Mac have granted a 3-month forbearance period to more than $1 billion of student loans. The student housing issue has also filtered into the real estate investment trust market.

Publicly Traded REITs are Less “Infected”

According to data presented by American Campus Communities, the country’s biggest player in student housing and a publicly-traded REIT, the coronavirus pandemic won’t have as bad of an effect on future student housing as many think.

ACC explained that students are still signing leases for fall 2020 regardless of the colleges’ plans for reopening. While this is optimistic, it is also backed by data. ACC’s housing portfolio is 82.6% preleased for next fall, which is very promising! However, despite their optimism, ACC is still prepared for a potential decrease in demand for student housing of 91,000 tenants (or students) given the uncertainty surrounding the pandemic.

The Near Future is Bleak

On top of that, it is expected that many students will take a gap year for the upcoming academic year, which may also hurt housing this fall. The future of student housing doesn’t look promising, but anything is possible.