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As students flood in to head back to college, school supplies aren’t the only things in high demand. If it feels like rentals disappear faster than usual when August rolls around, you’re not wrong. In fact, July and August are some of the best months to list a rental (and some of the worst if you’re a renter looking for a place near schools).
While it can be frustrating trying to compete for a rental during back-to-school months, we also wanted to look at the overall impact student renters have on the market in Utah. Specifically, how it impacts rental prices — especially in Salt Lake, where the demand for housing is already on the rise.
According to an NY Times article, 87 percent of students live off-campus and spend about half of their income (student loan or otherwise) on room and board. That means that while there are plenty of people looking for affordable rentals, there is also an influx of people putting money into the local economy and contributing to its growth.
Impact for renters
While the effect on the surrounding economy is noticeable, the impact it has on the local rental market is more nuanced. According to this study done about the economic effect of urban colleges, in some cases having a university nearby may actually lead to lower rent prices because the housing market caters to students with smaller housing budgets.
That influence can be felt in cities like Provo, home to BYU, where rental housing costs are among the lowest in the state, with the average rent price of a one bedroom/one bath apartment coming in at just $635. Although the cost of renting an apartment in Provo rose by an average of 16 percent in 2017, Utah Valley rentals remain consistently lower than the state average (a major plus when you’re living off a diet of ramen and spaghetti).
Downtown Salt Lake City, where the housing market is already in a tight squeeze, the opposite is true. It’s not your imagination; rent prices really do increase as students start moving in. One analysis of the impact students have on the rental market suggests that a 10 percent increase in the number of college students actually increases rent in a crowded city by about 11 percent. We looked at data from Rentler listings and found that it rang true in Salt Lake City, where rent prices increased 6 percent on average last year and continue to climb.
Impact for landlords
The influx of students doesn’t just affect tenants. Landlords in cities with universities have to tailor their rental business to reflect the needs of a large student population, which can have its own unique set of pros and cons.
First, the good news.
Although apartment growth is noticeable across the state, most people in Utah aspire to homeowners instead of long-term renters. Utah remains one of the only places in the nation where the homeowner rate, currently at 60 percent, hasn’t plummeted.
This Forbes article posits that in towns where the number of people renting lags behind national averages, colleges and universities can help boost the demand for rentals and make investing in real estate a more viable option. It can also have an impact on how you purchase real estate for investing.
Real estate experts use price/rent ratio to determine the types of property to invest in in certain areas. The current rule of thumb is that a home price/rent ratio over 18 means you should subdivide (purchase a house and divide it into multiple rental units). It just so happens that subdividing is a much better bet in college towns than renting out an entire single-family home; making it an ideal market for places with that type of price/rent ratios.
In Provo, for example, the average home price is $276,800 and the price/rent ratio falls right at 18. Most people can’t afford to rent out an entire home, but creating apartments and catering to students can be a good move if you have a property investment and are interested in being a landlord in this area.
Renting to college students isn’t always easy. There’s a much higher turnover rate, which can mean you have to do repairs more frequently than if you had long-term tenants.
And now the bad news:
Renting to college students isn’t always easy. There’s a much higher turnover rate, which can mean you have to do repairs more frequently than if you had long-term tenants. Teaching first-time renters how to be good tenants can sometimes feel like babysitting; however, most of these issues can be alleviated by creating a lease catered to students.
Many landlords in a student community will opt for two lease length options — nine months and one year. They also make sure to create a different lease for each roommate. While standard leases often require one person to act as “head of household”, student leases should be created for each individual tenant living in your rental.
In addition to having a lease for each tenant, student housing landlords should include a section with information pertaining to long-term guests. For instance, no guests may stay overnight for more than five days consecutively. This will help eliminate the couch-crashing that can sometimes become problematic in student rentals.
Finally, to alleviate problems before they start, you might want to add some specific responsibility clauses into your lease that allow for cleaning checks and a maximum number of noise complaints.
