Privately owned and developed student housing, which has a 20-year track record in the U.S., is finally taking root in Canada.
“It is a growing market with remarkable opportunities yet there is very little information about student housing in Canada,” said Derek Lobo, owner of Rock Apartment Advisors Inc. which hosted a May 7th symposium in Brampton, Ont., dedicated to the topic.
“There is a higher square foot rental for student housing than other kinds of rental. While another rental property might earn $2.5 per square foot, student housing will earn $3.5 per square foot,” said Lobo, who added that student housing has greater operational demands than other types of rental but “if you understand this market there are big gains to be made.”
Lobo cites the easing of rent control legislation in Ontario, a portion of the student population with more disposable income than ever before and a willingness to pay top dollar for a conveniently located residence for an expanding student housing market.
There are currently more than 800,000 students attending colleges and universities across Canada, with that number expected to grow to a million by 2021, according to the symposium brochure.
“There are a growing number of international students and 100 per cent of them need housing,” added Lobo.
Student housing building located at 260 Regina St., Waterloo, Ontario
Thousands of new units in Waterloo
“To say there is not much student housing in Canada would be true except in Waterloo, Ontario,” said Lobo.
In the past five years there have been 1,600 university housing units constructed in the Waterloo area, according to senior planner Ryan Mounsey with the City of Waterloo.
In addition, there are more than 1,500 units under review by the municipality for a total of 3,000 units that are completed or proposed for development.
There are five beds per unit, a term used to define student housing density by the municipality, translating into about 15,000 beds.
One in five Waterloo-area residents is a student with 68,000 enrolled in a college or university, Mounsey added in pointing out the demographic support for the student housing market.
The Waterloo area’s thriving economy also includes an extensive hi-tech industry and “hi-tech eco-system.”
The City of Waterloo, which expects to receive $118 million to build a LRT line, has seen more than $1.8 billion of construction value in the last five years, said Mounsey, who attributes a third of that total to student housing.
Waterloo’s traditional off-campus housing of a “bungalow” or a four-plex to a twelve-plex is being replaced by new buildings Mounsey described as up to 20 stories high with one to three buildings in a block containing up to 1,500 beds.
Wilfrid Laurier’s housing guarantee
Wilfrid Laurier University’s 14,500 students are largely based in Waterloo with smaller campuses in Milton and Brantford, said Wayne Steffler, the assistant vice-president of administration.
The university has plans to grow all three locations to provide education opportunity to 12,000 to 18,000 students apiece. It currently owns and manages a portfolio of student housing, most of which the university has developed on its own.
Wilfrid Laurier’s mandate of guaranteeing accommodation to all first-year students is facing some challenges, Steffler warned. One problem is that Laurier would rather use its borrowing capacity for academic programs rather than housing and secondly it is a landlocked campus with few development sites.
After looking at several ways to develop new student housing, Laurier is now considering a “land lease” model similar to one used by Vancouver’s Simon Fraser University and the University of British Columbia, Steffler said.
“Laurier is concerned that the market is over-estimating growth for student housing in Waterloo,” said Steffler. “What happens to rental units beyond the area close to the campus?”
Five-bed units have also had social problems the university is obliged to resolve and parents who have purchased condos in the city may lose money on their investments.
The Laurier representative urged student-housing developers to consult with the university prior to making any development plans. An RFP process imposed on universities by the province, requirements for fire suppression and fully accessible buildings are all top priorities for the university, he added.
Student housing in the U.S.
The Ambling University Development Group, based in Valdosta, Ga., has been involved in developing on-campus and off campus housing since 1997. It is now in 20 states and currently has 10 projects under development.
Diamond Realty Investments Inc., based in Irving, Texas, invests in student housing and works with development partners and managers. It has invested in multi-family housing since the early 1990s and in student housing since the late 1990s and now has an interest in more than 10,000 beds.
Representative Armand Charbonneau said Diamond pursues student housing projects with full kitchens featuring granite counter tops, stainless steel appliances, full-size washer and dryer and “bed bath parity” furniture as well as recreation facilities that can include swimming pools and sandlot volleyball facilities. Diamond is involved in sites as far as five miles from campus and when vacancies became soft, bus transportation to the campus has been arranged to boost rentals.
Charbonneau described the cash flow from student housing as “spectacular” with a “9 cash on cash return” making it attractive to pension fund investors.
One notable difference between Canadian and U.S. student housing facilities were parking ratios: the Waterloo requirement is one parking place for every five beds while in the non-northern states a one-to-one or better parking ratio is the norm.
Student housing challenges
Student housing is a “location sensitive business” according to Lobo, and “in Canada most universities tend to be urban locations where new housing sites are difficult to find.”
Converting hotels, office buildings and even shopping plazas were some of the proposed solutions.
Unlike regular rental housing which includes an opportunity to market a building year round, student housing rental revolves around the beginning of the school year in September.