What CRE brokers need to know about the risks and rewards of student housing
Over the next couple weeks, college students across the country will be returning to campus, moving into on-campus and off-campus housing and preparing for the new school year.
Every student not living at home needs a place to live, and this presents an interesting opportunity in the commercial real estate space.
Jeff Brown (pictured top), founder and CEO of T2 Capital Management, said his company has found an opportunity to invest in the space. However, he said it’s important for investors and brokers to assess each school before moving forward.
“I think student housing is definitely a favorite asset class and an expertise of ours,” Brown told Mortgage Professional America. “With any sort of high-level conversation about student housing, I think it's really important to separate the haves and have-nots within the student housing space.”
Brown cited a recent report from the Wall Street Journal comparing housing situations at a smaller school, Western Illinois, and a larger school, the University of Illinois. Western Illinois saw dorms razed to empty fields, while larger schools like Illinois continue to thrive.
And with the threat of reduced federal funding from the Trump administration, the market may become trickier in the future.
Assessing the risk
Brown said one of the factors they consider is what the requirements are for living on or around campus for first-year students.
“What's the mandate for students living on campus?” he asked. “Do they have the ability to live off campus? There's a fair amount of analysis that goes into it, but we've thoroughly enjoyed the student housing space. We clearly enjoy the off-campus student housing space, where it's maybe a bus to campus versus a walk to campus.”
Just like with all new construction projects right now, Brown said it’s important to make sure the numbers make sense in any new student housing being built.
“The real estate construction space has not abated on the cost side of the equation, and so any new student housing properties that are being developed right now are being delivered at a cost in which to make the numbers make sense,” Brown said. “As a for-profit developer, you're generally having to deliver at top-of-market sort of rents.
“For us to be off campus and to be able to buy properties in the secondary market that offer a much lower cost alternative to students at that given university is a really appealing investment. It’s worked out extraordinarily well for the past several years.”
While off-campus housing isn’t seeing as much mixed development, Brown is seeing colleges look for mixed development in on-campus housing. The goal is to create a small community that encourages students to spend a significant amount of time and money near their dorm room.
“Off campus is very purpose-built student housing,” he said, “Sometimes that syncs with being in the midst of a retail corridor, where you can't have a mixed-use product. But I do see the mixed-use student housing right at these locations on campus, where students want to be at the CVS or at the Target, at the restaurant, or at the bars. It is often on those main thoroughfares through campus that mixed-use student housing makes the most sense.”
Considering rising education costs
Another factor that his company is considering is the rising cost of education. In addition to federal funding being cut back, many students will be cutting back on loan products that they know they’ll be repaying upon graduation.
The challenge is finding the right cost for student housing without making it a project that you can’t make a profit on.
“Just within the past handful of months here within the United States, there was this notion that student debt forgiveness is off the table,” Brown said. “There's no longer this abatement of student debt repayment. I think it brings to the forefront the notion that prospective students need to ask themselves, ‘If I'm going to go to a given school and have a particular major, what kind of return on investment am I getting?’
“That's front and center as you think about the affordability of higher education and college and student housing, there's a meaningful component to that. I think that's a question that a lot of people are asking right now.”
Selma Hepp, chief economist at Cotality, says factors like the 10-year Treasury rate, federal debt, and economic growth can have a bigger impact on mortgage rates than the Fed's decisions alone.https://t.co/gsUpCj7RAi
— Mortgage Professional America Magazine (@MPAMagazineUS) August 5, 2025
For commercial real estate (CRE) mortgage brokers considering deals in the student housing space, Brown encourages them to research the prospective school, enrollment trends, and potential return on investment before encouraging a customer to move forward.
“It's a huge consideration for any prospective investment in the student housing space,” he said. “What are the trends on enrollment, on applications? How you assess demand for that school and enrollment applications is front and center now. That’s a really meaningful component for the underwriting of any student housing investment.”
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