College-Area Rents Are Falling Behind as Schools Move Online

Rhea-AI Summary

As of September 17, 2020, Zillow reports that rent prices in college neighborhoods have decreased due to widespread remote learning amid the pandemic. A significant 44% of U.S. colleges are operating primarily online, causing average rents in college areas to drop by 0.5% year-over-year by August, marking the first decline since at least 2017. In contrast, rents in non-college areas rose by 2.6% annually. Landlords are responding with increased rent concessions, which have nearly doubled since February. The report underlines a shifting rental landscape, particularly affecting areas populated by students.

Positive

• Average rents in college areas fell only 0.5% year-over-year, suggesting a less severe decline than anticipated.
• Rents in non-college areas increased by 2.6%, indicating overall stability in the broader rental market.

Negative

• 44% of U.S. colleges are fully or primarily online, reducing demand for rentals in college areas.
• Average rents in college areas have decreased for the first time since at least 2017.
• Rent concessions have doubled since February, highlighting increased competition among landlords.

SEATTLE, Sept. 17, 2020 /PRNewswire/ -- Rent prices in college neighborhoods have fallen this summer as colleges and universities across the country have opted for remote learning during the coronavirus pandemic. The drop throughout college areas stands out even in a rental market that has softened across the board since February with rent price growth slowing and landlords offering more concessions. 

Data from The Chronicle of Higher Education and Davidson College show 44% of U.S. colleges and universities are operating fully or primarily online for the Fall semester, while only 27% are offering classes fully or primarily in person. A new Zillow® analysis shows reduced demand in this largely remote environment is having a noticeable impact on rents in ZIP codes in which at least 20% of the population is college students, who make up about 8% of the U.S. rental market in a typical yearⁱ. 

In these neighborhoods with a high share of college students, average rent prices were growing 4.7% year over year in February. By August, when many students would typically move back near campus, rents were down 0.5% from the year before, marking the first time since at least 2017 -- the earliest Zillow data is available -- in which college-area rents were lower than the previous year. Meanwhile, rents in ZIP codes with a lower share of college students were up 2.6% annually.

In May, the average rent was only 1% lower in college areas than non-college areas. By August, that gap had widened to 3.4% as rents continued to fall in college areas but rose elsewhere. That's the furthest college-area rents have fallen below rents elsewhere since at least 2017.

Pricier areas with a high share of college students are often seeing steeper rent declines. For example, the average rent is down 7% year over year in Boston's 02115 ZIP code that includes Northeastern University, which is made up of about 60% college students, and down 5% in the 94704 ZIP code in Berkeley, Calif., with about 70% of the population being college students. 

"The softening rental market across the country is more stark in college neighborhoods as pandemic-mandated campus closures and opportunities to complete courses online have provided motivation for young people to move back home," said Zillow senior economist Cheryl Young. "With many leases ending at the end of the summer or the beginning of the fall, we can expect even greater impacts in the months ahead. The good news for rental owners is administrators seem to be itching to bring students back to campus as soon as they can do so safely, so it's possible this will be a relatively short-term shock to rent prices." 

Rising unemployment and campus closures, among other factors, pushed about 2.7 million American adults to move back in with parents or grandparents last spring. Those numbers dwindled during the summer months, but there were still 2 million more 18- to 25-year-olds living at home in August than there were a year earlier, an 11% increase. The jump in the share of these college-age Americans living at home was sharpest among Black and Asian and Pacific Islander young adults. Nearly two-thirds (65.7%) of Black 18- to 25-year-olds were living at home in August, up from 56.5% last year. 

With demand for rentals softening, landlords are offering discounts or other incentives as they strive to attract new tenants. Rent concessions on Zillow listings across the country are nearly twice as common as they were in February. Even small discounts or short-lived vacancies can have a big impact on landlords -- previous Zillow research has shown rental owners typically spend more than half of their rental income on fixed costs of property ownership such as mortgage payments, property taxes and insurance. 

	College Areas		Non-College Areas
Month	Average Rent	Average Rent - YoY Change	Average Rent	Average Rent - YoY Change
February 2020	$1,809	4.7%	$1,825	3.3%
May 2020	$1,800	1.5%	$1,819	1.2%
August 2020	$1,787	-0.5%	$1,851	2.6%

About Zillow
Zillow, the most visited real estate website in the U.S., is building an on-demand real estate experience. Whether selling, buying, renting or financing, customers can turn to Zillow's businesses to find and get into their next home with speed, certainty and ease.

In addition to for-sale and rental listings, Zillow Offers buys and sells homes directly in dozens of markets across the country, allowing sellers control over their timeline. Zillow Home Loans, our affiliate lender, provides our customers with an easy option to get pre-approved and secure financing for their next home purchase.

Millions of people visit Zillow Group sites every month to start their home search, and now they can rely on Zillow to help them finish it — with the same confidence, ease and empowerment they've come to expect from real estate's most trusted brand.

Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG).  

ⁱ Source: U.S. Census Bureau, 2018 American Community Survey

View original content:http://www.prnewswire.com/news-releases/college-area-rents-are-falling-behind-as-schools-move-online-301132950.html

SOURCE Zillow

FAQ

What factors contributed to the decline in college area rents reported by Zillow on September 17, 2020?

The decline in college area rents is primarily due to 44% of U.S. colleges operating online, leading to decreased demand.

How much did average rents decrease in college neighborhoods according to the Zillow analysis?

Average rents in college neighborhoods decreased by 0.5% year-over-year as of August 2020.

What is the year-over-year rent change in non-college areas as reported by Zillow?

In non-college areas, rents increased by 2.6% annually.

How have landlords responded to the softening rental market in college areas?

Landlords have started offering more rent concessions, which have nearly doubled since February 2020.

When was the last time college area rents were lower year-over-year?

The last recorded decline in college area rents was in August 2020, the first since at least 2017.