Do new student rentals affect other housing submarkets? Evidence from Champaign-Urbana
This paper explores the relationship between student rental housing and other submarkets. I use Champaign-Urbana, Illinois as my case study area — home to the flagship University of Illinois campus. I examine university enrollment data from 1980 to 2018 to track demographic changes in the student population. Then I use decennial census and American Community Survey 5-year estimates from 1990 on to determine the spatial distribution of student renters over time. Finally, I examine shifts in the distribution of rents to determine how the movement of students has affected what Champaign-Urbana’s landlords charge across the metropolitan area. I find evidence that a highly visible expansion of luxury student housing since 2008 in Champaign’s university adjacent Campustown area has thus far accommodated student growth without spillover to other neighborhoods. Over the past four decades, enrollment at the University has increased rapidly, with much of that growth due to international and out-of-state students, and particularly students from Asia. This occurred parallel to substantial tuition increases — a reaction to decreasing state appropriations for higher education. Because international and out-of-state students pay higher tuition rates and are less likely to receive financial aid, I infer I that they also have access to enough income to afford high rents. As enrollment skyrocketed, decades of public investments and regulatory decisions by the City of Champaign enabled the development of new, high-rise housing in Campustown. This included infrastructure upgrades that nullified the risk of flooding in the area, which lessened risk for developers seeking to build large-scale projects. Together, this incentivized denser development near campus. Areas of Champaign-Urbana with more constrained land use regulations did not see a similar increase in student renter populations, although the neighborhood just north of Campustown has begun to attract more students than in the past. As Campustown has absorbed higher densities of student renters, I also find areas near campus contain disproportionate numbers of housing units in the top rent quartile for Champaign County. Rents in the area often top $1,000. I conclude that the student housing boom that began around 2008 and continues today is a direct builder response to the University’s courtship of upper-income students from the U.S. and abroad. This boom has added a new segment to the metropolitan housing market, essentially making room for new students close to campus with little spillover into surrounding areas. As this boom occurred, the City’s regulatory, infrastructure, and placemaking actions funneled growth to one neighborhood. Because student demographic changes have an impact on housing demand, planners in college towns may benefit from increased coordination with University administrations. In addition, flexible land use regulations, along with strategic investments in infrastructure, can make certain neighborhoods favorable for student housing development, thereby shielding nearby residential areas from the effects of studentification. That said, planners should be mindful of which boundaries to student neighborhoods are most porous, especially since luxury student housing can push rents upward — something that could have negative effects for existing residents.
studentification, rental housing submarkets, housing, higher education, student apartments, land use, urban planning
University of Illinois - Urbana-Champaign
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University of Illinois at Urbana-Champaign