College students are feeling the pain in their wallets a little more this year.
With rent and grocery prices going up, it’s adding more strain on what is already a stressful school year during the pandemic.
College towns are especially feeling it – where students typically make up most of the demand for housing.
But what happens when those students then have to compete with an influx of competitors in the housing market? That’s the conundrum the pandemic has created.
“The market is hot right now. We’re seeing double-digit gains year over year,” said Marc Moffitt, an adjunct professor of real estate at The University of North Texas.
He said home buying has gone wild in the past year thanks to the federal reserve lowering interest rates to near nothing. People have snatched up all the inventory so supply is extremely limited, forcing home prices to go up by up to $50,000 or more over asking price.
"The number of available homes for sale has declined. Folks are hanging onto those houses. There’s an air of uncertainty about the future so that’s going to limit the supply. As a result, prices are going to increase there," Moffitt said.
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Because many of those buyers are turning those properties into rentals – which they paid more for – the rent for those homes is also increasing.
That pressure – coupled with the pandemic’s general strain on the economy – is also forcing apartment rentals to skyrocket. It's also sending more people searching for cheaper homes outside of the city center.
"As a result of the pandemic here, a lot of times folks are moving out of those urban areas and they’re seeking out places in the suburbs, which happen to include college towns," said Moffitt.
And what makes North Texas unique is population growth.
"Folks are moving here from all over the nation and as a result they need a place to stay. Texas has got 1,000 or 1,500 people a day moving to [the state]. It’s the land of opportunity,” Moffitt said. “Now that you have this shift in demand, what’s happening is now those college students are not just going to be competing amongst themselves for housing – they’re also having to compete among permanent residents there for housing."
Additionally, CNCB reports that throughout 2020, many renters were able to get some COVID-19 relief with lowered rent or even months of free rent because landlords were struggling to fill empty units. Those benefits are disappearing and in turn, landlords are hiking up prices as restrictions end and housing demand spikes.
According to a survey by real estate site Realtor.com, students had been struggling to find a place to live this summer ahead of the new semester.
Between July 12 and July 17, 35% of the 500 surveyed said they wouldn't be able to afford rent in their college town and 19% are relying on their parents to help cover rent. Nearly 45% believed the current real estate market is to blame for the struggle.
"In Denton, the median home rental rate for three bedroom a little over $1,700 a month, which is pretty substantial. That’s a lot of money especially for a college student. Some of them are taking a look about adding another roommate to the mix and keep the cost down," said Moffitt.
According to a report from Apartment List, the national median rent has increased by 11.4% so far in 2021, compared with just 3.3% for the first six months of 2017, 2018 and 2019.
And it's not just happening in college towns. It's also being felt in urban areas like Dallas-Fort Worth, which are hot zones for new jobs and population growth.
Students like Andres Andujar and his friends around UT Dallas say it's become harder to find available multiple-bedroom apartments.
“It’s really kind of the downside of being in a really strong industrial in jobs area. It’s because there’s many professionals that live right next to campus. As students, we’re competing with people who have those well-paying jobs,” he said.
Their rent is also going up by hundreds of dollars.
“I know a girl, she’s a recent graduate. She saw a $500 a month increase on her lease. She was shocked and I think she’s considering breaking early because it’s just so much money,” he said.
The further students move away to find better options, the more they have to pay in fuel costs. So that leaves many with limited options.
Bel Khuu, a graduate student at UT Dallas, is even considering using a DART pass to go to school in the morning and having someone pick her up in the afternoon.
“Definitely rent is one of my biggest concerns. I am living with a roommate this upcoming semester just because of rent. My current rent is getting a huge bump, it’s about $160 bump per month and that’s huge,” she said.
Food is also another big problem Andujar said he is noticing.
He said an eye-opening moment occurred after going grocery shopping with roommates. They forgot a few items and had to return to the store.
"That second trip was around $80. It was meat and a few other things we were stocking up on," he said. "I remember a story my dad told me. He said he had to make $50 a month stretch out every year. That was the maximum amount he would spend on food. And I’m like wow, we can barely keep it under $100 a week. Granted, it’s for three people but still I feel like prices are increasing very rapidly."
So what can students do?
Getting a roommate, looking toward financial aid from school, picking up extra work, or being mindful of what you’re spending money on are ways students can find relief.
Still, Moffitt believes rent prices for homes will continue to increase somewhere between six to eight percent over the next year or so.
"And for apartment rent, probably somewhere between 4% to 6%. It’s simply the result of supply and demand. There’s a lot of demand for those types of units," he said. "Also, the rental rates are derivative of the overall value of the property, so if property values and sales prices continue to increase like they have, we will continue to see rent increases."