The student housing market remains more resilient than other real estate sectors. Steady enrollment demand, annual lease renewals, and a slowdown in new construction support its stability. Investors are paying attention as financing conditions improve and rents return to pre-pandemic growth rates.
Will Baker, a managing director at Walker & Dunlop, said rent increases have settled into a “normal 1-3% range,” down from the 7-10% spikes seen in recent years. The adjustment helps align buyer and seller expectations, though transactions remain selective.
Financing adapts to persistent borrowing costs
Borrowers are changing their strategies due to higher interest rates. Many now choose five-year fixed-rate loans instead of floating-rate debt, valuing rate certainty over short-term flexibility. The shift reflects a broader market trend where refinancing has become more common than sales.
“We have more banks, life insurance company lenders, and debt funds than ever before in the student housing space,” Baker said. “Agency caps on student housing are effectively gone, so Fannie Mae and Freddie Mac are very much back in play.”
Christopher Epp, another managing director at the firm, said buyers now focus on “day-one economics.” They require even leverage or a spread-to-positive leverage—terms some sellers still resist. “If a seller has adjusted their mindset, deals happen,” he said. “If not, refinancing is the alternative.”
Investors favor strong fundamentals
While capital is returning to the sector, it flows toward properties with clear advantages: proximity to campus, newer construction, and limited nearby competition. Epp noted a well-positioned asset can attract “10 serious bidders,” but underwriting has grown stricter.
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“Equity firms are scrutinizing deals closely,” he said. “The approach is disciplined.”
Recapitalizations are also increasing, especially for high-value developments. Firms with in-house management platforms prefer to retain assets, collect development fees, and maintain assets under management rather than sell. “This makes sense given the current cycle,” Epp said.
The next two years may see a surge in financing activity as five- and 10-year loans come due. Higher interest rates have already pushed more owners toward refinancing, though Epp clarified the trend isn’t driven by distress. “It’s a practical response,” he said. “When the next wave of debt maturities arrives, sales activity will rise.”
For landlords, the ability to choose between selling, refinancing, or recapitalizing has become essential. The most successful operators are adaptable, evaluating all options to determine the best path. That flexibility can mean the difference between holding an asset through volatility or missing an opportunity.
The market’s strength isn’t consistent across all properties. Those in weaker markets or with aging infrastructure struggle to attract interest, even as prime assets draw attention. The gap between top-tier and secondary properties is growing, which may reshape the sector in the coming years.
Operators who prioritize adaptability over rigid strategies are better positioned to handle these changes.
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