Rent prices have softened in college towns as millions of Americans move back in with their parents due to the coronavirus pandemic, according to Zillow.
COVID-induced factors such as rising unemployment and campus closures have driven approximately 2 million 18- to 25-year-olds to move back in with parents or grandparents – an 11% increase from a year ago.
“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.
Around 44% of colleges and universities across the United States have transitioned fully or primarily to remote learning for the fall semester, according to data from The Chronicle of Higher Education and Davidson College. Only 27% are offering classes fully or primarily in person.
College students represent about 8% of the US rental market in a typical year, and reduced demand has a noticeable impact on rents in ZIP codes with at least 20% student population.
Before COVID-19, rent price growth in these neighborhoods was rising at a 4.7% year-over-year pace in February. By August – when many students would typically move back near campus – rents dipped 0.5% from the year before. This is the first time since at least 2017 in which college-area rents were lower than the previous year.
However, that was not the case for ZIP codes with a lower share of college students. Rent growth in these areas was up 2.6% annually.
The pandemic has also widened the rent price gap between college areas and non-college areas. In May, the average rent was just 1% lower in areas with a high share of college students than those with a lower student population. That grew to 3.4% in August – the furthest college-area rents have fallen below rents elsewhere since at least 2017, according to Zillow.
To attract new tenants and mitigate losses, rental owners in college neighborhoods have become more generous with discounts and other incentives. Rent concessions on Zillow listings nationwide were nearly twice as common as they were pre-pandemic.
On a more positive note, there is a possibility that landlords may be able to recover quickly from the downturn once vaccines are available and students can return safely to campus, according to 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,” she said. “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.”