Strong market fundamentals and resurging demand make well-located student housing highly attractive for investors and lenders, despite concerns about a potential future “enrollment cliff.”

Key Takeaways:

  • Well-positioned assets with higher projected rents near schools with enrollment growth are positioned to offset higher operating costs.  
  • Increased enrollment – aided by an influx of international students – is a demand driver, though concerns weigh on future demographic and policy trends.
  • Despite a slight pre-leasing cool down for the 2024-2025 school year, the U.S. student housing market is supply constrained and poised for continued growth.
  • Agency and bridge lenders have stepped up to fill gaps as banks pull back and capital markets recalibrate.

The U.S. student housing market is having a post-pandemic Renaissance moment.

With enrollment at leading universities surpassing pre-pandemic levels and showing signs of persistent growth, owners and developers of student housing properties are well-positioned to capitalize on the rising demand for high-quality assets in prime locations. In fact, student housing has shown its resilience to economic fluctuations in recent years and has outperformed other residential asset classes by offsetting higher interest rates and operating costs with outsized rent growth. This brief outlook will explore demand drivers, market fundamentals, development trends, and financing strategies so you can make informed decisions on this evolving sector.   

Fundamentals Remain Strong, Sector Poised for Continued Growth

Though the number of 18-year-olds in the United States is slowly declining, and some research suggests an “enrollment cliff” is on the horizon, the most recent data from the National Center for Educational Statistics projects that overall postsecondary enrollment is expected to increase 8% between 2020 and 2030, aided in part by outsized growth in the share of students of color. That steady growth is just part of the equation, as the total number of international students increased by 7% in 2024 alone to a record high of 1,127,000.[1] This is a long-term trend that’s largely due to the rise of the global middle class, which is expected to hit 5.2 billion people by 2030 – roughly 65% of the total global population.[2]

This demographic shift, driven largely by China and India, has reinforced the appeal of student housing as a stable and high-performing investment opportunity. It is no surprise now that global investors – particularly from Canada, the Middle East, and Asia – have joined the U.S. investment community in seeing student housing as a bedrock asset class, especially in the Sunbelt.

While annual student housing transaction volume is expected to remain in the $5.5 billion range for the near term after hitting a cyclical peak of $22.8 billion in 2022[3] (aided then by low interest rates and several major portfolio sales), the outlook for the industry is strong. This is especially true for markets with a concentration of the tier one “Power Five” schools that dominate the ACC, Big Ten, Big 12, Pac-12 and SEC athletic conferences.

While overall market pre-leasing activity was slightly slower than last year’s record levels, nearly half of the top 32 Power Five schools (all schools with an enrollment of over 25,000 students) saw pre-leasing activity for the 2024-2025 school year surpass the year prior.[4] Top performers were University of Missouri, University of Minnesota, and University of South Carolina with respective 8.5%, 7.7%, and 4.3% growth in pre-leasing activity. Even more impressive, the top 32 schools averaged 4.7% rent growth, with eight schools achieving year-over-year rent growth in excess of 10%. Top rent growth performers were University of Tennessee, Ohio State University, and University of Kentucky, with respective 14.5%, 12.5%, and 12.4% annual growth.  

Shifting Supply Dynamics: Deliveries Slow, Development Evolves

One factor supporting strong occupancy and rent growth is a slowdown in deliveries. There were 6% fewer units completed in 2024 compared to 2023, and the annual industry-wide supply is expected to drop below the 10-year rolling average of 40,000 beds for the near term. 4 That’s not to say that the pipeline is slow – there are 26,000 off-campus units under construction at the top 32 schools, a figure that represents 6% of the total stock.

As with the greater multifamily market, the construction pipeline is patchy. Some large rent growth schools like Auburn University (11.9%) and Louisiana State University (11.6%) have no new off-campus beds under construction. On the other hand, in addition to topping the rent growth list, University of Tennessee also has the greatest share of housing under construction, with over 3,300 beds (35% of existing stock) set to deliver over the next two school years. A single development project – Hub Knoxville – is responsible for 2,000 of those beds. Core Spaces and Schenk Realty Group are co-developing the mixed-use project, which topped off this summer just steps from campus. With 30,000 square feet of retail space including a university-run off-campus dining hall, 23,000 square feet of interior amenity space, and a 19,000-square-foot rooftop terrace with a basketball court, pool, and hot tub, Hub Knoxville is emblematic of the latest generation of student housing development.

Contemporary trophy student housing resembles more of an upscale urban hotel than the resort-style spread-out grounds and lazy-river pools of the prior development wave. While 2010s-vintage student housing may have offered a jitney to campus as an amenity, the communities that are closest to campus will have a clear competitive advantage in today’s market. Properties built a mile or more away from a university—even top-tier assets designed for students at top-tier schools—can become an underwriting risk and a red flag for many lenders. 

Securing the Right Financing Strategy

While elevated interest rates and operating costs present ongoing challenges for many borrowers, financing options for student housing owners and developers run the gamut in 2025. No longer a niche asset class, life companies and investor-driven groups are becoming increasingly involved, especially in the top Power Five markets. The CMBS market is also an option for borrowers looking for more leverage, but a rate premium will accompany those proceeds. National, regional, and local banks are still major players, though, as with the traditional multifamily side of the business, they have begun to pull back. Bridge lenders are stepping in to fill capital gaps for assets in lease-up or renovation phases. These loans enable developers to stabilize properties before transitioning to efficient agency-backed permanent financing, though they come with higher interest rates and shorter terms.

For stabilized assets in need of acquisition financing or a refinancing, the agencies Fannie Mae and Freddie Mac remain attractive options for long-term financing. Their offerings include loans ranging from $5 million to $100 million, with average loan-to-value (LTV) ratios of 65-75% and amortization periods up to 30 years. These parameters provide stability, but understanding the nuances of these programs can create competitive advantages. For example, in 2025, both agencies are increasingly prioritizing assets with strong pre-leasing metrics and close proximity to tier one universities with more than 10,000 students. Owners should proactively present robust operational histories – including 80% or more of leases with 12-month terms – and strong market analyses to secure the most favorable loan characteristics.

In an example of a successful transaction from earlier in 2024, Lument closed a $64.6 million Freddie Mac loan to refinance Nine East 33rd, a 568-bed, 2016-built student housing property located adjacent to the Johns Hopkins University campus. The loan features an attractive five-year, fixed-rate term with interest only, and allowed the borrower, a repeat Freddie Mac client, to exit short-term financing taken on when the property was acquired in 2021. 

With so many options for financing student housing properties, there is a product and structure out there to match every asset and business plan. The key will be working with a lending partner who can access the full range of capital solutions available and structure the right loan to best support an investment thesis.

Conclusion: Looking Ahead to Future Growth in Top Markets

Student housing is enjoying a strong resurgence. The sector remains supply-constrained, with top-performing schools achieving significant rent and pre-leasing growth. New construction trends, favoring luxury, amenity-rich developments near campus, further bolster the sector’s appeal and competitive edge. However, the decline in the number of 18-year-olds should be closely tracked, as an enrollment cliff could lead to localized consolidation, especially amongst the smallest schools (roughly a third of U.S. colleges enroll less than 1,000 students).

Financing options for student housing are dynamic, with agency lenders, bridge loans, and investor-driven capital stepping up as traditional banks recalibrate. Securing favorable terms requires a deep understanding of the nuances of loan programs, pre-leasing metrics, and market dynamics. Whether you’re navigating acquisitions, refinancing, or development projects, aligning with the right financial partner is critical for success.

[1] U.S. Department of State’s Open Doors Report, 2024.

[2] Brooking Institute, The Rise of the Global Middle Class, 2023.

[3] MSCI Real Capital Analytics.

[4] Yardi Matrix.