Darren Vanecko: The Privatization of Student Housing in Canada

by Scott Reid

Up until the late 1990s, the student housing market in Canada went relatively untouched by private investors. Aside from a few early-to-market REITs, there was very little investment interest within the niche student housing market. The only large players were colleges and universities themselves, who had very little competition, aside from a handful of apartment buildings and independent landlords. However, the competitive landscape of student housing in Canada has been going through a period of evolution, as private investors are changing the game.

For a great deal of time within the Canadian student housing market, colleges and universities were the only providers of purpose-built student housing; there really wasn’t any competition. As Glen Weppler, chief housing officer at the University of Waterloo says, “Competition is not something we are accustomed to in our work as campus housing professionals.” Competition is something that was largely unfamiliar and practically nonexistent to on-campus and school-affiliated student housing. It wasn’t until fairly recently that competition heated up as private investors upped the ante in the student housing market.

So why are private investors suddenly showing interest in the Canadian student housing market? Well for one, private investors saw a major void that needed to be filled, as enrollment was increasing but the amount of student housing beds was not.

In 2014, Rental Housing Business magazine published their Student Housing Report, citing that there were 898,400 full-time students pursuing an undergraduate degree in 2013. Of these 898,400 students, about half required student housing – that’s nearly 450,000 students. According to a survey conducted by Canada Mortgage and Housing Corp., only two thirds of post-secondary institutions in Canada own student housing (including both on- and off-campus). Virtually none of these schools are capable of housing their entire student body. In most cases, school-operated student housing is only guaranteed to first-year students. This is the void that private investors sought to fill.

Many colleges and universities across Canada have a limited amount of on-campus housing; building more often requires a great deal of capital. This is perhaps why there is such a low percentage of students living on-campus in Canada.

Back in 2011, the Canadian University Survey Consortium cited that only 16 percent of undergraduate students in Canada lived in on-campus housing. This percentage has moderately increased since 2011, but it still remains clear that a significant portion of students in Canada live off-campus. Furthermore, the off-campus housing market remains relatively untapped by academic institutions, as only a handful of Canadian colleges and universities own off-campus housing, in addition to on-campus properties. On the contrary, private investors are increasingly trying to carve their way into the on-campus housing market. 

A relatively new trend that is takin­g place in the Canadian student housing market is the introduction of public-private partnerships. This style of partnership has existed in the United States for some time now; EdR and American Campus Communities boast many successful public-private partnerships with American schools. In contrast, Canada doesn’t have as many public-private partnerships in student housing. However, there are a few notable players such as Campus Living Centres. It would be fair to predict that this type of partnership will continue to become more popular and prominent with Canadian colleges and universities.

Private investment is bound to continue increasing in the Canadian student housing market. While still in its infancy, it’s proving to be a profitable niche market. A recent report published by PWC entitled Emerging Trends in Real Estate 2014 (Canada Edition) stated that in the rental market for the lower age demographic, some investors favor student housing “…because it’s not cyclical” and “…because most colleges no longer build new dorms, the sector will remain strong.”

The demand for student housing remains quite strong in many Canadian college and university towns; often in many cases, the demand exceeds the supply. According to Henry Morton, president of Campus Suites, most Canadian markets are desperately short of purpose-built student housing. There are three cities that are overbuilt, however: Waterloo, London and Oshawa. Consider the fact that there are only about 18,000 privately built student housing beds across Canada, 9,000 of which are located in Waterloo, Ontario. Aside from a handful of overbuilt cities, the vast majority of markets simply don’t have enough dedicated student housing accommodations. As long as this continues to be the case, it’s fair to project that private investors will continue to build and invest.

To conclude, private investment interest has reached unprecedented levels in the Canadian student housing market within the past decade. It would be reasonable to estimate that the number of privately-built student housing beds will increase by the thousands in the next few years.  It would also come as no surprise if more public-private partnerships were formed, alleviating colleges and universities of the sole-responsibility to finance, build and manage student housing properties. Time will tell, but the future looks bright in privatization of student housing in Canada.  

— Darren Vanecko is president and CEO of Places4Students Inc., a company specializing in providing colleges and universities with off-campus housing solutions.

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