The American gentrification story will sound familiar to many: A historic neighborhood, home to traditionally transit-oriented apartments and modest single family homes, slowly becomes destitute and outdated as the automobile era drives population away from city centers. The neighborhood becomes derelict and neglected, but eventually, the bohemian counterculture — the artists, performers, musicians, and designers of a creative class — occupies and slowly kindles mainstream interest back into the area. Aside from retired, amenity-seeking empty nesters moving back into urban areas, most of these newcomers are young adults. There is a trend in these urban population shifts that is not often discussed — the study of college-aged students and their corresponding living patterns. Unlike other burgeoning urban neighborhoods, students occupy and dwell in a unique, confined location in close proximity to their college campus.

Land-grant universities like the University of Minnesota were commonly located in centrally-located cities within their respective states, and many slowly transitioned to rely on their respective college for economic growth. As enrollment increased, the pre-automobile era neighborhoods in close proximity to the classrooms slowly became student-occupied. Recently, a new form of student-focused gentrification has arisen, breaking the decades-long trend and stereotype. New amenity-filled apartment buildings, almost exclusively advertising to students, are being constructed close to college campuses. One would think this form of student-centric gentrification — “studentification,” as some scholars have defined and acquiesced — would follow the path of the gentry and price original populations out of the area.

However, if the original population of these college neighborhoods were historically occupied by a similar group for decades, are students simply pricing out other students?

Hypothesis

In a unique, demand-constrained market that college neighborhoods establish, the supply of housing fluctuates and increases based off of targeted students’ lifestyle desire. Normally, increased population density through the construction of dense dwelling units would continually attract population; however, the desirability to live in a student neighborhood is likely limited, and has been shown to appeal to students only. Therefore, the population in college neighborhoods is consistent with student enrollment, and does not increase as rapidly as would be observed in a traditionally gentrified area. I hypothesize that as the quantity of upscale student housing supply increases, the interest in older housing stock proportionally decreases. I estimate that these new, amenity filled units might have more allure to students and their parents. This may result in a situation where landlords who control the older stock need to lower prices or renovate property in order to compete with the new apartments. Unless the landlords have the capital to renovate outdated properties, rental rates will decrease, allowing thriftier students to realize cheaper living situations at little consequence.

Due to the unique student housing market, many landlords may attempt to sell their now obsolete cash cow, and since the desirability of the area is low to non-students, home sales prices may also decrease. In the long term — and past the scope of this post — the trend to commute to campus from distant areas may become less popular, and the amount of students living near campus could increase. However, assuming enrollment stays constant or grows at the slow rate that it has been over the past several decades, a housing saturation point will be reached, and the restricted nearby population will create a hyperlocal and highly competitive rental market.

Current Trends

Social and economic controversy has arisen in this new development phenomena in college neighborhoods around the country, with opponents citing many concerns that have paralleled common gentrification fights. In Madison, WI, residents in the student-majority Mansion Hill neighborhood fought a proposed development that would include 59 units and tear down an old apartment building called the Highlander House. In November 2013, opponents cited the higher costs, the removal of existing affordable units, and the effect of the construction on the historic nature of the neighborhood as main concerns. Meanwhile, the city council in Iowa City, IA — home to the University of Iowa — proposed a zoning ordinance in February 2012 that would limit the number of bedrooms in new development apartment units from five to three. This proposed change originated from the fallout of three student housing proposals that were cancelled in response to large opposition from neighbors. Jeff Davidson, the city director of Planning and Community Development, was quoted in a February 17, 2012 article from The Daily Iowan, stating that “the projects were very controversial… (they) involved taking out older buildings and replacing them with large student apartment buildings.”

In Minneapolis, a visible student housing boom since 2010 has put the surrounding college neighborhoods on edge and has made long-time residents weary of the rapid change. The construction boom has progressed in the past five years, and has bucked a decades-long trend that the University’s enrollment consisted primarily of long-distance commuters. After several similar projects came to fruition with little opposition, tensions flared when Minnetonka-based Opus Development proposed a six-story, 140-unit, mixed-use building in the quasi-historic Dinkytown business district on the northern edge of the University of Minnesota. Local business owners and a few long-time residents created a group called “Save Dinkytown” to combat the proposal from coming to fruition; in a June 2013 op-ed in the Minneapolis Star Tribune, a leader of the Save Dinkytown movement requested citizen action to “preserve the historic and eclectic character of the four-block Dinkytown commercial district.” The author also stated that only well-off students could afford the complex — providing attention to the odd fiscal divide between parent-backed “wealthy” students and financially struggling students. The building was approved in a controversial vote by the Minneapolis City Council on August 2, 2013. The building was completed in August 2014.

In addition to the Opus project, several large developments opened for the 2014-2015 school year, including the 215-unit “Metro Park East” project, a 337-unit project called “The Marshall,” and a 211-unit project called “The Bridges.” This large influx of apartments has driven visible competition for tenants. In an October 2014 Star Tribune article, it was revealed that the owners of Metro Park East hope to be three-quarters leased by the end of the year — a low estimate compared to previous projects’ lease-up numbers. However, the article also quoted local developer Kelly Doran, who believes that the percent of students that live near campus has increased from 25 to 60 percent in one generation.

Methods

Due to the local importance and media coverage of the many new student housing projects, the student neighborhoods around the University of Minnesota were utilized as the main study site. Property-specific rental information in college neighborhoods that primarily consisted of 18-20 year old individuals within one mile of a campus boundary were used. These areas consisted mostly of the Marcy-Holmes, Southeast Como, and Prospect Park neighborhoods in Minneapolis.

Juxtaposing individual rent listings, general vacancy rate trends were researched on a census block basis to attempt to reaffirm trends. Vacancy rates were found from 2010 Census data and 2012 Census estimates, and PolicyMap was utilized to extract and map the data. This data allows for either further confirmation or heightened discrepancy in trends. To cross-analyze further student rental trends, other college-focused cities that have had new student housing projects completed in the past five years were also studied. Three cities that host Big Ten universities were studied: Madison, WI; Iowa City, IA; and Champaign & Urbana, IL. Census block groups from student neighborhoods in Minneapolis were also utilized. The blocks were chosen in a similar fashion as the individual property research and took vacancy information from areas where the 18-20 year old demographic consisted of more than 10% of the total population. The vacancy rate data for these college-specific blocks was compared to citywide vacancy data in order to attempt to demonstrate the former blocks’ volatility.

To find individual property rental listings, the real estate website Zillow.com was utilized. Zillow uses both user-listed advertisements as well as data from public record sales and other websites to compile intricate property information lists. Although a limited number of properties have extensive Zillow profiles, those that do have historical rental listings and rent price changes. These historical rental listings and changes were retrieved and analyzed for this post. Zillow has basic information on all properties, but college neighborhood properties with Zillow profiles often contain these rental rate data points.

Analysis

In the vacancy rate exercise, census block vacancy rates from 2010 and 2012 were retrieved. The Madison and Iowa City data both consisted of nine census blocks, whereas the Champaign-Urbana and Minneapolis data consisted of twelve and ten census blocks, respectively.

In every city, vacancy rates increased from 2010 to 2012 as new student apartments opened, whereas the average vacancy rates for the city stayed relatively consistent. The vacancy rates for the student blocks were all lower than the city averages in 2010, but in 2012, three of the four studied blocks averaged higher vacancy rates than the city averages. The outlier in this trend — Iowa City — had less development occur in the two years due to neighborhood opposition; however, student block vacancy rate averages increased to a rate only one-tenth of a percent lower than the city averages by 2012, further validating the overall trend. The two outlying census blocks in the Minneapolis analysis where vacancy rates decreased between 2010 and 2012 were areas where new student housing was constructed, and therefore likely impacted the lowered vacancy rates. These rates for 2010 and 2012 are listed in the green rows, and are compared to the citywide vacancy averages in the blue rows.

In the property-by-property rental pricing analysis, a total of 49 units were found in the student neighborhoods near the University of Minnesota. Thirteen units had 2013-2014 rental data, 45 units had 2014-2015 rental data, and 10 units had data from both school years. The dwelling units mostly consisted of single houses and subdivided duplexes, with a few apartment unit listings in older buildings. No apartment listings from the newer, luxury-advertising buildings were used. Units were considered leased when the rental was no longer listed as available on Zillow. Rental prices from the 2013-2014 and 2014-2015 school year were utilized to compare the full effect of new-build student housing near the University’s main campus. The analyzed properties are marked in red on the maps below.

In the 2013-2014 school year leasing season, units were usually rented at their original listing price. Eleven of the 13 units listed in 2013 were leased at their original price; however, 2 units decreased their original listing price before the listing was taken down. In the 2014-2015 leasing season, more aggressive rental price reductions were observed. Out of the 45 researched units, 20 decreased their rental prices before their respective listings were taken down. The average rental price of all studied units decreased from $1,915/month at initial posting to $1,806/month at final posting. For the units that did drop price, rental listings decreased from $1,842/month to $1,563/month. This equates to a 15.2% decrease on rent — an almost $300/month reduction from the initially advertised price.

Conclusion

It was predicted that, due to the large and rapid influx of new student housing units infiltrating college neighborhoods, that a unique population-controlled housing market would arise, and rental prices would decrease in older housing units while overall vacancy rates in the areas would increase. Although much of the data is very new, the values retrieved have confirmed this initial hypothesis.

Unlike traditional gentrification situations where increased housing units and density attracts more population, the studentification only attracts a specific, already present population and skews the surrounding market. The rooted student neighborhoods don’t appeal to non-student populations, and therefore do not attract any age-diverse growth to the area. Therefore, the only population that sees the area as viable are the students themselves, which are limited by enrollment. In fact, at the University of Minnesota, the total enrollment has actually decreased from 56,338 full-time students in 2010 to 55,717 full-time students in 2014, thus further portraying a major population attraction issue.

The vacancy rate census block data for the three other collegiate cities also confirms the notion of strict population supply. A basic supply and demand economic principle arises as the supply of housing increases and the population stays constant. Taking the census blocks as a whole, growth will likely only be seen in larger tax bases, as the newer student apartment buildings likely generate more taxes for local governments than decrepit homes.

There is room for growth, however, specifically to the University of Minnesota and other traditionally large commuter-based campuses. Since the construction boom moved faster than evolving lifestyles, and professionals like Kelly Doran and University of Minnesota officials see a shifting attitude towards living near campus, there is likely still room to attract students who would otherwise be commuters. This will likely be a long-term adjustment as more traditional commuters seek the advantages of living closer to campus over time.

Nevertheless, the college neighborhoods will prospectively only attract students, and a housing saturation point will be reached in close conjunction with enrollment and surrounding stock. This means that college-based cities like those studied in this report will reach saturation more quickly, and future student housing will not be as attractive as it has been recently.

Necessary assumptions were made in this report in order to find conclusions, and would take further investigation to confirm. The assumption that leases were signed at the most recent Zillow price was needed in order to illustrate the trends, but true rents could vary from that value. The dataset is also not fully indicative of the surrounding neighborhoods, as only 49 properties could be studied out of potentially hundreds of rentals available. The impact to overall property values and respective home sale prices also demands further research, as it was not addressed in this post.

Still, the data that was discovered is revealing. As discussed in the literature review, the high premiums seen in the luxury housing market are very likely not borne by the students themselves, but rather by a third party, like parents or relatives. It would seem that since many students are indeed choosing to live in these newer apartment buildings, that the hyper-localized pricing structure does not matter for money-bearing parents, and therefore see the new builds and vast amenities as a positive for their college-aged children. In an ironic consequence, those students that desire living in a low-amenity house with other roommates reap the price benefits of other students choosing to live in new buildings. It seems that, in fact, the new student housing projects and the youth that live in them actually lower the rent cost for other students, making living near campus more affordable on average.

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Note: This post was abbreviated from my senior paper submission to the Urban Studies program at the University of Minnesota. I say abbreviated because, yes, the paper itself was actually quite a bit longer.

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