Provo’s largest new student apartment complex opened last week, and it appears to be a veritable Xanadu:
Madison Perry will be one of 944 students at the new complex that features valet trash service, towel service at the state-of-the-art fitness facility and a personal wireless network for each tenant.
The Village at South Campus at 605 E. 600 North consists of two five-story residential towers. The main building has a two-story common area with a swimming pool and hot tub, grocery market, two restaurants, lounge, several group study areas and a grassy area with outdoor grills and picnic areas. Each apartment has four bedrooms, two bathrooms and a laundry room. Apartments are 1,100 to 1,600 square feet, and rent ranges from $375 to $475 a month.
According to the article, the apartments are already mostly filled.
But where are all the new tenants coming from, especially considering the other new complexes that also will open soon?
Smaller complexes — such as this one and this one — are being built in other parts of Provo, and that’s all in addition to the massive new dorms BYU is building to replace Deseret Towers and Heritage Halls.
BYU and UVU typically increase enrollment over time, but collectively these new apartment complexes represent a surprising increase in the supply of student housing. More importantly, that increase may outpace the growth of demand for new beds.
Indeed, in recent years demand for student housing in Provo appears to have flatlined. When I first rented an off-campus apartment in 2003, I paid $269 a month for a well-located, medium quality shared room. Just a couple of weeks ago, I walked around the same block and saw signs advertising comparable rooms for $249.
That means that nearly ten years later some rents have actually dropped. Adjusted for inflation, that drop would appear even more dramatic, and more widespread. If demand for student housing had increased significantly over the years — and if there was a market for thousands of new rooms — exactly the opposite should have been true.
The short term result of an increasing supply and constant demand is a better market for students. Landlords will have to offer more value and renters will need to pay less.
The Village at South Campus is an example of that process. The apartment complex is offering a dizzying array of amenities — things like valet trash pickup, which sounds terrible because I typically don’t want someone bringing my trash back after dinner — all for less than $500 a month.
It’s true that some rents actually have gone up over the years, but the Village at South Campus is offering more “luxury” for rents that weren’t unheard of several years ago. Laura even considered renting a place in that price range back in 2006, though she ultimately opted for something cheaper. If demand was more robust, prices today would also be higher.
But while all of this is great for students in 2012, it may be less good for Provo circa, say, 2022. Over time, older apartment complexes — not to mention small-time resident landlords — may have an increasingly difficult time competing.
For example, a basic medium sized apartment complex like the Brittany on 500 North can’t offer valet trash pickup or towel service. The walls are also made of cinder block and the whole building looks a little old. It’s a fine place to live, but it’s certainly not a luxury complex.
To compete, the Brittany has to keep its prices lower. As supply increases and competition becomes more fierce, the Brittany has to keep lowering its prices because that’s the only competitive tool it has available. Over time, the owners are forced to do more with less money and the cycle repeats.
The point here is that an oversupply of student housing could potentially result in a bunch of dilapidated apartments in the years to come.
None of this is good for students or longer term residents, all of whom will suffer from worse housing stock and decreasing property values. It also starts to look like a student housing bubble, where successive waves of developers keep building for a specific demographic even as demand remains constant.
This scenario isn’t inevitable. For example, BYU could choose to increase enrollment more rapidly in order to keep demand on par with supply. But barring any such shift, Provo residents may need to prepare for cheaper student housing and more struggling apartment complexes.