American Campus Communities, Inc. (ACC): Rising Costs a Good Omen for Student Housing REITs

A college education is increasingly difficult to afford. It looks like cost is starting to become a hindrance to potential students, which could mean a falloff in enrollment. That could be good news for real estate investment trusts (REITs) focused on student housing.

Payback

At one point, a college diploma was the difference between getting an office job and one in which manual labor was involved. However, more and more often, a college diploma is needed to get any job outside of the low paying service sector.

That’s been a huge boon for the education industry. With increasing demand has come increasing prices. In late 2012, Bloomberg reported on a College Board study that showed tuition rose by a greater rate than inflation for that year. Sadly, the nearly 5% price hike was the lowest level in over a decade, a fact that shows just how much prices have increased.

There have also been notable headlines about the next credit crisis unfolding in student loan debt. In other words, more and more students aren’t earning enough to pay their loans. This begs the question of why take on the debt if a good job doesn’t come along with the diploma?

A Turning Point

For years the government stepped in to help students pay for college both via direct support to the student and through financial support for colleges. Today, with the rising concern about the country’s debt load, ever escalating government aid is less likely.

Moreover, if potential students start to question the logic of bothering with a degree, customers will fall off, too. Here the very public government criticism of the for-profit college segment hasn’t helped. While the push to clean that space up was probably justified, it also brought to light the inefficiency of the entire industry.

If this is a turning point, colleges will be hurt. For-profit schools have already felt a big impact. A niche REIT sector dedicated to student housing, however, might actually benefit.

Student Housing REITs

A handful of companies focus on this space. Essentially, they own buildings either on or close to colleges and rent them to students. American Campus Communities (NYSE:ACC), Education Realty Trust (NYSE:EDR), and Campus Crest Communities (NYSE:CCG) are the main players.

American Campus Communities (NYSE:ACC) is the largest owner and manager of student housing in the United States. It owns 160 communities and manages an addition 27, for a total bed count of over 120,000. The company has multiple projects in the works to build new properties and has been an active acquirer.