This week, the White House halted a plan to deport international students who take only online courses this fall. The quick about-face came just a week after US Immigration and Customs Enforcement threatened to revoke visas for students enrolled at universities that shift to fully remote learning.
ICE cited national security concerns for its hardline stance, but the move was understood to be part of a broader effort to cow schools into re-opening despite surging coronavirus cases. Interestingly, it elicited a chorus of dissent from an array of interested parties: state governments, elite universities, labor unions and tech giants all backed lawsuits to stop the order. Even the US Chamber of Commerce chimed in.
As much as principles of fairness and inclusivity may have been a factor, the financial interests of this diverse group of protesters are hard to ignore. Foreign students contributed more than $45 billion to the US economy in 2018, according to the Department of Commerce. And a big slice of that has gone to private real estate.
Globally, purpose-built student housing has grown into a $16 billion-a-year investment market, according to Knight Frank. The US holds a roughly 60 percent share of that market, with international students playing a significant role in the country’s sector dominance. Numbering 1.1 million, they make up 5.5 percent of the total US student body, and a third of enrollment at institutions such as New York University and the University of Southern California. Most flock to the same top-tier universities that are hot beds for private equity investment, as we explored in our report this week on the sector’s pandemic performance.
Institutional-grade apartments are a natural fit for international students. After all, it is easier for a faraway parent to trust established, name-brand operators than unknown local landlords. Students on visas have extra incentive to lock in leases far in advance and their rents are usually parent-guaranteed.
Still, the threat of mass deportation triggered by a fickle federal protocol was enough to trigger wide-ranging panic. Herein lies the bigger issue for universities and, by extension, the capital invested in student housing: immigration policies threaten the US’s standing as the top destination for international students.
Evidence of this can be found in an October 2019 white paper from the Graduate Management Admissions Council, which administers the GMAT entrance exam. It found that 70 percent of US business schools saw stable or declining international applications last year, while more than half of schools in Europe and Canada saw increases. The report found that a cap on work visas and anti-immigrant rhetoric had a chilling effect on international applicants in the US. Broadly, new foreign enrollments in the country have been on the decline since 2016.
Meanwhile, Canada and Australia saw international student enrollment jump 16 percent and 15 percent, respectively in 2018, according to NAFSA, a non-profit that promotes global education and exchange. UK enrollment ticked up 6 percent. And the gains are not exclusive to English-speaking countries. China has ramped its visiting student program up to half a million.
For now, the US continues to dominate the student housing market, with investment volume reaching an all-time high of $10.8 billion in 2018, according to a 2019 report from Savills. By contrast, volumes in the UK and Western Europe were down in 2018 as fewer major portfolios came to market, dropping 33 percent and 38 percent, respectively, the report stated. But that will likely change if foreign student enrollment continues to move out of the US.
Thus far, covid-19 has served as an accelerator for many real estate trends. A more competitive global student housing landscape is a key example.
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