Approved Housing Cost Structure

March 4, 2011

Writer: Owner & Developer Relations, Housing & Student Living Office

Simply comparing monthly rental "by the bed" prices in approved housing to those of community housing poses a challenge because the products and services are not perfect substitutes.

 

To provide apartments for rent, there are certain guaranteed costs associated with providing that housing. These might include taxes, mortgage payments, turnover costs, city utilities, parking lot maintenance, and so forth. Normal wear and tear on an apartment is certainly a factor as well. These costs factor into establishing a rental price. As the cost to provide housing rises, the rental price rises to cover those costs.

 

Many costs associated in living in an apartment are passed on by the landlord to the tenant. These are things that must be paid by the tenant above and beyond the rental price. Examples might include costs like utilities, furnishing the apartment, cable services, use of amenities, etc.

 

Included Benefits & Utilities in Approved Housing

Approved housing has additional items that influence how the rental price is determined. For most approved housing units, basic costs for living are included in the rental price. For example, many units in approved housing include water, electricity, gas, sewer, and sanitation, furnishings, parking, Internet, and television. This simplifies apartment living for the student-tenant.

 

There are other areas that affect how the rental price is determined differently than in community housing. Some of these include,

 

Turn Frequency & Costs

According to the National Apartment Association, the average turnover rate for typical apartments is 57 percent.[1] In other words, if a complex has 100 apartment units to rent out, on average in a year 57 of these units will have a move out and see new tenants move in.

 

At BYU-Idaho, if an approved housing complex had only one student move out of each apartment each semester, the turnover rate would be 300 percent for the year. In the time between check-outs and check-ins, apartment managers will incur costs to prepare the apartment for the next tenant (e.g., patching holes, painting, carpet cleaning, and sanitization).The exact cost of turning around these apartments will vary semester to semester but contribute to the maintenance costs of an apartment complex.

 

Higher Reserve Funds

Generally speaking, student housing received more wear and tear than housing units in the community. For example, four to six adults showering everyday will place much more strain on a water heater than a husband and wife with a few small children.

 

Providers of student housing must set aside a fund to make large, significant repairs and enhancements to the property. Because of the increased wear and tear, these funds typically are much larger than in community housing. If a complex has to pay more to keep apartment units maintained, that will factor into the rental price.

 

Partial Income Timetable

Because of university semesters, approved housing landlords are limited to ten months out of the year to rent all their units. Even when students aren't renting, there are still costs the owner must continue to pay to maintain and manage the property. This means that 12 months of operating costs need to be covered by those ten months of income when school is in session.[2]

 

In the community housing market, owners are able to rent year-round to tenants with little interruption income.

 

Limited Leasing Window

If a housing complex does not rent beds before the semester begins, it is unlikely that it will be able to fill those beds at all during the semester. Therefore, vacancies can be more financially damaging than in traditional community housing which can potentially fill an apartment at any time.


Required on-site management: In order to qualify for approved housing, all units must have an ecclesiastically endorsed manager on-site. The staffing and cost associated with providing a manager living on-site contributes to the overall cost of providing housing that must be covered by the rental price.

Notes

[1] National Apartment Association, Survey of Operating Income & Expenses in Rental Apartment Communities

[2] Zaransky, Michael H., Profit By Investing in Student Housing, pg. 135