WEST LAFAYETTE, Ind. — Skeletons of gleaming high-rise buildings have been going up over the cornfields and quiet subdivisions of ranch-style homes in this sleepy city.
A 16-story luxury apartment complex, on the former site of a Lutheran church, is one of seven new developments in a single square mile, with amenities including rooftop pools, outdoor theaters, 50-inch flat-screen TVs, showerhead speakers, fitness centers, saunas and private terraces with outdoor hot tubs.
“We build for people who expect more,” reads the motto affixed to the fence outside one of these buildings, the 11-story Hub Plus, backed by a Chicago developer and scheduled to open in the fall.
Those people — who will pay as much as $1,500 a month in rent — are students at Purdue University.
It’s at the edge of Purdue’s campus that these high-priced apartments have been sprouting, offering high-end perks for students wealthy enough to spring for rents well above the roughly $270 a month it costs to live in the most basic of the university’s dorm rooms.
Construction booms like this are happening not just around Purdue. Luxury housing for college and university students has become a multibillion-dollar industry, with shiny new apartment buildings featuring the likes of pools, clubhouses and spin studios encircling U.S. college and university campuses.
This kind of two-tiered housing system is becoming such a standard feature of campus life, observers have a name for it: the country club phenomenon.
They also say it’s worsening the socioeconomic divide in higher education by segregating rich students from their poorer classmates and pushing up other off-campus rents.
“We’re re-creating socially stratified communities on campus instead of giving students opportunities to live among people from different walks of life,” said Andrew Ryder, an assistant professor of higher education at the University of North Carolina, Wilmington.
In college towns from Berkeley to Boston, wealthy students at the end of the day return to these kinds of top-of-the-line apartments while their lower-income classmates file back to shared rooms in aging dorms.
Such disparities in housing are reinforcing “a total divide” in the student body, said Leah Pearlman, a senior studying media at the University of Illinois at Urbana-Champaign, or UIUC, who lived during her junior year in a private luxury student apartment complex and noticed how many of her fellow tenants were, like her, from affluent suburbs north of Chicago.
“We’re re-creating socially stratified communities on campus instead of giving students opportunities to live among people from different walks of life.”
It was a marked change from her first year on campus, when she experienced greater diversity in housing. Pearlman, who is white, lived in a dorm that year with mostly African-American students.
For her senior year, Pearlman opted to rent a house with a group of friends, but she still is conscious of this socioeconomic segregation. “There’s such a diverse group of people who go to UIUC, but you don’t really see that in campus life,” she said.
Lower-income students often can’t afford to live with their friends who are more financially well off, said Michelle Ashcraft, director of the Purdue Promise program, which provides financial and academic support to low-income college students from Indiana.
Ashcraft’s charges get a housing stipend as part of their financial aid, but it typically covers only the cost of dorms or less expensive off-campus options. Some “go tour those big luxury complexes, but they quickly realize they’re out of reach,” she said.
There is one way that students can live in these places, even if they can’t afford the rents: by agreeing to work in them in exchange for discounted or even free rent. At least one class-action lawsuit alleges that this has essentially made them the equivalent of indentured servants to their wealthier classmates.
For much of the last century, living on campus was considered “an integral part of the educational pathway,” said Carla Yanni, a professor of art history at Rutgers University and author of a new book about the history of dormitories at American colleges and universities.
A 1926 brochure for the University of Wisconsin-Madison, cited in the book, described two new quadrangle-style dormitories as places where “the son of banker and farmer will find mutual understanding.”
This has changed dramatically as the student housing market has become big business for mega-developers who see it as a recession-proof investment. Last year, real-estate fund managers raised $2.5 billion for student housing projects, a small but growing slice of the nearly $138 billion raised for all kinds of real estate, according to the data firm Preqin.
Last year, real-estate fund managers raised $2.5 billion for student housing projects, a small but growing slice of the nearly $138 billion raised for all kinds of real estate.
Those investors include major Wall Street players like the Blackstone Group, a private equity firm with more than $470 billion in assets under management. Blackstone recently spent $1.2 billion to acquire 20 student developments adjacent to schools including the University of California Riverside, Penn State and Arizona State University.
A British company called Scape said it is planning to invest $1 billion in private off-campus housing for 2,000 students in Boston, with a goal of eventually expanding that to 20,000.
In an industry whose size is measured by the number of beds for rent, the top 25 private owners collectively account for more than 800,000 of them, according to Student Housing Business magazine. That number is fast approaching a fifth of the total “purpose-built student housing” at U.S. colleges, the research site iREIT said. American Campus Communities, the largest owner and operator of student apartments nationwide, controls roughly 110,000 beds at flagship public universities including the University of Michigan, Texas A&M and the University of Maryland, and smaller colleges such as the University of Toledo and the College of Staten Island.
The company has plans to add another 20,000 beds by the fall of 2020. A publicly traded real-estate investment trust, its largest shareholders include JPMorgan Chase, Wells Fargo and Deutsche Bank.
Gina Cowart, a spokesperson for American Campus, said the company offers a variety of floor plans and price points to ensure “inclusive communities.” Residents, she said, “are a direct representation of the diversity of the university’s student body.”
The average monthly rent in an American Campus development is $760 per bed, typically for a private room, said Cowart. Making a direct comparison with the cost of living in a conventional dorm is difficult because on-campus housing plans usually cover only the academic year and the most reliable estimate of them includes meals. Average on-campus room and board in the academic year just ended cost $11,140 at public and $12,680 at private four-year colleges and universities, according to the College Board.
The boom in luxury off-campus housing is troubling to university housing officers for another reason, too: It’s cutting into their market. Even at public and nonprofit institutions, dorms typically generate revenue that helps to pay for everything else.
The University of Illinois at Urbana-Champaign requires freshmen to live on campus, but only 28 percent return to the dorms for a second year. Fifteen years ago, roughly 35 percent did, said Mari Anne Brocker Curry, associate director of university housing, housing information and marketing. That affects revenues, as well as student experience: Students who live on campus for at least two years are more likely to graduate on time, according to an analysis commissioned by the university.
Developers including American Campus, which operates four apartment complexes within walking distance of the university, are almost certainly a factor in falling occupancy rates on campus, according to Brocker Curry.
She said off-campus apartments sometimes offer temporary discounts to fully lease their properties for fall but students who move in because of a discount often struggle to pay full price later.
American Campus said it awards scholarships to help students from different backgrounds afford to live in its buildings.
The company gave $15,000 to two Purdue students and $7,500 to a University of Illinois student in the past year, for example, Cowart said.
It also offers job opportunities. But that’s run into controversy. A class-action lawsuit pending in Texas Western District Court alleges that the “community assistants” the company allows to live in its building for low or no rent became, in effect, indentured servants to their higher-income neighbors.
At hundreds of its properties nationwide, American Campus allegedly violated federal labor laws by requiring the students to live onsite and giving them free housing in lieu of paying them the minimum wage. The suit claims that these student employees were also expected to work “off the clock” to plan and attend events, mediate disputes and refer fellow students to support services as needed — typically without overtime pay.
Cowart said the company does not comment on ongoing litigation but that student staff positions are now paid and do not entail a residency requirement.
A similar class-action lawsuit settled in 2017 against student developer Asset Plus Companies alleged that as part of the “work-live resident program,” community assistants worked on “night watch” and the property maintenance team, delivered mail and did bookkeeping in exchange for reduced or free rent, also in violation of minimum wage and overtime laws.
In some cases, a flurry of investor activity in the student housing market also appears to have led to a glut of luxury properties that ultimately prove too expensive for students.
There has been a decline of more than 3 million college students since the last enrollment peak, in the fall of 2011.
Delinquencies in private-label mortgage securities backed by student housing projects stood at 7.4 percent in May, more than three times the delinquency rate for all multifamily loans, according to the data provider Trepp.
While institutions such as the University of Illinois view private developments as competition for their own revenue-producing on-campus housing, Purdue has been admitting more students than it has room for, and university officials said they were happy to have private developers step in.
Last year, photos of cubicle-style “auxiliary housing” set up by the university in basements and study lounges of residence halls drew outrage on social media. It’s now building two new residence halls on campus and adding another through a public-private partnership.
City officials in West Lafayette have been less pleased with the building boom, saying they will halt approval for further high-rises aimed exclusively at students. The city said it has nixed proposals from American Campus Communities for new developments it sought to build.
Instead, the company ended up acquiring two properties within walking distance of campus. At Campus Edge, which it bought in 2017 as part of a $560 million portfolio at public universities, amenities include outdoor televisions and grilling stations and a gym with a sauna. A one-bedroom with a private bath and a separate study room goes for $1,956 a month, though the building also offers double-occupancy rooms that cost $659 per student per month.
J.D. Choi, a freshman from South Korea who is studying marketing, lives in one of the building’s studio apartments. He said high school friends who had gone to Purdue encouraged him to live there instead of in a dorm.
When he’s not on campus, Choi said, he mostly keeps to himself. But he said he meets plenty of students from different backgrounds in his classes. While he might have considered living in the dorms, having a kitchen makes the higher price of a private apartment worthwhile. “I like being able to cook,” he said.
Annika Svendsen, a freshman from Minnesota who came to Purdue for the engineering program, was originally placed in a quad in a university-owned complex called Purdue Village. But when two of her roommates visited before the start of school, they didn’t like what they saw. The complex was built in the 1950s, and students sometimes complain of mold and pests. About 15 minutes of the main campus and adjacent to a run-down shopping mall, the area also didn’t look “super safe,” said Svendsen. So they opted to move to a four-bedroom apartment in Campus Edge.
“My parents wanted me to be able to be comfortable at college and have a good first-year experience,” said Svendsen. Two of her roommates are from Indiana, but she has found that many other of her neighbors in the building are out-of-state or international students who pay more in tuition and often come from wealthier backgrounds.
The pricey new high-rises have one more unwelcome impact, said Remingtin Mickle, a senior at Purdue studying sociology and brain and behavioral science: They’re pushing up off-campus rents.
“It’s almost impossible to find anything affordable near campus,” said Mickle.
During her junior year Mickle, who grew up in the neighboring city of Lafayette, worked 18 hours a week as a pharmacy technician to pay tuition and housing costs. When she was laid off last spring, she decided to move back in with her parents for her senior year, assuming she wouldn’t be able to find a new job and save for an apartment come fall.
As co-chair of the school’s Young Democratic Socialists of America chapter, Mickle said she hopes to work with students and tenants in the city to advocate for more affordable housing and improved conditions.
“Students who live in apartments are working two jobs to make rent,” she said. “The dorms are cheaper, but conditions there can still be pretty bad. That’s an unacceptable choice to have to make.”
This story about student housing was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for our higher education newsletter.
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