Oct 14, 2019 by - Hana LaRock

Will Colleges Closing Down Affect the Housing Market?

It’s no secret that the price of higher education in the United States is more than most families can manage. Add the necessity to take out student loans on top of that – with remarkably high interest rates – and it has made it very difficult for young people to buy homes as early as the previous generation did. We know that this fact alone has certainly impacted the housing market or at least caused a shift in it. 

Yet, despite the skyrocketing cost of tuition, little by little, some colleges in the United States are beginning to close down. According to CBS, 25% of colleges are predicted to fail within the next 20 years. Because real estate usually does very well around college areas, this is something that agents should definitely be paying attention to, as the domino effect may have already begun.

How many colleges have closed already?

According to a Google Sheets document linked to by Education Dive, there have already been more than 100 colleges that have closed down. Some of these include Green Mountain College in Vermont, Dowling College in New York, many of the University of Wisconsin branches, and the American Jewish University. Though many on this list are liberal arts colleges or community colleges, these combine both for-profit and nonprofit schools. Many for-profit schools are turning to a nonprofit model and some colleges are consolidating with others in order to survive.

Factors that lead to colleges closing

There can be all kinds of reasons that a college would close down. One might wonder that if tuition is so high, how colleges cannot afford to stay open. Well, because the tuition is so high, student enrollment is decreasing rapidly, as young people have considered other career pathways. 

Many schools rely on tuition as their main source of revenue, but they are not able to cover their expenses, which have also gone up. And, while many large schools can survive on donations from alumni, that’s not going to cut it in other schools. Sometimes, you can start to see the signs when schools begin cutting programs, rapidly raising tuition, reducing funding and grant and scholarship programs for students.

Trickle down effects on the housing market

Institutions of higher education can be central to a town’s economy. When colleges close down, the impact can either be astronomical, or it can go unnoticed. For instance, in a small town whose economy depends largely on the influx of college students, a college closing can be detrimental. 

In terms of real estate, the first thing that would happen is landlords would not be able to find renters for their properties. Without college students living in the area, businesses that are typically supported by those students – such as restaurants, bars, bookshops, cafes, even hotels for when family visits – may decline or even close down. If the owners of these businesses also own their own homes, they may find it very difficult to keep up with their mortgage payments.

For the most part, colleges also make a town or city an attractive place to live. It creates a younger vibe and brings up the education level of the population. If students have a good experience in college, or find a job in that town after graduation, it’s good for the economy and can thereby be good for the housing market overall, despite the fact that there is not always a direct correlation between the two.

What you can do as an agent

As an agent, you may be wondering how this all connects. In theory, you could say anything could or could not potentially impact the housing market, depending on how you look at it and what kind of market you’re working in. In general, you probably don’t have any reason to worry right at this moment. But, as with anything, it’s important to keep your eye on the news, especially if you’re working in an area where the college is the backbone of the town. Real estate agents should always be aware of what’s going on in their community, and checking in on the status of the local college certainly won’t hurt. You can also, of course, get involved by speaking to your local representative or joining a board. 


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