2023 Campus Student Housing Project

Campus Student Housing Market Logo

The entirety of the Purdue campus student housing multifamily property pool has been reassessed and values updated to more closely reflect market value as of 1/1/23.

Campus Student Housing Dashboard

Campus Housing Dashboard

The entirety of the Purdue campus student housing multifamily property pool has been reassessed and values updated to more closely reflect market value as of 1/1/23.

Background:

Since the recovery following the Great Recession, the Tippecanoe County Assessor’s Office’s yearly sales ratio studies for this property type shows that our assessed values have consistently fallen far below the actual sales prices in typical, arms-length transactions. For the assessment date of 1/1/2023, the commercial valuation team focused on updating the campus student housing income model in order to apply one model to all properties in this category yielding equitable and more accurate assessments across the entire property type.

The discrepancy between sales price and assessed value for campus apartments.

The graph above shows the discrepancy between assessed values per unit at the time of sale (orange line), and the sales price per unit* for campus multifamily property (purple line).

*Sales price does not include any personal property included with sale as declared on sales disclosures.

Methodology:

In 2021, surveys were sent to all multifamily property owners in Tippecanoe County that own properties with 5 or more units, sharing the unit mix information the Assessor’s Office had on file for each property, and asking that any errors on the survey be corrected. We sent out close to 700 surveys and had a roughly 13% return rate. We corrected any information as provided by the property owners who responded to the survey.

In 2022, campus student housing in particular was a focus of Cyclical Reassessment, which occurs over a 4 year cycle. During Cyclical Reassessment, our commercial field agents reviewed properties based on exterior physical and desk reviews, and by using interior imagery as provided by online apartment rental listings.

Additionally, a long-term, ongoing project in the Assessor’s Office is to capture as much residential rental data as possible. Employees will periodically search and record information from rental listings including: monthly rent, unit square footage, bed/bath count, amenities, and current property management companies. This information has been compiled over years. For this project, we analyzed collected data from 1/1/2021 through 12/31/22.

There are roughly 200 properties that are classed as Campus Student Housing. Loosely, this categorization aligns with Purdue’s Parking Permit C Boundary, excluding properties on the east side of the Wabash River in downtown Lafayette. These properties are considered to be within walking distance of Purdue University. This classification does not include properties in what is commonly known as the “shuttle bus market.”

Rough Boundary of Campus Properties within Walking Distance of Purdue

Purdue Campus Student Housing Market
Multifamily properties in the state of Indiana must be assessed based on which of the three approaches to value is the lowest: sales, income, or replacement cost less depreciation. It is our experience that the income approach is the lowest of the three approaches to value. The sales comparison approach and the replacement cost approach using a modern cost table that accurately reflects cost of materials and labor consistently produce higher values than the income approach to value.

Rent models were created for individual unit types. These models are regression based and developed using a statistics program called NCSS. The models used advertised monthly rent as data points, and included variables such as the following to develop the models:
  • Age
  • Floor count
  • Unit square footage
  • Unit count
  • Amenity rank
  • Proximity to Purdue
  • Elevator access
  • Mixed use or single use (Apartment/retail use, for instance, as opposed to solely apartment use)

Each unit type (Studio, 1BR/1BA, etc) had an individual regression based rent model developed. The models use only variables that were deemed mathematically significant for each unit type by the statistics program. Once rents were modeled for each unit type, the models were applied and a ratio study performed against the actual advertised rents to determine if the model reflected the market accurately. The models and resulting ratio studies are available to view/download online in the links below. A few unit types did not have enough data points to create functional models, and their rents were extrapolated from the closest unit types (Microstudios, 1BR/1.5BA, 4BR/3BA).

The modeled rents were applied to the properties, and a weighted modeled monthly rent/unit was created for each property. For example, if a property has 20 1BR/1BA units, and the modeled rent for that unit is $1000 each, then the monthly rent used in the Assessor’s income model is $1000/month. However, if a property has 10 1BR/1BA units with a modeled rent of $1000/month, and also has 10 2BR/2BA units with a modeled rent of $2000/month, the weighted modeled monthly rent/unit for that property would be $1500/month.

After deriving the weighted modeled rents, the next step in developing the income model was to acquire a vacancy rate. The Tippecanoe County Area Plan Commission has produced its yearly analysis of apartment vacancy rates, which in turns assists the APC and the cities of Lafayette and West Lafayette in either approving or denying new multifamily developments. Based on USPS data, the area encompassed by this project had a vacancy rate of 1.1% over a 5-year period of 2017-2021. The study further goes on to detail APC’s own survey of student housing landlords, which showed a 0% vacancy rate for the 2021-2022 school year.

The commercial real estate website, Costar, shows a comparable occupancy level for the Purdue student housing market within walking distance for the 4th quarter of 2022 of 97.89%. Based on this information, the Assessor’s Office applied a 2.6% Vacancy and Collections rate to all properties in the campus student housing market, accounting for both collections and the exceptionally low vacancy rate.

The other parts of the income model that we needed to develop were Additional Income, Expenses, and Capitalization Rate. In order to determine the most accurate metrics to use for these factors, the Assessor’s Office hired Don R. Scheidt & Co to appraise 4 campus student properties, and also perform a housing expense and cap rate market study for the Purdue market area. These 4 appraisals and the Expense Study are all available to view online. For the sake of the study, we asked the appraiser to focus on the four property types (or Tiers) of apartment properties that seem to be the most prevalent in the market area. Those property types are as follows:

Hi-Vine, a representative Tier 1B property

Hi-Vine apartment building, a student housing multiuse building adjacent to Purdue University.

• Tier 1B: Higher end complexes built 2010 and after, typically more than 3 stories, more than 50 units, and with a number of sought-after amenities.

State Street Towers, a representative Tier 2 property

State Street Towers

• Tier 2: Slightly dated but still functional properties, built primarily in the 1990s and 2000s, typically with 2-4 stories and between 20-50 units, with some amenities.

Southfork Apartments, a representative Tier 3 property

Southfork Apartments

• Tier 3: Dated apartment complexes with some functionally obsolete features and less attractive unit mixes, built primarily in the 1980s and 1990s, typically with three stories or less, and 30 units or less.

427 N Chauncey, a representative Tier 4 property

427 North Chauncey

• Tier 4: Primarily older houses from the early 20th century that have been converted into multi-unit rentals.

Not every multifamily property in the market area fits neatly within one of these parameters, however, the Assessor’s Office felt that these categories were broad enough to use as benchmarks for the income model.

Based on the information provided in the Expense and Cap Rate Study, the average Additional Income, Expenses, and Cap Rate as determined by the appraiser was applied to the subject properties based upon which grouping a specific property most closely aligned with. When that was complete, a review of all the properties’ new income models was performed to detect any properties that needed special consideration or adjustments made to their income model due to unique characteristics of their property. For example, part of the property known as Launch Social Living lies within a floodplain. Adjustments were made to that income model to reflect higher than typical expenses and capitalization rate.

Effects:

The application of the new Campus Housing valuation methodology and adjustments to properties made per progress on building permits during 2022 resulted in a total increase of valuation in the Campus Student Housing market of 30.66% over the 2022 total assessed value of that market. This does not mean every property increased in valuation 30% over the 2022 value.

Campus Sales vs 2023 Assessed Values
The graph above shows the effect of the remodeling process on campus student housing 2023 assessed values (orange line) as compared to the sale prices (purple line). Keep in mind that these sales range from 2015 through 2022, and have not been time-trended to adjust for inflation.

Stats:

  • From 2015 to 2022, the Campus Student Housing Market assessed values increased by a total of 24.5%. In that same time period, the actual market sales price/unit of Campus Student Housing increased by 53.12%.
  • From 2015 to 2022, single family residential properties in Taxing District 026 (West Lafayette Wabash WLCS-B-WL) increased in value an average of 46.4%. In that same time period, the Campus Student Housing Market assessed values increased by 24.5%.
  • From 2015 through the end of 2022, Campus Student Housing Occupancy rates increased by 8.12%. In that same time period, Purdue Undergraduate admissions increased by 28.65%.
  • Market Asking Rent for Campus Student Housing increased by 33.6% from 2015 to the end of 2022.
  • After the application of the new income model for Campus Student Housing, 159 properties increased in value over 5%. 24 properties increased in value from 0.1% to 5%. 14 properties decreased in value.
  • The biggest percentage increase in value due to the new income model is for a 5 unit divided house that increased in value 153%.
  • The biggest percentage decrease in value due to the income model is for a 15 unit low rise apartment building that decreased in value by 17%.
  • Considering all Campus Student Housing Sales (excluding sales of apartment buildings purchased for redevelopment) from 2015 through the end of 2022, the average sales price per unit is $189,000 without any adjustments for inflation. The average sales price per unit of Campus Student Housing for only sales that occurred in 2022 is $224,000. The new average assessed value per unit for the Campus Student Housing market is $148,000.

Resources

Data used in development of the 2023 campus student housing assessed values