Student housing construction slowed during the recession but not as much as other commercial construction. New units continue to be added and more are planned. As school enrollment has increased, so has demand for student housing. Universities are often landlocked or their budgets are constrained and they cannot afford to add new housing for the additional students. Private investors are moving to fill that void with housing specifically designed for the student who enjoys community life and the amenities of on-campus housing but would like more freedom, more space, and better accommodations.

According to the Student Housing Bulletin, lenders are very interested in financing construction of student housing, but only when developers have a successful track record, are financially strong, and the building project makes sense because of demand.

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If obtaining a driver’s license is the first step towards adult responsibility, moving to college is the next one. With a car, a young person can control his or her comings and goings for the first time. Living away at college gives students their first opportunity to control their space. There are no parents to enforce household rules. The young person must both develop rules for living and learn how to enforce them. Colleges often help with this transition by imposing rules and standards for dorm living. When the student moves off campus, his or her landlord must either impose and enforce rules of conduct or expect chaos as students attempt to develop their own.

Here is a possible loss scenario:

Michelle visits her friend Meghan’s off-campus apartment. She and 15 of Meghan’s closest friends are in the two-bedroom apartment enjoying drinks and snacks and playing video games. Michelle dares Brad to try to balance on the balcony railing. Brad agrees but insists that Michelle join him. Michelle readily agrees. Other friends find this game amusing and join the couple on the railing. After a loud cracking sound, the railing collapses. Brad and the others are able to jump to the balcony in time but Michelle falls two stories, lands on the sidewalk, and breaks her leg and arm.

Michelle and her parents sue the apartment complex, arguing that the railing was unsafe.

The market for student housing has certain common characteristics and many variables. The three common characteristics are the age of the tenants (usually between 18 and 26), the fact that they are college students, and that fact that the properties are often vacant for weeks or months at a time.

Some important variables of these properties are the type and age of the structure, number of units, amenities offered, rents charged, lease terms, quality of maintenance and supervision, and overall management control.

Jessalynn Suda, assistant underwriting manager at Burns & Wilcox, says, “I've seen all kinds of different student housing risks, from apartments to single-family dwellings, duplexes, triplexes, and town homes. We have coverage requests for both property and general liability. Some risks have just one or two locations. Other submissions involve large schedules owned by a single entity.”

Atlantic Specialty Lines, Inc., has a similar underwriting appetite. Greg Provenzo, senior vice president, says, “Most of the units we cover are close to campus (but not on campus) and are owned by individuals, contractors, or LLCs, not by the university or college. The units we cover are primarily of frame or joisted masonry construction (brick facing on frame). We write urban and rural properties as well as Atlantic coastal properties.”

Markets for student housing are primarily nonadmitted carriers and include Admiral, Berkley, Essex, James River, Lexington, Lloyd’s, Mount Hawley, and Scottsdale. A key admitted market is MiddleOak.

Jim O’Neill, director of business development at New Empire Group, says, “We write off-campus student housing that is not affiliated with any university or school, and we place this business exclusively with MiddleOak.”

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