The specter of John Belushi still looms over the student housing sector, particularly where insurance and risk are concerned, and many in the sector are eager to shake off the fraternity house stigma borne by their properties.
“Because student is still a relatively younger industry, the market still thinks ‘Animal House’,” Ted Brown, partner & president, property & casualty at Lockton, said during an insurance-focused panel at the National Multifamily Housing Council’s student housing conference in Las Vegas on Oct. 18.
Monte Huber, CFO of The Scion Group, stressed the importance of informing lenders, financiers and industry partners about the nature of student housing properties. “For us it is about educating the market, educating the underwriters and telling our stories… We take dozens of meetings a year to tell them about Scion, tell them about our risk and, really, we try to dispel this misconception that student is a worse risk.”
Huber argued that market intelligence backs up the idea that student housing is unfairly maligned. “When you look at the data, when you look at it objectively, student performs better,” he observed. “This is high-quality stuff, it’s not what you’re thinking in your head.”
Educating underwriters and other players in the sector to rid them of their teen movie conceptions often involves reminders of just how college students are different rather than pretending they are like all or
“We talk about the kind of residents we have, the demographics around those residents, the type of things that an underwriter might think happens at our property that would lead to a higher risk that doesn’t really happen,” said Huber. Fire risk, for example, is lower at student housing properties, he contended. “College students don’t cook, especially since COVID. They are not preparing meals in their kitchen on a daily basis like a 30-year-old multifamily (resident who is) cooking every day.”
Youthful vitality is a boon for student housing providers, as are other habits of college-age residents. Despite their reputation for taking unnecessary risks that increase potential liability, youth also offers an insurance-related upside. “One of the things that younger students also have is that they are more flexible, they don’t fall down as easily. Younger students don’t want to tell their parents the stupid things they did, so when they hurt themselves, they usually keep it to themselves–they don’t try to seek some sort of legal settlement.”
Risk management tips and tales
There remain anecdotes floating about that are likely to rankle those attempting to rehabilitate the sector’s image and they were on full display during an Oct. 19 panel focusing on operations.
“In 30 years of student housing I’ve seen some pretty incredible things,” said Miles Orth, executive vice president & COO at Campus Apartments. “I think these are probably things the risk management panel doesn’t want us to talk about,” he added, to laughter from the audience.
Julie Bonnin, principal at Asset Living, remembers one property whose wild reputation was confirmed by her visit. “There were mattresses being thrown over the balconies,” she recalled. “We realized we were short like 80 mattresses.” While attempting to corral enough mattresses for the property, Bonnin was contacted by her colleagues at the community. “I get a call from the team (saying) ’We have a problem here, you need to come and address it. The dean of students is here and the president of the university is here and this place is out of control.’ It’s like an Animal House of kids who are literally flying off the balconies.”
Managing risk is, of course, a much larger issue than what rowdy undergraduates may get up to. “Water damage is the number one cause of loss, and we certainly have new technologies coming into the market that have enabled us to do better at catching but it still (has a) hugely costly impact.,” said Kevin Donnelly, NMHC’s vice president for government affairs, technology and strategic initiatives.
“It is important to know the differences between renters’ liability or tenant legal liability and your traditional renters’ insurance,” advised Sarah Creighton, vice president, business development, at Foxen, speaking on the insurance panel. Renter’s insurance will generally have more comprehensive coverage but owners may not be able to require it across a portfolio. “Tenant legal liability is a really nice answer to … mitigating risk below your deductible because it does cover for all tenant-related damages from net zero to, typically what we see, around $100,000 of liability.”
These policies are helpful in mitigating risk for out-of-pocket costs incurred from events like kitchen fires and busted pipes, said Creighton. “If you are operating a portfolio right now… it makes sense to implement a tenant liability program.”
