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Student housing as a catalyst for Canadian higher education institutions to navigate uncertainty and create a competitive advantage

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Edward Ng

EY Canada Partner, Infrastructure and Project Finance Advisory

10 minute read 04 Jun. 2025

Co-author: Megan Shellie, Vice President, Infrastructure Advisory, EY Canada

Discover how strategic investment in student housing can empower Canadian higher education institutions to overcome funding challenges and enhance their competitive positioning.

In brief
  • Student housing serves as a vital growth engine for Canadian higher education, addressing funding challenges and evolving student needs.
  • Institutions must embrace innovative housing solutions to adapt to market dynamics and foster community engagement.
  • Collaboration with public and private partners is essential to create affordable housing options that benefit students and the broader community.

Many Canadian universities and colleges are facing significant headwinds associated with stagnant funding and tuition revenues, as well as the federal cap on international students.1  As institutions continue to navigate through these changes, there is an opportunity for institutions to reimagine the role of purpose-built student accommodation (PBSA) as a strategic growth driver. 

Let’s explore how student housing can be a catalyst for new and expanded programming and enrolment, campus revitalization, and the advancement of amenities and mixed-use spaces that benefit the broader community.

While managing the diverse priorities of various stakeholders is a complex task, there are also numerous opportunities to collaborate with public and private partners to increase the availability of affordable student housing through innovative, market-driven models.

Student housing outlook 

The latest data from the Canadian Mortgage and Housing Corporation highlights a slowing of rental pricing growth in the purpose-built rental market in Canada’s largest rental markets, with vacancy rates averaging 2.2% nationally.2  

Despite the federal cap, the student housing market continues to face significant rental supply shortages. In 2023, on-campus residence buildings and privately owned off-campus buildings accommodated only 16% of total student enrolment, with an all-time low average vacancy rate of 1.5%, which was recorded in 2023.3

Forum REIIF estimates that 400,000 PBSA beds will be needed in the next six years, with 1.5 million students competing for just 170,000 PBSA beds in Canada’s 20 largest university markets.4

While there continues to be a shortage of PBSA, if the broader purpose-built rental market continues to soften over the coming two years, more affordable options for students will likely become available off campus, potentially shifting some demand away from on-campus PBSA.5 This can be seen in Table 1 below, where average market rents are already typically more affordable for students than student housing is.

However, housing starts in the key markets of Ontario and British Columbia have declined by 20% and 19%, respectively, compared to 2023.5 This suggests that supply in these areas will tighten in the medium term. These factors present an opportunity for post-secondary institutions to implement housing strategies in alignment with changing market conditions.

Table 1: Student housing compared to average market rents (per unit, per bedroom)

Sources: EY Research, CMHC and Rentals.ca

Maintaining and growing demand in student housing will require institutions to consider the value proposition of this asset relative to what is available in the broader market. Factors such as location, convenience, residence life programming, sense of community and safety continue to form the basis of the demand for student housing.

Institutions should also consider how other factors — such as new or upgraded amenities, proximity to transit, retail and employment opportunities, flexible living arrangements (including catering to families) and flexible tiered pricing — can all support ongoing demand for student housing for both domestic and international student cohorts.

Expanding student housing

Drops in enrolment associated with the federal cap have seen some institutions question the viability of expanding student housing in the short term. However, over the medium to long term, new student housing will be needed to keep pace with domestic enrolment growth, including for institutions seeking to capture inter- and intra-provincial enrolment and future growth of international student enrolment. Given these are significant capital-intensive multi-year projects, it is crucial that institutions look beyond the immediate challenge and consider how expanded student housing plays a role in unlocking new growth.

Expanding student housing is not without its challenges, however, as hard costs to develop student housing projects are increasing between 5% and 20% annually, which is further impacting project feasibility at the institution level. Table 2 below highlights this reality, with this potentially further compounded by ongoing trade tensions between Canada and the US impacting supply of construction materials. 

Table change in per sqft development cost for student residences

Source: Altus Canadian Construction Cost Guide [6]

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Federal and provincial governments continue to identify opportunities to support the growth of student housing. The federal government is considering extending the GST rebate to purpose-built student housing, with consultations occurring in late 2024. Through CMHC, the government has also expanded the Affordable Housing Fund and the Apartment Construction Loan Program, including the specific student housing stream.

 

Across Canada, provinces are looking at mechanisms to support the expansion of student housing. For example, BC has committed to build 8,000 new student housing beds and Ontario’s Building Ontario Fund has begun to offer affordable finance for student housing projects. Ontario has also moved to exempt publicly funded universities from planning permissions as part of Bill 185.

 

While there are challenges to navigate, there are numerous strategic levers available to institutions to consider as they navigate the expansion of PBSA: 

  • Embrace market-led models for development, including partnering with private developers to access larger sources of capital, reducing upfront costs of development that limit institutional flexibility, and supporting innovation in operating and maintenance service models.
  • Consider opportunities for cross-subsidization and scale, including mixed uses of the PBSA asset — such as market rental housing, academic, commercial and retail uses where these attract economic rents — to support affordability and project viability while promoting campus revitalization. PBSA expansion could also include inclusion of other broader social aims, such as housing vulnerable young people and housing key workers, which may unlock other sources of funding or lower-cost financing.
  • Provide on-campus land, which can significantly improve the viability of development and support greater developer confidence where risk is shared between the developer and the institution. The terms of contribution are typically a key point of negotiation.
  • Reuse and refurbish – Institutions are looking at aging office buildings and surplus spaces to realize new PBSA, which can be more cost effective than building a new PBSA asset.
  • Evolve the PBSA product to cater to affordability, including consideration of materials, room sizes and densification, product mix and operational efficiencies to maximize the benefits to students. There are also opportunities to consider how university and college advancement programs can contribute to projects to improve access and affordability for students.
  • Design projects to meet eligibility for different types of finance to support the acceleration of PBSA, including consideration of finance through construction and operations. While governments and their agencies have shown a willingness to invest in loans, there are limited programs available for capital funding for PBSA. The recently updated Apartment Construction Loan Program now includes a dedicated student housing stream. This program supports the acceleration of PBSA projects by providing financing during construction and operations, helping to bridge the affordability gap many projects face.7

Universities and colleges may consider how embedding sustainability into their projects can create eligibility for various grants or loan programs. One such program is the CMHC MLI Select Program, which offers mortgage insurance for multi-unit residential construction but is criteria-based, requiring projects to meet specific standards related to affordability, sustainability and energy efficiency.          

How can EY help?

There are numerous strategic options available for post-secondary institutions to expand the supply of PBSA. Applying them effectively can be a complex and lengthy process if it’s not managed strategically. Our multidisciplinary approach combines strategic insights, deep financial knowledge and operational capabilities to navigate the complexities associated with developing affordable, sustainable student housing.

We recognize that each institution is unique and requires approaches tailored directly to its needs to align with its broader strategic goals.

Here’s how we can help you:

Development of partnership opportunities 

Our professionals can identify and facilitate partnership opportunities between institutions, private developers and community stakeholders. We can help structure partnerships that capitalize on each party’s strengths to deliver innovative PBSA solutions. Additionally, our knowledge of private sector developers helps make project designs appealing to private sector investment partners.

Operational efficiency and sustainability

Our teams can advise on optimizing the design and management of PBSA facilities to enhance operational efficiency and sustainability. This includes advising on opportunities to improve current operations, opportunities for monetization of assets, prioritization of deferred maintenance, and opportunities for strategic investments to achieve climate targets and reduce energy costs.

Capital raising and increasing funding and financing opportunities

We have an in-depth understanding of the funding and capital-raising opportunities available to post-secondary institutions. We help them explore these options so they’re considered early in the project conceptualization stage to improve the availability of low-cost funding, interest from the capital markets, and navigating the relevant approvals associated with an institution’s contingent liabilities.

Financial modelling and feasibility analysis
 

Our financial advisors can develop robust financial models and conduct detailed feasibility testing to explore innovative designs and assess the demand for various types of student accommodations. Coupled with our knowledge of PBSA funding opportunities, this aims to enhance the feasibility of projects by identifying sustainable funding mechanisms and reducing costs to the institution.

Real estate analysis

We can help your institution evaluate strategic opportunities for acquisitions and partnerships to expand accommodation off campus through strategic real estate analysis, valuations and articulation of highest and best use for existing and new space. 

Strategy and business case development

Our teams can support institutions in undertaking demand studies, articulating strategic priorities and developing a detailed business case that considers different strategic pathways for the expansion of PBSA. 

Procurement support

Whether through a public-private partnership, a traditional delivery model or a variation in between, we provide strategic procurement and transaction services, helping institutions develop compelling market documentation and negotiation support to secure the right partner for their project while managing risk and aligning incentives to achieve established outcomes. 

Knowledge of the changing regulatory environment

With a deep understanding of the regulatory landscape specific to PBSA development, we can help institutions navigate new legislation to help them manage these changes to enhance the development process.


Summary 

Student housing can be a strategic asset for Canadian higher education institutions. By navigating funding constraints and evolving market conditions, institutions can employ student housing to drive growth, enhance student experience and foster community connections. Through collaboration and innovative approaches, they can create affordable housing solutions that not only meet student needs but also position themselves competitively in a challenging landscape.

About this article

Photographic portrait of Edward
Edward Ng
EY Canada Partner, Infrastructure and Project Finance Advisory
Visionary leader excited about the way infrastructure has the power to transform our working world.
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