How declining birth rates will reshape higher education demand — and why disciplined university selection has never mattered more for student housing investors.
If you follow higher education or student housing, you have almost certainly encountered the term “demographic cliff.” It has become one of the most discussed topics in institutional real estate. The data behind it is real and well-documented. But its implications for student housing investment are far more nuanced than the headline suggests — and that nuance is where we believe the opportunity lies.
What Is the Demographic Cliff?
The demographic cliff refers to the projected decline in the number of U.S. high school graduates beginning after 2025, driven primarily by a sustained drop in birth rates that began during the Great Recession of 2008. According to the 11th edition of WICHE’s Knocking at the College Door (December 2024), the number of high school graduates peaked at approximately 3.9 million in 2025 — the highest level ever recorded — and will then decline steadily through 2041, when the graduating class will be approximately 13% smaller than today’s.
Nathan Grawe, the Carleton College economist widely credited with defining the enrollment cliff in his 2018 book, projects that the number of college-going 18-year-olds will drop approximately 12 percentage points between 2025 and 2030. Grawe’s research indicates that the demand for higher education is influenced by familial education levels and socioeconomic status. Further, he models demand not just by geography but by institution type — a critical distinction for student housing investors.
The cause is straightforward demographic arithmetic: during and after the 2008 recession, U.S. fertility rates dropped sharply and have not recovered. Annual births fell from 4.3 million in 2007 to 3.6 million by 2023, a 17% decline. Those children born in 2008 and after are now turning 18 and entering the higher education pipeline with smaller cohorts behind them for at least the next 15 years.
Where the Cliff Hits Hardest — and Where It Doesn’t
The most important finding from WICHE’s research is that the cliff’s impact varies dramatically by state and region. The national average masks a tale of two Americas, and reflects not just lower birth rates but also the internal migration of the U.S. population toward states with lower costs of living and robust job markets.
The hardest-hit regions are the Northeast, Midwest, and West. WICHE projects the Northeast will lose 17% of its high school graduates by 2041, the Midwest 16%, and the West 20%. Five large-population states alone — California (-29%), Illinois (-32%), New York (-27%), Michigan (-20%), and Pennsylvania (-17%) — will account for roughly three-quarters of the entire national decline.
Other states facing meaningful declines include Wisconsin (-15%), Missouri (-12%), Oregon (-19%), Mississippi (-16%), and West Virginia (-26%).
The South, by contrast, will grow. WICHE projects the South region will see an overall 3% gain in high school graduates through 2041. Several Southern states are projected to experience significant growth: Tennessee (+15.1%), South Carolina (+14.4%), and Florida (+11.6%). Texas, already the second-largest producer of high school graduates nationally, will add 21,000 graduates by 2041 (+5.4%) and is projected to overtake California as the nation’s largest by 2033. Other Southern states including Georgia, North Carolina, Virginia, and Alabama are not flagged by WICHE as significant decliners and benefit from strong in-migration trends.
Why Flagship Universities Are Insulated — and the Data That Proves It
The demographic cliff does not affect all institutions equally. This is perhaps the single most important point for student housing investors to understand. While small private colleges and regional public universities in declining states face genuine enrollment risk, large flagship public universities with national and international draw operate under fundamentally different demand dynamics. The “Power 4” conferences—the Big Ten, SEC, ACC, and Big 12—represent the gold standard for student housing investment. These institutions benefit from massive brand equity, national media exposure through collegiate athletics, and significant research endowments.
The aggregate data is compelling. RealPage’s analysis of the Top 175 investment-grade universities shows these institutions are projecting 7.7% enrollment growth through 2029 — even as the national pool of high school graduates contracts. Grawe’s own research shows that demand for elite and flagship universities may be as much as 14% higher by 2029 than in 2012. Harrison Street, one of the most respected institutional investors in student housing, confirms that enrollment patterns over the last five to ten years have shifted decisively to favor primary, flagship public schools.
The school-specific data is even more telling. Consider the University of Michigan, which sits in a state projected to lose 20% of its high school graduates. Despite that headwind, Michigan received 115,125 undergraduate applications for Fall 2026 — a record. First-year applications have increased 36% over the past five years. Over half the undergraduate student body now comes from out of state, up from 36% a decade ago. Applications increased across all categories: in-state, out-of-state, and international. With 115,000 applications competing for roughly 8,000 seats, Michigan has a 14-to-1 demand coverage ratio. The state’s declining birth rate is simply not a constraint on this institution’s enrollment.
UW-Madison tells a similar story. After Wisconsin’s legislature lifted the cap on out-of-state enrollment in 2015, out-of-state enrollment surged 29% and tuition revenue rose 47%. The university’s acceptance rate has fallen from 72% in 2001 to under 50% today, and National Merit Scholars enrolled have increased 175% in five years. Ohio State saw all enrollment categories — undergraduate, graduate, professional, and transfer — increase for the Autumn 2025 semester, and the university’s president called Ohio State the “destination of choice” for students and families. The University of Georgia has seen Early Action applicants more than triple since 2012, with applications continuing to rise even after reinstating mandatory SAT/ACT scores.
These are not projections. They are verified, trailing data points that demonstrate how flagship public universities with strong national brands can sustain and grow enrollment even as their home states face meaningful demographic headwinds.
The Supply Side: A Structural Tailwind
The demographic picture is only half the thesis. On the supply side, student housing faces constraints that are arguably more favorable today than at any point in the last decade. According to Capright’s March 2026 market update, approximately 30,000 student housing beds are expected to deliver in Fall 2026, well below the roughly 50,000 beds delivered annually during the prior decade. PwC and ULI report that tariffs on steel, aluminum, and HVAC systems have doubled since mid-2025, making new beds significantly more expensive to build. Combined with skilled labor shortages and tighter bank lending, the construction pipeline for student housing will remain constrained for the foreseeable future.
At supply-constrained flagship campuses, occupancy rates exceed 96%, and markets with strong enrollment growth and limited supply pipelines are still achieving 5% to 10% rent growth. Student housing also demonstrated exceptional resilience during the last two downturns: rent collections exceeded 98% through COVID, and the asset class outperformed conventional multifamily during the Global Financial Crisis.
Jacobson’s Student Housing Acquisition Strategy
The demographic cliff reinforces a principle that has always guided our approach to student housing: university and market selection are everything. Not all student housing is created equal, and not all markets will perform equally. Our strategy is built around two tiers of target markets, each supported by distinct but complementary data.
Our primary targets are flagship public universities in states with projected high school graduate growth or stability: Florida (University of Florida, FSU, UCF, USF), Texas (Texas A&M, UT Austin), Tennessee (UT Knoxville), South Carolina (USC, Clemson), Georgia (UGA, Georgia Tech), North Carolina (UNC, NC State), Virginia (UVA, Virginia Tech), and Alabama (Alabama, Auburn). These states benefit from both favorable demographics and strong flagship enrollment trends. Our existing student housing assets at the University of Florida and Texas A&M are positioned in two of the strongest growth-state flagship markets in the country.
Our selective targets are elite national flagships in states where university-specific demand has demonstrably decoupled from state demographics: the University of Michigan (state -20%, but record applications and 50%+ out-of-state enrollment), UW-Madison (state -15%, but out-of-state enrollment surged 29% after the cap was lifted), Ohio State (Midwest -16%, but all enrollment categories growing), and the University of Washington (West -20%, but strong international draw and tech economy pipeline). We would pursue student housing opportunities at these campuses only where we can verify that university-level demand indicators — applications, enrollment growth, out-of-state draw, and acceptance rate compression — confirm that the institution is effectively insulated from its state’s demographic trajectory.
Absent discrete, idiosyncratic data to the contrary, we are not interested in student housing at small private colleges, regional public universities in declining states, or institutions whose enrollment is primarily drawn from a shrinking local population. We believe the demographic cliff will be real and painful for those institutions. Our role as fiduciaries of our investors’ capital is to ensure that we are on the right side of that divide.
The Bottom Line
The demographic cliff is real, it is imminent, and it will reshape American higher education over the next 15 years. But its impact will be radically uneven. For disciplined investors who target the right universities in the right markets, student housing remains one of the most attractive risk-adjusted real estate asset classes available — a structurally undersupplied, recession-resilient sector where demand at flagship institutions continues to grow even as the national headline suggests contraction.
We believe this environment rewards exactly the kind of market-by-market, university-by-university analysis that has always defined our approach to student housing. As always, we welcome your questions and look forward to discussing these dynamics with you in greater detail.
Larry Jacobson
President & CEO, Jacobson Equities
SOURCES
Western Interstate Commission for Higher Education (WICHE), Knocking at the College Door: Projections of High School Graduates, 11th Edition, December 2024. Nathan D. Grawe, Demographics and the Demand for Higher Education (Johns Hopkins University Press, 2018) and The Agile College (2021). RealPage Top 175 University Enrollment Projections. Harrison Street Asset Management. Capright, Student Housing Market Update, March 2026. Cushman & Wakefield, U.S. Student Housing Trends and Valuation Indices. PwC/ULI, Emerging Trends in Real Estate 2026. Inland Investments, March 2026. University of Michigan Office of Enrollment Management and The University Record. Higher Ed Dive. Ohio State University Enrollment Census, Autumn 2025.
This newsletter is for informational purposes only and does not constitute an offer to sell or a solicitation to buy any securities. Past performance is not indicative of future results. Investment in real estate involves the risk of loss, including loss of principal.
