At any given moment in Isla Vista, thousands of students jostle their keys to apartments owned by one of several dozen landlords. And while in the next few years the number of students will increase, the landlords may be cut down to a select few survivors.
On the heels of corporate student housing’s increased interest in I.V. – with Conquest Student Housing moving in to manage 6626 Picasso and other properties and Allen & O’Hara Education Services’ purchase of Fontainebleu – the rental housing climate in I.V. is ripe for yet another change.
Historically, dozens of different owners have simultaneously laid claim to I.V. In the 1920s it was the possibility of oil that encouraged investors to buy property in the largely uninhabited area, and in the 1950s it was the promise of student renters with the opening of UCSB next door. Now, citing success in other college communities, officials at recently interviewed corporate student housing companies say they would like to expand their influence in Isla Vista, a move that could revolutionize the variety of ownership and, according to some local authorities, increase competition and shift the feel of community in the area.
The supply and demand for housing in this one-half square mile town is also facing shifts at the hands of the university and the I.V. Master Plan. By Fall 2008, UCSB will add around 1,000 new spaces to its arsenal of housing for undergraduates and graduate students with the San Clemente project on El Colegio Road, and about 380 additional spaces for faculty and staff will follow in the next few years. And as part of the new I.V. Master Plan, which is currently in the approval process, within the next few years I.V. zoning changes may accommodate up to 4,330 new residents.
For now, the California Costal Commission’s cap on the UCSB student body as part of the 1990 Long Range Development Plan remains at 20,000, but campus administrators working on the new goals for the university’s growth say the student body may see an increase of 5,000 once the plan gets approved.
Of course, in a community that is 95.4 percent renters, demand for housing remains high despite the continually raising rent prices – the rental vacancy rate, according to the 2000 census, is at 1.2 percent, while the national rate is at 4 percent. And though the housing market has recently changed, investors are still willing to pay comparatively high property purchase prices to be a part of this unique area.
The Corporate Side
“Many campuses have interesting and eclectic student housing neighborhoods like Isla Vista,” said Craig Cardwell, president of Allen & O’Hara. “There are none that I can think of that are in a setting such as UCSB and Isla Vista, with the mountains on one side and the ocean on the other side, with the pleasant weather, diverse population, and an enormously large number of students – UCSB and SBCC – in a restricted growth living environment.”
Because most investors consider student demand to be in fairly constant supply, especially at a developing university like UCSB, economics professor Stephen LeRoy, who specializes in finance, said student housing investors are just betting that the prices on their properties will eventually rise.
“The university is not going to shrink – it’s not a stupid bet,” said LeRoy, who lived on Del Playa Drive for four years. “There’s also housing being built, so put that into more students fighting over more housing.”
This interplay between corporate student housing companies with large holdings in the community and existing owners could create more competition for student attention, said Kris Miller-Fisher, director of special projects for Third District Supervisor Brooks Firestone. This, she said, will yield higher quality living for renters.
“Some people have owned their properties for a long time,” Miller-Fisher said. “The new owners want to keep their units filled, so my guess is it would make it more competitive, and better for students.”
Conquest’s first building in the area, Breakpointe, located on the 6600 block of Abrego Road, was completely renovated two years ago before the first residents moved in, and after the previous occupants were offered the chance to break their lease early. The company’s newest acquisition, Coronado, is currently being remodeled amidst several protests due to the August evictions of its 55 units of tenants, most of whom were low-income Latino families, from the 6626 Picasso Rd. complex. The building is scheduled to open for renters in the fall.
Conquest Student Housing Manager Eric Johnson said the company, which manages 19 properties in the USC area, hopes to replicate its USC success as the “number one housing provider” in Isla Vista by maintaining an attention to detail.
“We can meet an untapped need – high quality, safe student housing,” Johnson said. “[With Breakpointe and Coronado], we took buildings that had not been upgraded in many years, and added a whole new facade, a state-of-the-art fitness center with individual plasmas on each machine, brand new unit interiors with all new appliances and fixtures in the kitchens and baths, Ethernet, Dish Network television, a new fire pit, a BBQ area by the pool, etcetera.”
Johnson said three-bedroom apartments in both buildings are sold out, with five apartments left at Breakpointe. Coronado has been leased to about 70 percent capacity, but he said he expects it will sell out soon.
Neither Conquest nor Allen & O’Hara are new to student housing. Conquest has been at USC since 1993, and Allen & O’Hara has been around since 1963, and it was the original developer of Francisco Torres from 1968 to 1998. UCSB acquired FT in 2002, and with it came the rowdy reputation still intact to this day. Allen & O’Hara has 66 communities at college campuses across the United States.
Allen & O’Hara purchased Fontainebleu, the privately owned residence hall-style complex, located at 6525 El Colegio Rd., several years ago. Like on-campus residence halls, Fontainebleu offers students living in suites meal plans, cleaning, cable and utilities. Tropicana, located at 6585 El Colegio Rd., has a similar layout and is also privately owned.
Cardwell, a UCSB graduate, said he feels large companies have more resources available to them to improve the environment for their renters.
“A private owner can do an excellent job providing a good student housing environment, and many do,” Cardwell said. “A large company such as ours… with a complete culture dedicated to the student experience, and access to many sources of short and long term capital, probably has a better chance of providing a successful experience for students over a longer number of years.”
The Flip Side
Not everyone is a fan of the corporate model, or they are at least careful to give praise. Chuck Eckert, chairman of the executive committee of the I.V. Property Owners’ Association, said he thinks the attention to management of the buildings is more important than the size of the company.
“My personal opinion is that much more important than who owns the property is the management policy,” Eckert said. “You can have good management that manages five units or 500 units; it depends on the policies and the people. … To do a good job managing you have to manage enough units so that you have somebody paying diligent attention to management and maintenance issues.”
Meanwhile, UCSB Dean of Students Yonie Harris said she is concerned that larger companies focusing on the business of student housing may miss the importance of history to a community. For instance, she said she thinks the 6626 Picasso “no cause” evictions came out of a misunderstanding and lack of sensitivity to I.V.’s community, which consists of a large percentage of renters.
“I think what companies miss is an understanding of what the full community is,” Harris said. “You can’t just go from place to place. … If you provide housing in a small community you have to understand the community. Large companies may miss that. I.V. has a history and the students who live there have values.”
Vestiges of I.V.’s past still remain, posing challenges for investors and planners alike. The town’s characteristically skinny streets, lack of parking, and quickly constructed buildings are a result of the 1950s building boom, which came shortly after the UC Regents announced plans in 1948 to relocate UCSB from Santa Barbara’s hills to its current location.
Despite original plans to keep UCSB to the size of a small liberal arts school with around 3,500 students, in 1958 the Regents announced that the student body cap would increase to 10,000, bringing an additional 2,000 to 3,000 faculty and staff members to the area as well as a desperate need for housing.
With the exception of Manzanita Village, UCSB Housing and Residential Services Director Wilfred Brown said the university built all of its on-campus residence halls during this peak period – the school’s opening in 1954 through 1968 – all the while making I.V. property owners eager to cash in on the overflow renters’ need for housing.
Dean of Students Yonie Harris said the zoning originally put in place by the Santa Barbara Board of Supervisors to regulate I.V.’s development was not adequately enforced and repeatedly disobeyed by owners racing to put up properties.
“There was a relax of zoning regulations and builders in I.V. were allowed to not build to code,” Harris said. “Builders were allowed to ignore setbacks, the parking regulations were relaxed. In order to get enough building to occur, certain policies and regulations were relaxed or overlooked.”
Harris arrived in the area shortly after the 1970 bank burning and rioting in protest of the Vietnam War. She lived in I.V. for 27 years and was involved in the Isla Vista community before she started at UCSB.
“It always struck me how perfect it is for college students,” Harris said of Isla Vista. “It’s on a human scale. Community involvement is very easy to slide into … when you’re part of a community it leaves an imprint on you and how you view the world.”
By the numbers, in 2006 Isla Vista drew approximately 2,000 more students than its closest competitor, UCSB. According to Community Housing Office survey results, in Fall Quarter 2006, 8,450 students lived in Isla Vista, 6,372 students lived in university-owned housing, 2,407 lived in Goleta and 1,489 lived in Santa Barbara.
“Most students want the ‘college experience’ of living in I.V.,” CHO Manager Roane Akchurin, a UCSB alum, said. “Living in their own apartment is part of the experience. It’s been there, and it’s been a legend.”
The current incarnation of a limited housing supply, sky-high demand and a history of pro-development county polices makes I.V. a plum for savvy real estate investors, especially for larger companies looking to expand.
These companies have their plates full in terms of financing, said Brian Bailey, a Central Coast Investments real estate broker. Whereas an investor of a smaller building would be able to obtain as much as an 80 percent loan, he said lenders are much more cautious dealing with a business investor – sometimes requiring payments in cash and a larger down payment. He said it is important for the companies to have cash flow right away to start paying off their loans.
Bailey, a graduate of UCSB, has represented buyers and sellers in Isla Vista real estate transactions for the past 30 years. As a student, he never lived in I.V. because of the noise, but when he got his real estate broker’s license in 1979 he started working there – much to more experienced brokers chagrin.
“When I began, I.V. as a location on the Central Coast was pariah – my fellow brokers wouldn’t even drive out there,” he said. “The area was looked down on [and I was told my] reputation would suffer. I liked that because it meant no one else was going to do it.”
As the tumultuous times of the 1970s fade into memory, so I.V. has become a more acceptable place to invest. Despite the area’s newly earned mainstream status, Bailey said the values for buyers are not as good as they once were.
In the past two years, he said, there have been more properties up for sale – as many as six or seven at a time compared to three in the past – because the purchase market is slowly shifting to a buyer’s market, which means there are fewer buyers and property values have flattened or dropped.
“Properties not at their highest and best use or needing further development or remodeling and properties in other than optimal locations, with deferred maintenance or other challenges, have not fared as well in the current market,” Bailey said. “The market for this type of property is still liquid, but is price sensitive. Apartment buildings priced in line with the current market will sell within a reasonable period of time. There are a larger number of properties available of this type than usual.”
Allen & O’Hara Education Services President Craig Cardwell noted that though rents may be relatively high, student-housing investment does not often produce short-term returns, which is something many new investors do not expect.
“While the rents may seem higher than for other forms of real estate, the operating expenses, insurance expenses and capital improvement expenses to keep a student housing community in good condition are much more than for other forms of real estate,” Cardwell said. “So, on a net basis, student housing can be characterized as a form of investment that has reasonable, but not large returns on invested capital.”
Bailey said real estate in general is never a good short-term investment because of its frequent up and down cycles. He tells people to expect to own the property for a minimum of 10 years, but suggests never selling and refinancing to free up more money.
In addition to attracting those who are secure with the market, Bailey said I.V. attracts younger buyers who are comfortable dealing with students and their parents, as well as the specific maintenance issues such customers tend to create. According to the 2000 census, the median age of residents in I.V. is 21.1.
“In my opinion, in student rental properties there is less of a risk of rent collection than in a lot of downtown properties,” said Bailey, also a property owner in I.V. “Parents are, as a group, fairly wealthy, whereas in another location renters might not have the rent. A lot of people can’t mentally deal with renting to 20-year-olds, but my experience with that has been positive.”
Student renters certainly present different challenges for owners and managers, said Chuck Eckert, chairman of the executive committee of the I.V. Property Owners’ Association. He cited the June and September move-in and move-out rushes as a hectic time for owners who have to prepare their properties for new renters in a very short period of time.
Welcome to the Neighborhood
The market forces, rental rates, community building rhetoric and decades of history piling up on the town’s sandy beaches and sometimes-paved roads don’t always trickle down to I.V.’s wards and critics. Most just cycle through to class, and cycle out of the system.
Third-year business economics major Casey Bradshaw said she has been living in Isla Vista for three years and said despite the condition of most houses, she enjoys living on Sueno Road because of its location.
“It’s convenient and close to campus,” Bradshaw said. “And there are a lot of parties.”
Fifth-year philosophy and art history major Devon Dickinson said he currently lives in Santa Maria and has never lived close to UCSB. Though he said he regrets not having the I.V. experience – while admitting that “it’s a mess” – he chose to commute because of the price and the peace and quiet.
“I’m pretty studious,” Dickinson said looking up from his reader. “That’s one of the reasons I’ve insisted on living in Lompoc and Santa Maria. Also, housing here is pretty expensive.”