Former Secretary of State Condoleezza Rice sold her four-bedroom abode on the Stanford University campus at the tail end of June for $1,962,500.
Rice, who holds faculty positions at the university, purchased the 2,300-square-foot home in 2008 for $1,375,000, leaving her with a small profit.
In other parts of the country, these facts wouldn’t raise an eyebrow. However, this particular part of the Bay Area is nestled right up against two of the most expensive ZIP codes in the country. Palo Alto has plenty of claims to fame, but cheap real estate isn’t among them. So how did Rice sell at a price that ignored the laws of supply and demand?
Stanford cuts faculty a deal
As a Stanford professor, Rice benefited from a program for eligible faculty to buy on-campus housing discounted (by Bay Area standards), which is then bought back by the university should they choose to leave.
Stanford’s housing website explains that the university’s founders, Leland and Jane Stanford, specified that campus land could never be sold. As a result, ownership interests in homes on the (highly desired) Stanford campus are transferred by a residential ground lease.
So a Stanford homeowner doesn’t own the land underneath the house, which gives Stanford control over the (ever-more valuable) properties.
This provides buyers a major price break. However, the homes don’t appreciate at market rate and can’t be passed down to heirs. The homes can only be sold to eligible faculty and staff, or sold back to the university. In fact, all ownership records for these homes show both the name of the faculty member and Leland Stanford Jr. University.
But the benefits of home ownership in the Bay Area make the lower appreciation worthwhile. Faculty members can receive mortgage help, equity, and, yes, a modest profit when they eventually sell, even at the below-market rate.
Pricey Palo Alto land
Stanford sits on valuable land, and is surrounded by a number of wealthy communities. According to realtor.com®, the median sales price in Palo Alto is $2,800,000, and the city has an average price per square foot of $1,300.
Given that college professors don’t pull down salaries to compare with private industry—and would have to compete for housing with employees of nearby Apple and Facebook—the housing program serves as a recruiting tool and a lifeline for academics from outside the Bay Area who don’t see a $2 million house as any sort of bargain. These Stanford homes are only made available to a very limited pool of buyers.
“Affordability is a problem nationwide, but it is an acute problem in the Bay Area, because it’s so expensive,” says listing agent Penelope Huang, who currently has a Stanford listing on the market. She notes that the low appreciation rate of the Stanford homes comes with pros and cons.
“This house I’m selling is half of much as what it would go for in Palo Alto. That’s part of the overall plan, to keep Stanford housing inexpensive. It’s good for a new buyer, but it’s not good for a seller who’s exiting.”
A Stanford condo for sale
Hugest home owner in the Bay Area?
According to the Stanford faculty housing website, about 900 ground leases are held jointly by the university and faculty members in the area. Our records indicate that this number might be even a little larger, with the university listed as an owner (or co-owner) on over 1,000 properties in Santa Clara County.
“Homes on campus typically sell for about 20%-30% less than similar homes in Palo Alto, Menlo Park, or Los Altos,” says Chris Iverson, an agent who has represented many properties on campus over the years. He’s currently representing two sellers on university land, an estate priced at $4.7 million, and another at $2.4 million.
Stanford campus home for sale
The properties are differentiated only in the listing details, which note that the homes are “eligible to Stanford faculty only.” The other big difference? The too-good-to-be-true prices. While the prices still soar way, way above the national average for a house, these lower-market rate homes are meant to cushion the blow for out-of-towners looking to live among the academics.
A midcentury modern Stanford property
“Many faculty members, especially those coming from ‘college towns,’ want to live on campus surrounded by other faculty,” says Iverson. “The combination of the two helps Stanford recruit new faculty to our high-cost area.”
Iverson sees the program as a net positive for the area, “Homes on campus, the housing purchase programs for faculty, and some of the new Stanford developments are all ways that the university is being proactive in combating the high cost of housing in the area.”
While it’s a convenient way for faculty to buy into an area in the throes of a housing shortage, it’s less of an incentive to ever sell for an owner who’s locked into the program, and Stanford continues to amass real estate for the ever-present housing need.
In 2017, the university made headlines by constructing a 17-acre housing development with about 180 condos, aimed at first-time homeowners who are full-time faculty. According to a San Francisco Business Times story, the university provides homes for about 37% of its faculty, and continues to build more.
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Source: Housing Trends Feed