A prestigious residential university is the student's whole life. Leaving its boundaries is a special event. You eat, sleep, study, exercise, work, etc. with your classmates around the clock. Like a monastery. Administrators are not just engineering the content of lecture. They are engineering the group of classmates in the library at 12:45am puzzling out together what the lecture meant. Students who only show up on campus for scheduled classes throw a wrench in those plans. Hence the mandate to live on campus.
This has always been the image of college in the United States. The alleged change is that conditions are getting less monastic.
This mandate can relax after freshmen year because at that point you've integrated. You'll take an apartment with some friends in the neighborhood, but you won't really be leaving. The university may no longer be your landlord and your grocer, but your landlord and your grocer will be doing 99% of their business with university-affiliated customers. The neighborhood is still campus, de facto if not de jure. You're still immersed. Technically some students may use this freedom to move across town or back in with their parents, but the mandatory year on campus has brought this risk acceptably low.
When it works, it works well. I have memories from late nights in the library and from Saturday evenings in the theater control booth that I wouldn't trade for anything in the world. But many schools in their search for prestige are trying to force this on kids who don't want it, and on top of that are failing to deliver.