The other edge to that sword is that schools are also required to create and preserve a safe living and education evironment for all students.
If that arrangement makes born females uncomfortable, the schools could possibly be sued under other laws for creating and maintaining an uncomfortable living and education environments.
Either all dorms are made co-ed or they create separate dorms for "other/miscellaneous". The school might be able to get an exemption if it doesn't accept Federal funds. That's how rich towns avoid having to bus in minority students from the city.