What’s the Build-to-Rent Market?

What’s the Build-to-Rent Market?

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While homebuilder sentiment is low right now, there’s one bright spot—the build-to-rent market.

Build-to-rent housing communities have become more popular than ever before in 2022. Homebuilding companies are shifting how they do things to keep up with this trend and its different limitations and requirements. Build-to-rent communities usually include single-family and multi-family units, which are built specifically to be rented.

What Is Build-to-Rent?

Build-to-rent or BTR homes are available in different plans and styles.

BTR communities are becoming so popular because people are priced out of buying, making renting their most viable financial option. At the same time, there is a desire to have the benefits of owning your own home, like a traditional single-family style.

From 2021 to 2022, there has been a 106% increase in the amount of single-family build-to-rent homes being constructed in the U.S. That’s compared to a 36% increase from the previous year.

RentCafe estimates there are currently almost 14,000 single-family build-to-rent homes under construction in the U.S.

The total number of these homes being constructed has been steadily increasing in the past four years, but 2022 has been the year we can describe seeing explosive growth.

While RentCafe has its estimate, some say that build-to-rent housing starts may actually be much higher. The number could, in reality, be anywhere from 110,000 to 120,000 this year.

The single-family build-to-rent option is more desirable compared to multifamily homes when we think about traditional rentals for a lot of people.

For the companies building these homes and communities, there are a lot of advantages too. There’s quite a bit of capital being raised in this space, and developers are aggressively putting that money to work.

Analysts say that these single-family build-to-rent properties are a good investment because many people can’t afford to make the large down payment required for homeownership, and interest rates are soaring right now.

While there are benefits to the build-to-rent market, there’s also criticism. For example, these are designed for long-term renters, and resources are being poured into creating housing inventory not designed for ownership. Therefore it’s increasing the already many struggles first-time buyers are facing.

Who Does Build-to-Rent Appeal To?

A single-family home tenant in these rental properties is usually a couple with kids or without kids.

Forty-four percent are couples with kids, according to a 2021 survey, and 30% are couples with no kids. Around 13%, according to the same study, are retired, or empty-nesters, and the same percentage are estimated to be single people.

That makes couples with kids, by and large, the primary driving factor of single-family built-to-rent housing popularity right now.

Millennials are increasingly having children, which also drives the demand for these communities and types of housing specifically. These people want to live in a house in the suburbs, and they want a yard, but they might not be able to afford to buy.

Some Millennial families also see it as a step to home ownership, but they want to try out what the suburban lifestyle might be like.

For older demographics, like baby boomers, these communities provide the chance to monetize a home they own and then move into something that gives them a fixed cost of living.

Metros with the Most Build-to-Rent Homes

The Phoenix metro is the nation’s leader as far as build-to-rent communities. Columbus and Dallas are the two metros that round out the top three. Other areas where they’re popular include the Houston, Riverside, Las Vegas, and Kansas City metros.

Most experts feel that this type of housing will continue to grow because of the inflated housing market. It’s likely that this is still very much in the early stages and will continue expanding in many markets around the nation.

The Amenities

It’s not just the affordability that makes build-to-rent communities appealing for some.

They also have amenities, like parks and recreation areas, green spaces, dog parks, pools, and gyms.

When a builder constructs these homes, they’re doing so with a lot of focus on easy maintenance and durability. They know that the house has to go through a lot of wear and tear.

The Downside

This was touched on briefly above, but while build-to-rent can be great for investors, developers, and many families in the short term, it’s also going to prevent the creation of both personal and generational wealth if people are staying put in rentals because they give them everything a single-family home would if they were to own it.

Regardless of how you might feel about these communities, it’s unlikely they’re going anywhere but up in popularity and growth in the next few years.

With our team at A Better Home Inspection, we’ve been your neighborhood home inspection company since 1988. Our staff has helped many California homeowners maintain their houses – Please call us at 619-514-4699 and schedule today!

Article written by Ashley Sutphin; Posted to Realty Time 1/3/23

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