- Build-to-rent homes projected to increase two-fold by 2024
- Banks and investment firms putting down some $40B in next 18 months
Built-To-Rent Developments = New Subdivisions for Renter
Investors have been buying up distressed properties and single-family houses to rent out to tenants for years now. But, built-to-rent subdivisions designed expressly for renters are emerging concepts being realized right now by builders, investors and private investment firms.
Currently, built-to-rent homes represent just over 6% of new homes built every year in the US, according to Hunter Housing Economics. This percentage of built-to-rent homes is projected to double by 2024.
Built-to-Rent Subdivisions in Nearly 30 States
Brad Hunter, founder of Hunter Housing Economics, said that some $40B has already been committed to built-to-rent subdivisions over the next 18 months.
Homeownership Projected to Decline Over Next Two Decades
In recently released research by the Urban Institute, homeownership is expected to decline. The reason? Continued and fast-rising homeownership costs. The higher/faster those homeownership prices increase, the more people, including people with higher incomes, are expected to rent.
Potential Tenants in Built-to-Rent Subdivisions
Certainly urban apartment renters wanting/needing more private space would be attracted to built-to-rent subdivisions.
Young professionals and families, many of whom who did not get the homeownership gene from their parents, want the flexibility of renting and the associated freedoms that come with that flexibility. They may like the yard, good schools, garage and s-p-a-c-e that “come with” a built-to-rent home without having to pay for maintenance and new motors when things stop working.
Welcome to Built-to-Rent Suburbia
Rather than monthly mortgage payments that translate into homeowners’ equity, monthly rental payments become new income for real estate companies and/or investors. Real estate companies, in turn, professionally manage everything from landscaping to repairs to design specifics on what renters can put outside their rented houses.
New forms of ownership and investment could give renters a stake in the home and/or subdivision. Christopher Ptomey, executive director of the Terwilliger Center for Housing at the Urban Land Institute, said, “We need to be thinking more about different ways that people can still own the communities that they live in, outside of the primary residence model.”
Visually, expect built-to-rent subdivisions to have no for-sale or for-rent signs as potential renters will go through either in-person or online leasing offices. Expect more compact, uniform layouts, more durable interior materials meant to last and, in some neighborhoods, more high-end amenities. And expect more dogs.
Headwinds to Rapid Growth in Built-to-Rent Developments
The land shortage affecting for-sale housing developments is also affecting built-to-rent subdivisions.
Another impasse is opposition from local homeowners and local governments.
And then there’s the ongoing vision of that home ownership represents the fulfillment of the American dream.
All that said, such headwinds/impasses have not slowed growth within this built-to-rent sector.
John Burns, president of John Burns Real Estate Consulting, said, “There’s a portion of America that want to rent a new house. Let it happen.”
Thanks to the Urban Institute, Urban Land Institute, Hunter Housing Economics, John Burns Real Estate Consulting and The Wall Street Journal.
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