Build-to-rent housing is becoming a legit player in the real estate market. Build-to-rent homes are those that are designed from inception to be single-family rental homes, often grouped in a community. The difference? All the residents are renters. And while the build-to-rent umbrella can include townhomes and duplexes, September’s event featured four experts focused mainly on single-family detached homes.
“Five to ten percent of new build homes are now build-for-rent,” says Heather Personne, managing principal at Evolve Ventures. “Phoenix is the third largest market by unit count for single family and build-to-rent housing, and it has the lowest vacancy rate since 1984 because of persistent demand and our continued under supply.”
These communities are rising stars in the market because there are more and more families that aren’t ready for homeownership’s costs or responsibilities, but need more space than an apartment can give, or want to remain flexible in the event of a relocation. “These units are not necessarily for lower income renters. We’re seeing people who are nurses and teachers. Build-for-rent is filling a bit of the workforce housing need, but it’s not Section 8. People want a little more luxury,” said Chris Grogan, partner at El Dorado Holdings.
Dustin Lacey, VP of brand and marketing for Mark-Taylor Companies notes, “We term our demographic ‘the modern millennial’. Residents average about 38 years old with double the percentage of pet owners. They aren’t all families, but the household sizes are larger on average, and household incomes are in the $90,000-$92,000 range. In terms of rent-to-income ratio, it’s probably the highest ratio relative to our product types, which means they’re probably a higher exposure risk should economic conditions change.”
In spite of that, the breakfast’s panel believe build-to-rent communities are dependable long-term, with the average build-to-rent tenant staying three times longer than in a multifamily unit.
Grogan also observes that some people are renters by choice, but that’s not always the case. “We all remember a time where we one in four homes were foreclosed and short sold. If that was your house, you face seven years until you can get back into the market and get a loan. Build-to-rent was born because people lost their homes and didn’t want to go to apartments,” says Grogan. “But this is a real product class that’s not detrimental to anybody else’s project.”
Build-to-rent homes aren’t going anywhere. The numbers are increasing by the year, with a projected 700,000 to be started in the next five years across the country.