Source: Adam Graham, Fixr.com
Top experts in the build-to-rent industry analyze the current growth of these communities and the reasons behind the increasing demand in 2022.
Build-to-rent housing communities are more popular than ever before in 2022. Homebuilding companies are adapting to the requirements and limitations that people are facing in an ever-increasingly expensive housing market by offering an alternative. Build-to-rent communities feature both single-family and multi-family units which are specifically built to be rented out.
Build-to-rent (BTR), also known as built-to-rent or built-for-rent (BFR) homes, are available in different styles and plans. For many, buying a home is out of reach, leaving renting as the most viable option. Yet, many families would still like the benefits of living in a larger, traditional single-family home, but without the burden of a down payment, high interest mortgage, and unmanageable maintenance costs.
We have spoken to top experts working in the build-to-rent industry to comment on and analyze the current state of this sector; the growth in construction, who is driving the demand, where the most populous communities are in the country, and what amenities are attracting renters.
Big Increase in Build-to-Rent Homes Under Construction in 2022
Most Popular Build-to-Rent Amenities
What is the appeal of build-to-rent homes and communities? According to the professionals we surveyed, 37% agree that the draw of living in a home with features such as patios, decks, and balconies are key. Another 37% also mentioned the benefit of having parks and recreation areas as a convincing factor. Other amenities, including pools, green space, gyms, and dog parks, add to the appeal of living in build-to-rent communities.
We asked experts to comment on these features and mention what others make the difference between traditional rentals, and those that are built-for-rent.
Experts List Outdoor Areas and Easy Maintenance As Top Features
Hunter explains that, “When a BTR builder constructs a home, it is with a great deal of attention to durability and ease of maintenance. That builder (or the investor/operator partner of that builder) knows that this home has to be able to withstand and resist pet damage, spills, and other mishaps.”
Taking into consideration the aspect of easily maintaining a rental home, Hunter continues to detail specific materials and design plans, saying, “That’s why most of the projects I’m seeing in the BTR world feature luxury vinyl plank flooring, which looks great, and is very resistant to scratches and will not warp if a drink is spilled on it. I’m also seeing home designs that allow maintenance workers to service the air conditioning systems and other HVAC systems via the garage, which is less intrusive for the tenants.”
Cunningham agrees with the surveyed experts, commenting that, “…people want amenities similar to what they can have in a neighborhood. This includes pools, parks, gyms, and some retail as well.”
Koskovich highlights garages as a key feature of BTR housing, as well as considering the popularity of having a dog as a pet: “BTR is all about garages and backyards, this is what the core product is about. 70% of this tenant base will own pets (mostly dogs), to that point dog parks and pocket parks are in the communities to walk the dog and meet your neighbors.”
Despite Conflicting Data, BTR Growth Predicted to Continue
While current growth in the build-to-rent sector is there for all to see, the reasons behind its continued popularity moving forward seem to be mainly as a result of continued financial restrictions. Hunter says that in 2022, “Demand is already increasing rapidly, and the surge in mortgage rates has only accelerated the growth”.
Predicting an ever-increasing boom in this area of the housing market, Koskovich claims that, “This segment of the market is here to stay, it will continue to expand and evolve and we expect it to be the fastest growing residential sector in the U.S. in the year ahead.”
However, not everyone is enthusiastic about the outlook of BTR housing. Cunningham questions the fallout of such a high increase in rental properties: “I question if build-to-rent is truly a desirable alternative for anyone in the long run. […] Build-to-rent makes great economic sense for investors but it’s bad for communities. It’s making it harder for people to access homeownership. When that opportunity is taken away, like it is in communities like mine where there’s already low housing stock, it’s harder for people to create personal and generational wealth.”
It is important to note that the data analyzed in this article may only tell a fraction of the story. According to NAHB analysis, there were approximately 13,000 SF BTR home starts in the first quarter of 2022 alone, and 51,000 overall in 2021. Meaning that the number of starts in 2022 is set to be significantly greater than the data suggested by RentCafe. Also, the data analyzed by NAHB does not take into account homes that are sold to another company for rental purposes. Brad Hunter, President of Hunter Housing Economics, points out that this means there were an estimated 85,000 to 95,000 build-to-rent starts in 2021, and a predicted 110,000 to 120,000 in 2022.
Whichever statistic you choose to analyze, one thing is clear: The build-to-rent sector is growing at a rapid pace with no signs of slowing down in 2022 or the near future.