As macroeconomic factors create headwinds for first-time homebuyers, and younger generations continue to redefine the meaning of “The American Dream”, a compelling trend has accelerated in the real estate market: built-to-rent housing. These are nice, suburban housing plans that offer all the benefits of neighborhood living, but without the burden of ownership, taxes, and maintenance. It makes a lot of sense, and many real estate companies are jumping at the chance to invest.
The percentage of renters in the US has been steadily increasing since the 2008 housing crisis, but it’s really accelerated this year. Traditional homeownership isn’t financially feasible for many Millennials and the idea is likely to be challenged by Zoomers. However, younger people reach a point where the small apartment living no longer works, and they begin longing for more space, privacy, and less traffic. If they have kids, they want to get them into a good school district. Just because these generations aren’t keen on owning a home, doesn’t mean they want to forgo the traditional suburban lifestyle.
For real estate investors who can’t make heads or tails of the current market, built-to-rent housing may be something to consider. It addresses a significant gap in the current market, and it’s a concept that’s expected to grow rapidly in the coming years.
The Current State Of The Built-To-Rent Housing
Built-to-rent single-family subdivisions serve as a stepping stone to homeownership for many or can be a permanent middle-ground solution for younger generations who like the idea of neighborhood living, but don’t like the hassle or cost of homeownership. These subdivisions can be located in an urban or suburban area and much like a typical apartment building, they’re usually maintained by a property management company that is responsible for rent collection, neighborhood rules, and maintenance.
Built-To-Rent plans have been around for nearly a decade, and there are currently thousands in communities across the US. They’re also expected to grow quickly, with new plans popping up every month. According to a study conducted by Hunter Housing Economics, built-to-rent homes now represent more than 6% of new homes built every year. They believe we’ll see about 105,000 new homes in 2022 alone, and production is expected to double by 2024.
The Built-To-Rent Model’s Impact On The Overall Market
New home construction has been slowing for years but has nearly come to a halt due to affordability challenges, supply-chain issues, and inflation, This has led to a huge gap in availability and is the leading driver behind the current lack of inventory on the market. Some believe the increase in built-to-rent construction can help to drive new development. Still, other industry experts believe built-to-rent subdivisions will further weaken the market by driving up the cost of entry-level homes.
Either way, it doesn’t appear that built-to-rent housing development will slow down any time soon. While it’s hard to predict the long-term impact of this model, it provides consumers with a solution to the many challenges of today’s market.
