Make way for the Next Big Thing in rental properties: built-to-rent communities. This new niche of the rental market has skyrocketed in popularity over the last few years, and major players in the single-family and multifamily game are beginning to take notice. Given the post-pandemic uncertainty that’s shaking the rest of the rental market, this booming new take on rental living must be doing something right, so let’s dive right in.
What is it?
“Built-to-rent”, “build-for-rent”, “single-family rental” – the concept is so new, there isn’t even an established term or acronym for it. Coming from a market that loves its acronyms, this says a lot about the revolutionary nature of the trend. Although single-family rental communities aren’t a particularly new idea, the demand for them certainly is. And as more multifamily companies get involved, single-family rentals are about to get a makeover.
Built-to-rent communities, which fall under the umbrella of single-family communities, are where the convenience of an apartment meets the autonomy of a home. Instead of developments being bought by homeowners and promptly rented to families, these new communities are cutting out the middle man, building and marketing directly to single families looking to rent. Families live in a single, freestanding building (picture a townhouse) instead of the traditional multi-level, “how did we fit so many units in one structure” apartment building. Aesthetically it’s a very different approach, but operationally, it should feel very familiar. The built-to-rent communities’ functions are modeled after apartment complexes: amenities, shared spaces, and a sense of community. Because rental communities are just that – rentals – property owners and managers often struggle to create that neighborhood feel in their communities. But built-to-rent properties have the capacity to feel more like a home simply because they look like homes. Throw in the added benefit of community amenities and property management, and you’ve got a recipe for great living.
Who’s getting involved?
The sudden interest in single-family communities reflects a shift in the rental market that no one can afford to ignore. Literally. The possibilities are lucrative and everyone wants to be involved.
First, let’s break down the demographics of renters who are making this whole thing possible. The name of the communities should give you your first clue: single-family rentals. So we’re looking at families, usually seeking their first home but without the means or desire to buy immediately. Instead, they turn to rentals. The most common type of family renter is millennials, to no one’s surprise. The communities are also attractive to empty-nesters, young singles, and “life transitioners” such as divorcees. Built-to-rent communities offer long-term options without the financial commitment of a house. Developers call single-family homes “stickier” than traditional apartments because their residents find themselves wanting to stay, driving renewal rates through the rented roof. NexMetro Communities calls it “the American dream untethered by the responsibilities of home ownership” and we must say, we agree.
But millennials and other rent-happy families aren’t alone in making this housing system boom. Property developers, owners, and investors are fanning the explosions by, well, developing, buying, and investing. Hundreds of rental communities are already transitioning to accommodate or focus solely on single-family built-to-rent homes. Christopher Todd Communities advertises “a home built for life.” The Bungalows calls it “home without the hassle.” Everywhere you look, you see companies realizing the true beauty of built-to-rent: the best of both apartments and houses in a single option. Even the smart technology corner of the market is getting involved. LittleBird, a smart tech company previously focused on multifamily housing, has now expanded operations to incorporate single-family rentals. And it seems even a website dedicated to multifamily news, Multifam.com is opening its doors to this new trend. Heck, if it weren’t so cute we’d even have to consider changing our name!
Why is it important?
Single-family rentals say a lot about the way the housing market is shifting, from the priorities of owners to the demands of renters. First, the rise of rentals has been slowly adapting the industry to be more focused on long-term rentals, a grey area between the traditional rental and the traditional house that hadn’t previously been considered. The expansion of our definition of “rental communities” is an important one, because it creates more flexibility for a wide market of renters. The apartment complex lifestyle is an attractive one to people from all walks of life, and properties can only benefit from accommodating as many needs as possible.
The novelty of this venture is also important to consider. Although, as we’ve established, single-family rentals are not a new concept, the popularity of it certainly is and it’s beginning to get even more traction. As investment and development opportunities go, this is about as exciting as it gets in the housing market. A new and promising venture like built-to-rent communities is one that will define the next generation of companies and properties who want to make their mark.
Single-family homes and built-to-rent communities are sweeping the housing market, expanding operations and creating new opportunities for everyone involved. From renters and owners to developers and investors, there’s enough interest in this new venture to keep built-to-rent properties around for a long time.