Housing Solutions: Build-to-Rent Helps Fill a Gap

The single-family rental phenomenon began after the 2008 financial crisis. With houses going into foreclosure, institutional investors realized they could purchase homes at baseline prices and rent them out at premiums.

Introduction

The build-to-rent industry has gained significant momentum over the past decade, providing an alternative housing solution to those who don’t want to or can’t afford to buy a home. Despite misconceptions that it’s solely driven by institutional investors, the industry is actually adding purpose-built homes to the housing supply and addressing the housing crisis in the United States. In this article, we explore the reasons why build-to-rent is attracting investors, its benefits for both renters and homeowners, and its potential for long-term growth.

Changing Preferences and the Housing Shortage

The 2008 financial crisis and the COVID-19 pandemic have reshaped housing preferences. People have realized that they don’t have to live in the same city they work in and have shifted towards seeking more space and better weather. This change in preferences, combined with economic shakeups, has led to a housing shortage in the United States. According to CNN, the country is short roughly 6.5 million units of housing, unable to keep up with the number of new households being formed.

The Rise of Build-to-Rent

To address the housing shortage, the build-to-rent industry emerged. Contiguous neighborhoods were developed with houses solely for rent, providing an affordable option for those who couldn’t afford to buy a home. Large institutional investors and dedicated build-to-rent firms entered the market, recognizing the stability and potential for long-term cash flow. The Southeast, which experienced significant in-migration before and after the pandemic, became a prime location for build-to-rent developments due to its fast-growing metropolitan statistical areas.

The Benefits for Renters and Homeowners

The build-to-rent model offers advantages for both renters and homeowners. A portion of residents in build-to-rent communities are “renters-by-choice,” individuals who can afford to buy a home but opt to rent for various reasons such as downsizing, living closer to family, or avoiding the responsibilities of homeownership. By choosing to rent, they free up for-sale housing stock for others, potentially leading to more starter housing becoming available. Additionally, build-to-rent provides an affordable housing option for those who desire to buy a home but are unable to afford it due to factors such as high mortgage rates and difficulties saving for a down payment. Renting a build-to-rent home offers the benefits of a stable living situation, with maintenance tasks taken care of by full-service teams and no long-term commitment.

Investor Interest and Long-Term Growth

Investors are attracted to the build-to-rent model due to its stability and potential for long-term growth. In particular, the Southeast has seen significant investor activity, driven by population increases and limited housing supply. Institutions are willing to invest in build-to-rent developments because they recognize the changing preferences of renters and the long-lasting demand for this alternative housing solution. The success of Quinn Residences, a build-to-rent owner-operator and developer based in Atlanta, demonstrates that capital is available for firms with a proven track record, even in the face of market volatility and economic uncertainty.

Related Facts

• The build-to-rent market experienced a surge during the COVID-19 pandemic as people sought more spacious and independent living arrangements.
• The Southeastern region of the United States has witnessed significant population growth, making it an attractive location for build-to-rent developments.
• Institutional investors are primarily concentrated in the Southeast, demonstrating their confidence in the region’s potential for long-term growth.

Key Takeaway

The build-to-rent industry is not just about institutional investors purchasing homes out of the hands of hard-working Americans. It is an important solution to the housing crisis, adding purpose-built homes to the housing supply and offering an attainable and flexible housing option for both renters and potential homeowners. The industry’s stability and long-term growth potential have attracted investor interest, ensuring continued innovation and expansion in the build-to-rent market.

Conclusion

The build-to-rent industry has emerged as a vital solution to the housing shortage in the United States. By providing purpose-built homes for rent, it offers an attainable housing option for those who don’t want to or can’t afford to buy a home. The build-to-rent model benefits both renters and homeowners, freeing up for-sale housing stock and providing stability and affordability. With investor interest and the changing preferences of renters, the industry is poised for long-term growth and continued contribution to addressing the housing crisis.