Build-To-Rent Communities Help People Break Free Of The Burden Of Homeownership

Skyrocketing housing prices and high interest rates are reasons many people are shying away from homeownership.

But maintenance, property taxes and homeowners insurance also add up, and many people are turning to single-family build-to-rent (BTR) homes to avoid them.

The National Association of Homebuilders estimates that 69,000 BTR homes started construction in 2022, but it does not consider homes sold to another party for rental purposes, which could represent another 5% or higher of single-family home starts.

Fixr.com predicts the total number of BTR homes built in 2022 to be about 119,250. It also estimates the number of single-family BTR houses has doubled in the last five years.

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Demand for BTR homes is split between Gen Z (55%) and millennials (41%), according to Fixr.com's survey of 52 home construction experts for its recently released Build-to-Rent Homes Report 2023.

"Millennials are starting to have children, and demographic projections show that more of them will start families over the next few years," said Brad Hunter, president of Hunter Housing Economics. "This is one of the drivers of built-for-rent demand — young couples with babies and toddlers want to be in the suburbs and live in a home with a yard for the kids to play in. Sometimes they can't afford to buy, at least right now, so renting a single-family home makes a lot of sense for them."

What's The Attraction?

But a home with a yard in the suburbs isn't the only reason BTR communities are rising in popularity. The biggest attraction of built-to-rent homes Is avoiding maintenance and repair costs, according to 62% of the home construction experts surveyed. If a problem needs fixing, it's usually the landlord who arranges and pays for the repairs.

Repairs can add up. HVAC maintenance costs about $200 per year, and if you need your air conditioning replaced, you can expect to pay around $3,600. The yard, roof, plumbing maintenance and structural touchup also should be accounted for.

Maintenance costs aside, just owning a home can be expensive. Homeowners Association (HOA) fees, property taxes and homeowners insurance make it difficult for people with limited incomes to afford homeownership.

Trevor Koskovich, a capital real estate investment expert at Northmarq, said there is a massive development pipeline for single-family BTR homes because the product has fared well operationally. Single-family BTRs have proven to be more desirable than renting multifamily units.

"There was also a tremendous amount of capital raised in the space, and developers are deploying that money aggressively," Koskovich said. "I think there has been a demographic shift, and tenants really prefer this type of product."

While single-family rentals are viewed as a good investment because many people can't afford the large down payments required to buy a home, Ethos Design + Build | Remodel owner Sarah Cunningham warns of repercussions.

"They are designed for long-term renters, but they are also creating housing stock that is not designed for home ownership and continues to make it difficult for first-time buyers to find a place to live," Cunningham said.
While the high cost of housing may keep some people from buying a home, it is still possible to own real estate. With Arrived Homes, you don't have to spend a fortune to invest in real estate. With as little as $100, anyone can buy shares of a rental property and benefit from long-term appreciation while collecting passive income.

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