Published by REALTOR.com | December 27, 2022
A for-sale market with still-high housing prices and surging mortgage interest rates are pricing many out of homeownership, at least for now.
Many renters crave the extra bedrooms, laundry facility, and backyard big enough for a pair of swings and a slide that single-family houses provide. But they’re facing a for-sale market with still-high housing prices and surging mortgage interest rates, pricing many out of homeownership, at least for now.
But what if you could have that large house without having to come up with a big down payment and get approved for a mortgage?
Many builders are rushing to put up whole communities of single-family homes for rent. And renters seeking more space and privacy—but can’t afford to purchase a home—are turning to this rapidly growing build-to-rent market. While the sector isn’t new, interest ramped up during the COVID-19 pandemic when renters began searching for larger homes, and a greater part of the workforce began working remotely from home.
Sometimes described as “horizontal apartments,” build-to-rent communities are designed and developed with the sole intent of renting out the homes. Over the past few decades, 3% of single-family starts were developed as rentals. By the third quarter 2022, that number has jumped to 12%, according to the National Association of Home Builders.
While investment and planning for new build-to-rent communities had been brewing in the year leading up to COVID-19, the pandemic coupled with rising inflation has contributed to the growing interest as many would-be homeowners are grappling with higher costs, says Robert Dietz, chief economist of the builders association.
“We know that as a result of COVID, a lot of people wanted a single-family structure. They wanted more space. We estimate that probably about a third of the workforce is working at home, at least a few days a week. All those factors drive demand for the single-family structure. But of course, not everyone can afford those costs.”
Unlike an apartment rental, single-family rentals in a build-to-rent community offer the lifestyle of homeownership without the added expenses of maintenance or what some call the hassle of owning a home. The homes generally rent for more than a typical apartment.
“We had this idea that if you build new-build homes in a community setting and you put a management, maintenance, and amenity package, much like an apartment, you probably have something pretty attractive,” says Mark Wolf, CEO and founder of AHV Communities. The company is one of the first developers, builders, and operators of luxury, single-family, and attached home rentals.
Since starting in 2013, AHV manages nine communities in Colorado, Texas, and Washington, with six more under construction in Texas, Alabama, and California.
