Build-to-rent (BTR), an expanding sector of the rental market, continues to snag a growing share of the single-family landscape. Spurred by single-family affordability challenges, demographic shifts and lifestyle changes for renters entering the home buying stage, an increasing number of institutional capital sources have entered the market along with developers evaluating the impact of BTR on their multifamily portfolio.
Outside of conventional multifamily, renters have several options. While conventional multifamily accounts for about half of the rental universe, about 21 million units fall under the single-family rental umbrella. Single-family rentals include the traditional single-family rental (“for rent by owner”), townhomes and BTR – as defined by the Census Bureau.
Single-family rentals have distinct characteristics. The traditional single-family rental (SFR) is typically a new or existing single-family home built for homeownership. Conversely, BTR units are purpose-built communities designed for rental. Another difference between traditional SFR and BTR is location. BTR units are developed as master-planned communities in high-growth suburban neighborhoods. Whereas SFR homes are on scattered sites in established neighborhoods. SFR is traditionally managed by individuals or small investors, however, there is growing interest among institutional sources of capital. Meanwhile, institutional investors with property management companies providing on-site support lead the BTR space.
Specifically, BTR is distinguished from SFR by ample amenities and a smaller unit size (less than 1,500 square feet) appealing to renters seeking things like attached garages, front and back yards, extra storage space, pet-friendliness and increased privacy. Developers also deliver amenities like the gym and pool commonly found in conventional properties in BTR designed communities.
A growing gap between the cost of home ownership and renting, with ownership currently estimated around 50% more expensive than renting, opportunities within BTR remain ample.
For more information on build-to-rent, watch the webcast Market Intelligence: Build-to-Rent Market Trends.
