Is Single-Family Built-for-Rent the Future of Rental Housing?
Increases in telework are changing not only the way people are approaching the way their homes feel and operate; it's also potentially changing the type of home in which they may want to reside. Although a small segment within the overall housing industry, single-family built-for-rent has growth opportunity in the wake of the COVID-19 pandemic as various demographics seek out lower-density areas and living spaces, while also providing the flexibility of renting.
"The COVID-19 pandemic has many persons decamping from the big city to outlying areas in search of housing types that are more suburban in nature, which closely mirrors what built-for-rent communities are delivering," shared Scott Adams, senior principal at Bassenian Lagoni. This includes millennials who want low- to no-maintenance homes, as well as baby boomers who may be eyeing retirement and want a "touchbase place" to do more traveling post-pandemic.
To be successful in the built-for-rent market requires an understanding of these demographics and what types of features they're looking for — not only in a home but the overall community appeal of a single-family built-for-rent project. Outdoor spaces such as private yards make these types of homes a popular option — especially for dog owners, Adams noted — in comparison to more traditional garden apartments. Community features such as walking paths and common areas, as well as front porches to help connect the residents to the community, are also key.
Success in this market also requires an understanding of how to approach construction of built-for-rent homes and how they differ from for-sale single-family homes.
"The biggest challenge in building built-for-rent properties is blending the two disciplines of single-family building and multifamily investment and development," stated Rich Eneim Jr., vice president and principal of Keystone Homes in Scottsdale, Ariz. "If you're coming at it from just one of those perspectives, you'll have some stumbling blocks. You need experience from both to be successful."
This includes streamlining the design process and the options available to prospective residents, as well as understanding how components such as drain storage and utilities will be set up, especially if there is intent to potentially sell the properties in the future.
As more builders and developers look toward this product type, land buying has become extremely competitive, Eneim observed, and will likely continue as supply of these projects increases.
"As people are getting more comfortable at home as part of their lives, this product type is going to be a beneficiary of that," he noted. "In the Phoenix market, there is still a robust demand for rentals and for residents to stay in the area."