How Build-to-Rent Cuts Across Consumer Needs and Changing Market Conditions
In a moment of unstable mortgage rates and scarce single-family housing, the American Dream’s accessibility is in question. But a new option is proving increasingly viable: Build-to-Rent (BTR).
BTR is often mistakenly clustered with traditional Single-Family Detached (SFD) products – but that’s like calling a Mini Cooper a small X5. So, accurate classification depends for now on a formulaic approach (and if you remove even one component, it’s not really BTR):
- Single-family home that was intentionally built as a rental
- Constructed horizontally versus vertically – no one living below or above
- Exists in a managed and ammenetized community with other BTR homes
During 2022, the BTR model exploded with no signs of slowing down. Its impressive range of amenities directly pleases home shoppers and builders alike: restoring optimism, opportunity, and the proverbial white picket fence.
But this isn’t a return to some bygone era.
If we learned anything over the past few years, it’s that replicating the past won’t cut it anymore. Buyers who are priced out of today’s real estate market are finding fulfillment with BTR’s countless features that often surpass traditional homeownership. From a tangible standpoint, BTR checks off just about everything on a modern renter’s wish list:
More breathing room, comfort, and privacy
Thanks to BTR’s horizontal, stand-alone construction, tenants enjoy the comforts of living in a single-family detached home with no neighbors above or below them. Attached garages and direct, secure access are typically standard.
From dog runs to fitness centers, tenants enjoy amenity-rich communities (without the extra financial burden of HOA fees). Additionally, BTR neighborhoods are often situated near parks, schools, shopping, entertainment, and employers.
A managed neighborhood setting
Unlike a for-sale product, the BTR model always exists within a managed community composed entirely of other BTR homes. This means living around other renters who likely share common lifestyle goals.
When analyzing the overall force behind BTR’s growth among today’s modern renters, the most noteworthy driver is the large swath of millennials who are adopting dogs, starting families, and working from home. These up-and-comers are eager to trade their downtown balconies for bigger backyards and neighborhood parks. For this group, buying a home in the ‘burbs felt like the traditional next step, but it hasn’t panned out due to an unsustainable market that has rendered the dream beyond reach, at least for the moment. This is a result of today’s macro conditions – a cacophony of high mortgage rates, high median housing costs and a sheer lack of starter home inventory. An uncertain economy hasn’t helped, prompting both sellers and buyers to wait for brighter days.
Cultural shifts driving BTR
Other, more profound cultural shifts – ones that will likely outlive current conditions – are also driving this change. The pandemic unquestionably shifted how and where people work, blurring life/work borders and giving employees the ability to conduct business from nearly anywhere with a Wi-Fi connection. As a result, priorities changed: major metropolitan hubs began losing their allure as more people chose suburbia and nature over dense, big-city living. And no matter the destination, the high value placed on flexibility and freedom lessens the urgency to put down roots in one place and commit to a long-term mortgage.
Millennials as a force
And how about the large group of millennials who grew up during the recession and experienced firsthand the rapid crash of the real estate market? Their more skeptical view of homeownership is that it’s not always a sound investment. Many young professional families have become disillusioned with consumption and focused on experiences rather than home maintenance. They are drawn to new, well-appointed homes a nice neighborhoods that come without the restrictions and responsibilities of ownership.
More sustainable and innovative building practices
The general appeal of BTR even extends to how these communities are planned and built in the first place. With BTR’s higher densities, land is more thoughtfully and sustainably used. And, because these communities are under a single management for their foreseeable lifecycle, there is a greater focus on innovative construction solutions, including material choices and water and energy conservation.
For today’s modern home seeker, BTR is more than a rental. It’s a housing opportunity that fulfills needs for the “now” and, very possibly, establishes a model for the long-term future.
For Mosaic, it’s an especially thrilling segment because it’s constantly changing – nothing is solidified, and nothing is taken for granted. Our teams are continually learning, adapting, refining and redefining as we go, applying our growing knowledge and team’s years of expertise into countless successful BTR communities across the country. As this asset class matures, we’ll begin to identify more differentiations for competitive market segmentations.