The Built-to-Rent Boom: When Builders Turn to Single-Family Rentals, Who Wins? | New


It has become nearly impossible for first time home buyers to afford a first home in Fort Worth.

But with a new product rapidly gaining traction in the Sunbelt, those looking to live in a first home have another option.

They can rent one.

“Built-to-let” communities are positioned as an answer to the riddle: I can’t afford a house, but this apartment is too small.

These communities, also called “horizontal apartments”, resemble your average neighborhood of primary residence. Identical rows of single-family homes or duplexes with modest, manicured lawns line a freshly paved street. There may be a community center, and sometimes there is a swimming pool.

In 2021, about 95,000 built-for-rental homes were built in the county, estimates Brad Hunter, owner of Hunter Housing Economics, a market consulting firm.

In fact, Dallas-Fort Worth ranks third nationally in the number of single-family rentals.

Hunter predicts about 120,000 rental units will be built nationwide this year, a 33% increase from 2021.

This is just the beginning, he says.

As interest rates begin to rise, making homeownership more out of reach for first-time buyers, the built-to-rent product is a trend that is likely to continue. But that could be a bigger boon for builders than renters.

Finally an alternative

Between April 2021 and April 2022, the median home price in Fort Worth increased 28.6%, from $276,000 to $355,000.

Meanwhile, inventory remains dangerously low — April marked six months of inventory below a month in Fort Worth — and mortgage rates are climbing. Soaring interest rates pushed up payments on a $350,000 mortgage by more than $500 a month.

“Unfortunately, I think we are about to enter a period where it will be even harder than ever for young families to buy a home,” Hunter said.

During the same period, rents in Dallas-Fort Worth rose 17.3%, according to data from

So renting becomes more and more expensive, but not at the same rate.

Housing market economics “forces people to say, ‘What are the alternatives?’ said Hunter.

“Built to rent” is the industry’s answer to today’s market, and it’s a boon for builders and investors alike.

“In fiscal 2022, we expect our rental operations to generate more than $700 million in revenue from the sale of rental properties,” said Mike Murray, executive vice president of homebuilder DR Horton, in an earnings call in November 2021.

Around this time, DR Horton announced plans to invest an additional $1 billion in single-family rentals.

ONM Living, the builder of built-to-rent homes under the HistoryMaker builder umbrella, has seven projects in various stages of development across Dallas-Fort Worth and one in the Houston area. In total, the projects will provide approximately $650 million in asset value.

“They’re in the growth aisles of the Metroplex,” said Nelson Mitchell, CEO of HistoryMaker. “I think with some of the rental products, you definitely can’t go to the total periphery. You need to stay a little closer.

ONM Living developments are (or will be) in places like Burleson, Hurst, Lewisville and near Eagle Mountain Lake.

Who are the tenants?

The Cottages at Bell Station, a built-to-let community in Hurst, offers a housing solution for a diversity of tenants.

There is a 72-year-old woman going through a divorce; a woman who moved to the area after finding a job at DFW Airport with American Airlines; and a newly married millennial couple who wanted more space for their golden retriever, Maverick.

In fact, dogs make up a fairly large contingent of built-to-let residents, as the community offers additional green space, a sizable dog park, and even private yards for some units.

Typically, a one-bedroom unit in a built-to-rent community will be more expensive than a one-bedroom unit in an apartment complex. But, in terms of price per square meter, built to rent is better value for money.

There are many reasons why tenants may choose to build to rent, such as the convenience of renting. Or maybe they’re still saving for a down payment.

Some of ONM Living’s communities cater to people in this situation, Mitchell said.

These communities can combine homes for sale as well as rental products, with the goal that “one day they can buy a home with HistoryMaker.”

While built-to-let tenants of course don’t own their homes, Nelson and Hunter said they were good stewards of their neighborhoods, contrary to the fears of nearby landlord neighbors.

“People who move into these rental homes put down roots,” Hunter said. “They don’t come for a year. They stay longer, several years. On the whole, they are not transient, and that is an important factor. »

Life built to rent

The Cottages at Bell Station were built by ONM Living in Hurst and sold to MBP Capital in April.

This is often what happens. A builder constructs a built-for-rental community and, upon completion, hands it over to a property management company.

Thus, residents of these rental communities have access to amenities such as swimming pools and dog parks and can expect to have their lawns mowed and their washing machines repaired in the event of a breakdown.

But, unlike home ownership, this arrangement can put tenants at the mercy of a distant management company.

Kendri and Ruby Bennett moved into The Cottage at Bell Station before the community was sold in April.

The company increased its rent by $500 a month, the Bennetts said. They also had problems with the online rent payment system used by the company.

“A lot of people are moving,” Kendri Bennett said. “A lot of people break their lease. Like, I’m about to break mine.

Another community resident said the rent is manageable, but she struggles with fees: pool fees, trash fees, fees she had to pay when the company’s direct deposit management was not working and his rent was overdue, interest charged with late fees, credit card processing fees charged for paying rent online.

She will have to find something cheaper when she retires, she says.

MBP Capital did not respond to a request for comment.

The future of rental housing

While build-to-rent is being touted as a product that will help affordability, renters paying $2,000 a month for a two-bedroom home might struggle to save for a down payment for a similar home.

“My mortgage, for example, for a comparably sized house is only a fraction of that,” said Josh Roberson, data analyst at the Texas Real Estate Research Center.

But, experts agree that as house prices and rents rise, the increased supply will help the frenzied housing market, regardless of product.

“I think we’re going to go back to that period and say, ‘Why didn’t this happen sooner? ‘” Hunter said.


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