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The housing market is fiercely competitive for prospective homeowners, with only two months of inventory available as of January 2023. Renters are also facing a challenging situation with a limited and expensive selection of units. To address these issues, builders and investors have alighted on an attractive solution: built-for-rent (BFR) housing, also known as built-to-rent or BTR. BTR communities are composed of high-quality detached single-family rental properties, often with shared amenities that make them especially attractive to residents. This asset class has attracted a lot of attention lately based on its potential to offer differentiated resident benefits and the relative operational efficiency it creates for property owners compared to scattered site single-family rentals.
Unlike traditional single-family home subdivisions, these properties are developed with the intention of appealing to the rental market. Residents of BTR housing get the same benefits of single-family rentals, but with the added bonus of living in a professionally managed, amenity-filled community without HOA costs. To enable this, each house is built for efficiency in terms of repairs and maintenance, and the entire community is structured differently from a legal standpoint, with the property deeded as one entity. Municipalities are still trying to determine how to zone BTR communities, but we have seen broad-based bipartisan recognition that they have the potential to rapidly address the affordable housing deficit, which is currently estimated at more than 6 million units (Realtor.com)
Since homes in BTR communities are constructed in large batches, they can be built much faster than single-family subdivisions, where builders must consult with home buyers and take into consideration their customization priorities and concerns. As developers become more adept at cooperating with cities to zone their BTR projects, more of these homes are popping up nationwide to the benefit of investors and residents alike.
For investors, we're seeing the best returns from BTR properties located in a low-density suburban markets with high multifamily occupancy rates. Site position is also important; proximate features like great shopping, parks and top-notch schools increase rental valuations and lease-up velocity. Additionally, we encourage investors to thoughtfully consider the type and quality of amenities in the community. BTR communities with superior amenities rent sooner and often outpace the market in terms of actual rents achieved.
Currently, BTR only accounts for about 6% of housing built in the US, but this number is expected to grow significantly. Between September 2021 and September 2022, 68,000 BTR units were built — a 42% increase over the same period the previous year. With many more projects in the pipeline, BTR communities are predicted to become even more common between now and 2030. Overall, BTR is well-suited to meet the continuing customer demand for affordable housing alternatives that provide the flexibility, location benefits, and quality of a single-family home without the burden of a mortgage or the hassle of DIY maintenance. As more and more working Americans move from large cities to suburban areas with lower costs of living, BTR, and the investors who recognize its potential, are poised to benefit.
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