Housing affordability challenges drive demand for BTR homes.

As home prices escalated, inventory shrank, and families sought more living space, communities of rental houses emerged as a growing option. Here’s why they appeal—and what you should know. Although the BTR trend started shortly before the pandemic, that “poured gasoline on the fire,” says Michael Van Der Poel, managing partner at ACRE, a vertically integrated private equity firm that specializes in housing investment, including BTRs. People fled dense urban cores and crowded apartments for more space and greenery, says Shannon Hersker, senior vice president of Northmarq, a commercial real estate brokerage firm that represents builders entering the niche. Unable to buy a house, many turn to BTRs, says Don Walker, managing principal and CFO at John Burns Real Estate Consulting, a housing industry analyst firm. According to a National Association of Home Builders analysis of Census Bureau numbers, there were approximately 21,000 single-family BTR starts during the second quarter of 2022, a 91% increase compared to the second quarter a year before.

Although many equate BTRs with three- or four-bedroom single-family homes, there’s increasing variety as the trend evolves. Homeownership remains the overwhelming desire of Americans. In a survey released by Bankrate last year, 74% of Americans called homeownership a part of the American dream. But the percentage was lower for younger adults, many of whom cited high prices, low inventory and an inability to save for a down payment as barriers. Millennials who can’t afford to buy—or who aren’t ready to be tied to a location—aren’t the only ones being targeted by BTR companies. They’re also marketing to aging baby boomers, who might want to eliminate chores and costs, and to people hit by unexpected life changes, such as divorce or death, who want to gain an instant community. Developer Levi Kelman, CEO and founder of Blue Onyx Companies, says operators in the Sun Belt see a significant number of renters with higher disposable incomes turning to BTRs for privacy and security.

Source: REALTOR® Magazine