As the housing market deteriorates, families across the country are shunning homeownership and instead looking to newer homes in rental-only developments like Gaston’s landed. You’ll have separate homes, each with a kitchen island, 2-car garage, and small lawn lot, all for rent only.
This is one of thousands of “build-for-rent” developments occurring across the country billed as a reachable route to single-family homes and front yards in an era where homeownership is becoming increasingly inaccessible. It’s one. Developers will add 105,000 homes to such communities this year, a 50% increase by 2025, according to real estate consultancy Hunter Housing Economics.
This rental housing phenomenon came before the recent slowdown in existing home sales, which has been declining for seven consecutive months.
But decades of high mortgage rates are expected to make housing even more affordable, boosting demand for rentals. Her 20s and her 30s today are far more likely to be renting than the generations before them. This is thanks to a combination of economic and social factors such as the aftermath of the Great Recession, rising student loan debt and the desire for more flexible living conditions.
“We considered buying it a few times but couldn’t swallow it,” said Adam, 34, who owns a dog walking and grooming business. “We fit into the demographic of people who five years ago would have bought a huge house in the suburbs. I have.”
The construction of tens of thousands of new rental homes could help rebalance the broader housing market, which has been in a construction crisis for years. There is a shortage of detached houses.
But critics, including local housing economists, say the rental housing arrangement is exacerbating long-simmering inequalities by replacing entry-level housing, which makes home ownership even more elusive, with rental housing. says there is.
Buying a home has long been one of the most direct and reliable ways to build wealth. But when renters face ever-rising rents, it becomes much more difficult to save up the down payment to buy a home. Data shows that rents tend to rise each year, so renters spend more of their income on their homes than homeowners.
James Gaines, an economist at Texas A&M University’s Center for Real Estate Studies, said: “It’s changing the economic dynamics of entry-level homebuying, and it’s having a real impact on what kind of homes people can afford, and for how much. I have.”
Meanwhile, many of the country’s biggest home builders, including Toll Brothers, DR Houghton and Renner, have begun investing billions in single-family rentals, according to Brad Hunter, founder of Hunter Housing Economics. He estimates that about 10% of new housing construction in the country is built for rent.
“Homebuilders haven’t done a good job of producing affordable housing for young families,” Hunter said. They work from home and say, ‘I need a garden and a park nearby, so I need to move out of my downtown apartment and into a detached house.’ But they can’t afford it.”
There are already at least six such built communities for rent within 20 miles. Austin has 11 more projects underway. Over 2,500 new homes in total. Most of the developments were in suburbs such as Round Rock, where Dell’s headquarters are located, and it was common for middle-class families to buy their first homes.
In interviews with about a dozen residents renting new homes in central Texas, most said they would buy one if they had enough savings. Many are in their 20s and 30s and recently engaged or married. Some had young children. Almost everyone had a dog.
“Buying a home is the next step. This is what keeps us going until we get there,” said the 37-year-old, who moved into a two-bedroom house in Urbana in the Goodnight Ranch rental development in southeast Austin. said Justin Whited of Pandemic. Since then, his rent has gone up 20% to $2,200 a month, but he wants to stay where he is until he saves a down payment.
“We got our home set up without the hassle of long-term commitments,” he said.
It also appealed to the Gaston family, who moved to Texas from New York, where $4,000 a month rent is more common than Texas.
Like thousands of others, Gaston was seduced Early Pandemic It promises warm weather, plenty of space, and low costs. This influx of new residents has boosted rents and home prices in the Austin area by at least 30% in his two years.Median home price starts at $355,000 nearly $500,000, according to the Austin Real Estate Association.Meanwhile, median rents have risen from about $1,780 up to $2,343 One month, Redfin data shows.
“Our accountants, financial advisors, almost all of us kept asking, ‘Why aren’t you buying a house? ‘” said Adam Gaston. But for our generation, that is no longer the case.”
In the aftermath of the Great Recession, developers began building entire rental housing lots about ten years ago. We have found that building large rental homes of 300-400 units is more efficient and profitable than buying investment homes one at a time.
A handful of rental housing areas, concentrated in Arizona, Texas, and other states along the South, aimed at people who haven’t had the cash or credit score to buy a home for years but still wanted the feel of suburban living.
As covid-19 cases become more common, Suddenly, young professionals across the country wanted to trade their city apartments for suburban rental properties.they took precedence A space to work from home and a yard for a pandemic puppy.
Homebuilders and investors were ready, cash was plentiful, and they had access to cheap financing. And by renting homes instead of selling them, you can take advantage of skyrocketing rent growth while preserving fast-appreciating residential land, said Gaines, an economist at Texas A&M. As a result, about 800 new rental homes will be built in the Austin area between 2020 and 2022, a 134% increase from pre-pandemic construction rates, reports national apartment search site RentCafe. I’m here.
“Every time you suddenly see hundreds of acres of land down the road, people are turning it into rental housing instead of people buying it,” Gaines said. “We really don’t know what their exit strategy is or how long they’re going to stay here. Will these be rental neighborhoods forever? They’ll sell the property at some point. Are you planning to start? There are several possibilities, but there is no doubt that the ultimate goal is how much money you can make.
With the housing market nearing a standstill, some homebuilders and investors are beginning to convert entire neighborhoods of new real estate to rentals, as was the case with the Gaston development. started putting all 100+ lots together for rent, some of the homes there were already on the market.
Oaks-on-Chisholm Trail Leasing Consultant Brian Borshevski said: “And you have to say, ‘No, sorry, it’s just a rental.’ We’re in the rental generation now.”
Housing economists say this shift to rental puts homebuyers at a disadvantage. Housing policy and poverty experts have long viewed homeownership as a one-way ticket to the middle class. This is especially true at a time when house prices are skyrocketing. Both rents and house prices have risen sharply during the pandemic. However, while homeowners have benefited from low interest rates and rising home values, renters have not.
“Rent payments are not used to build the assets that make up a significant portion of most American household wealth,” says Daniel Pang, a research assistant at the Urban Institute’s Center for Housing Finance Policy. . “Homeownership is a vehicle and a channel that can deliver a lot of privileges…it has always been.”
But developers and investors say they are simply meeting demand for rental housing. His NexMetro Communities, a Phoenix-based homebuilding company, is expanding across the country, building thousands of rental homes in suburban neighborhoods near Dallas, Denver, Atlanta, and Tampa. His two communities under construction north of Austin each have about 200 homes, plus swimming pools and dog parks to accommodate a mix of millennials and baby boomers.
The company typically holds developments and operates them for the long term, but it also sells entire communities of 100 to 200 homes to real estate investment trusts and other investors and then rents them out.
said Jacque Petroulakis, executive vice president of NexMetro. “Build-to-rent is not a replacement for homeownership. It’s just another leasing option that gives people a more attractive option before buying a home.”
Earlier this year, 48-year-old Tim VanZile moved into a rental subdivision with his wife and deaf rescue dog Soda in Georgetown, Texas, about 30 miles north of Austin. I was. They paid his $2,600 for his four-bedroom home and are saving to eventually purchase their own home.
On the other hand, he prefers a detached house free from the hassles of owning a home, such as mowing the lawn and changing the air conditioner filter.
“If a light bulb burns out, you don’t have to replace it,” he said. “Even if he has to wait five years, realistically he has to wait seven years to secure the down payment, at least he can live comfortably in a place like Pleasantville.”
VanZile, who works as an inventory manager for a vehicle leasing company, wants to live in a rental home for at least five years. He and his wife have already added decks and made other improvements. However, he worries that the price could drop by then.
“I have no doubt our rent will go up at some point, so who knows how long we can keep this up,” he said. “Then what do you do? Shall we move farther?
Rachel Siegel contributed to this report.