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The Rise of Built-for-Rent Homes

Some builders are redefining the path to homeownership through new detached rental products. According to a post on the National Association of Home Builders' (NAHB's) Best in American Living blog [1], renting by choice–instead of owning outright–is becoming increasingly popular among millennials.

The blog said that this was where newly constructed built for-rent single-family homes came into the picture. These homes, according to the blog, present millennials "with a terrific opportunity to live the American dream–without the additional responsibilities and stress of homeownership."

The blog indicated that one of the key reasons for the rise of these built-for-rent homes was diminishing affordability.

The post, written by BSB Design [2], said that transitioning from a multifamily property to a single-family home was a "move-up" solution for families that desired "to have the flexibility to travel, live a low maintenance lifestyle, or avoid financial burdens."

Additionally, single-family rental homes offered advantages like a backyard as well as enhanced privacy without the expenses associated with homeownership like mortgages, down payment, or maintenance. "As rentals, these single-family products use high-quality interior finishes and materials to mitigate potential damage, and those finishes just feel more luxurious in a detached product," said Rick Henry, Senior Principal of BSB Design in the blog. "For young families looking to grow, single-family rentals often offer more space."

Citing a survey by John Burns Real Estate Consulting, the blog indicated that 65% of single-family rentals offer three or more bedrooms compared to 11% of apartments.

“The statistics also illustrate myriad benefits for builders, developers and property managers,” Henry observed. “First, diversifying product offerings is always a good thing, especially with waning single-family sales numbers of late. Developers appreciate the market penetration these rental homes achieve, allowing them to target younger newlyweds, families and even retirees. And finally, with a lower turnover rate for tenants compared to traditional multifamily rentals, property managers can earn premium rents.”