Built-for-rent (BFR) housing is emerging as a significant trend in the multifamily housing sector, offering tenants enhanced privacy akin to that of a single-family home while simplifying property management for landlords.
In an era where both the housing market for buyers is remarkably constrained—with a mere 2.7 months’ supply of homes available for sale as of November 2022—and the rental market grows increasingly competitive and costly, BFR housing emerges as a strategic compromise. This model has been gaining traction, drawing attention for its innovative approach to addressing housing market challenges.
Understanding Built-for-Rent Housing
BFR housing, also known as “build-to-rent,” revitalizes the traditional concept of leasing homes. Unlike the scattered individual rental properties of the past, BFR homes are grouped to form cohesive communities, complete with the amenities one might find in an apartment complex.
Ben Miller, co-founder and CEO of Fundrise, explains that BFR communities are akin to horizontal apartment complexes, offering varied housing types—from townhomes to detached houses—depending on the location’s density. From a landlord’s perspective, these communities operate much like multifamily apartment buildings, yet offer tenants the lifestyle of single-family residences.
Landlords are particularly drawn to BFR properties due to their streamlined management and maintenance, alongside the potential for long tenant tenures and high renewal rates, making them an attractive investment.
Benefits for Tenants
A Fannie Mae study highlights a significant shortage in affordable single-family housing, estimating a deficit of around 4.4 million units. BFR housing addresses this gap by facilitating quicker, more efficient construction of homes, potentially easing affordable housing shortages.
The streamlined development of BFR communities, compared to traditional single-family subdivisions, could lead to an increase in housing supply, particularly in areas grappling with affordability issues. Miller notes that BFR projects often face less resistance than apartment complexes, allowing for more rapid expansion of housing options.
BFR communities offer a unique flexibility, enabling adaptations to meet tenant needs, from the integration of solar power to the transformation of units for commercial use, thereby enhancing the living experience.
Distinctive Features of Built-for-Rent Housing
While BFR homes may resemble traditional neighborhoods, they are distinct in their development and legal structure, being designed as cohesive rental communities. This model simplifies zoning challenges and legal complexities, as the entire community is treated as a single property.
Tenants in BFR communities enjoy the benefits of single-family living without the maintenance responsibilities, as the community’s management handles exterior upkeep.
The Expansion of BFR Communities
Although still a small fraction of the overall housing market, with 68,000 homes built between September 2021 and September 2022, BFR’s share is growing rapidly. This growth represents a 42% increase from the previous year, indicating a significant shift towards BFR housing.
Markets across the U.S., from Austin and Phoenix to Charlotte and Atlanta, are witnessing the rise of BFR communities, with Fundrise and other companies leading the charge in exploring new locations for development, including potential hotspots like Columbus, Ohio.
BFR housing is not just a temporary trend but a forward-thinking solution to the challenges of today’s housing market, offering benefits for both tenants and landlords alike.
