As the real estate landscape continues to evolve, built-for-rent (BFR) housing is emerging as a promising solution to the multifamily living conundrum, offering tenants the privacy of a single-family home without sacrificing the convenience of apartment living.
The current housing market is exceedingly competitive for buyers, with a mere 2.7 months of inventory available as of late 2022, and renters are also feeling the squeeze in a market that’s becoming increasingly expensive. In response, real estate investors have pioneered BFR housing as a creative solution to address the needs of both markets.
Defining Built-for-Rent Housing
BFR housing, or “build-to-rent,” represents a modern twist on traditional leasing options. Unlike sporadic rental houses scattered across a neighborhood, BFR properties are designed as cohesive communities, offering an experience akin to apartment living but with the added benefits of more space and privacy.
Ben Miller of Fundrise describes BFR communities as horizontally laid out spaces that may include townhomes, cottages, or detached houses, depending on the location. These communities combine the operational aspects of apartment complexes with the living experience of single-family homes, providing amenities like pools and fitness centers without the vertical stacking of traditional apartments.
Landlords find BFR particularly appealing due to its streamlined approach to rental management, boasting features like easy maintenance and high tenant renewal rates, according to Jack Richardson of SERHANT.
The Tenant Advantage in Built-for-Rent Housing
BFR addresses the significant shortage of affordable housing in the U.S., estimated by Fannie Mae to be around 4.4 million units. By constructing entire communities at once, BFR can potentially expedite the provision of housing faster than traditional single-family subdivisions, which are often slowed by individual buyer consultations.
This approach not only speeds up construction but also offers a solution to the affordable housing crisis by creating more supply in the market. Miller highlights the ease of BFR development compared to apartment buildings, noting that these communities can integrate seamlessly into suburban neighborhoods, often facing less opposition than apartment complexes.
BFR communities are tailored to encourage longer tenant stays by responding to their needs, offering flexibility for adaptations such as solar installations or the inclusion of commercial spaces like cafes, making the living experience highly customizable.
How Built-for-Rent Housing Stands Out
From the tenant’s perspective, a BFR neighborhood might appear like any other, possibly offering more amenities. However, developers approach BFR with a unique perspective, designing each home not just for individual efficiency but as part of a larger, cohesive rental community. This collective approach extends to legal considerations, with many BFR communities treated as a single property for zoning purposes, differing from traditional neighborhoods where each home has a separate deed.
For tenants, this means enjoying the privacy of a detached home without the burden of maintenance, as communal areas and exterior upkeep are managed by the community, ensuring a hassle-free living environment.
The Future of Built-for-Rent Housing
Although BFR currently constitutes a small fraction of the housing market, its growth is noteworthy, with a 42% increase in units completed within a year and many more projects underway. Fundrise, among others, is exploring BFR development in diverse markets, from Austin and Phoenix to potentially emerging locations like Columbus, Ohio, driven by industry growth and technological advancements.
As BFR housing continues to expand, it promises to redefine residential living, blending the best of both worlds: the privacy and space of single-family homes with the convenience and community of multifamily living, offering a compelling option for renters and investors alike in today’s challenging real estate market.