You’ve heard of rent to buy? Welcome to the world of build to rent
As rising interest rates are helping to moderate overheated home sales prices, the latest trend in the housing market is gaining momentum in the Fort Worth area.
Hillwood Communities, a Perot Company, is the latest to announce that it has jumped into the booming build-to-rent market that is sweeping across parts of Texas and the nation.
“There are a lot of reasons why people don’t want to buy a home but want to live in a home rather than an apartment,” said Ted Wilson, owner and principal for Residential Strategies, a real estate analysis and consulting firm. “Build-to-rent homes have become a very popular option and demand for them continues to grow.”
Wilson said 5,084 build-to-rent home starts occurred in the Dallas-Fort Worth area during the 2021-22 fiscal year, which ended on June 30. Of those, 829 were on the Fort Worth side of DFW, including Burleson, Hurst, Roanoke, Justin and Arlington.
Hillwood’s entry into the build-to-rent market is the result of a partnership with BB Living to build 191 three- and four-bedroom homes in Hillwood’s Harvest community, straddling Argyle and Northlake. Homes will range in size from 1,800 to 2,500 square feet.
“Single-family for lease homes are in high demand,” said Fred Balda, president of Hillwood Communities, developer of Harvest. “This new product allows families who don’t want home ownership a chance to live in a great community like Harvest.”
While the build-to-rent movement dates back more than a decade, the market has grown exponentially over the past few years, Wilson said. Driving factors of this growth include home locations with desirable schools, more living space than apartments and pet ownership.
The rental option also appeals to those who cannot afford down payments to buy a house as well as newcomers who prefer to get to know an area before buying. The low inventory of homes for sale in the Dallas-Fort Worth market during the past couple of years has also increased the popularity of these homes, according to Wilson.
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The homes can range from traditional, detached single-family homes to attached single-family styles. Rents are often $2,000 or above, similar to the level of Class A apartments, Wilson said.
“Renting was not always viewed as a good option but we are changing that perception by delivering unique neighborhoods in great communities, resort-style amenities, superior locations and a focus on the resident experience, said Branden Lombardi, president of BB Living.
Phoenix is the top market for build-to-rent homes but the Dallas-Fort Worth area is not far behind, according to a report by RentCafe, a digital site for the consumer rental market. The DFW area was third in a ranking of metros with the most build-to-rent homes, according to data analysis from RentCafe partner Yardi Matrix. Houston ranked fourth in the survey.
Grapevine-based HistoryMaker Homes, founded as Young American Homes, introduced its build-to-rent division, ONM Living, in 2019 to fill shifting needs in the housing marketplace. ONM Living builds in DFW and Houston but it is mainly focused on the Fort Worth area.
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“Texas, DFW and specifically Fort Worth are dealing with a rapidly increasing affordability gap, with fewer people able to purchase a home,” said Zac Thompson, president of ONM Living.
“The recent rise in interest rates has only compounded the issue, “ Thompson said. “Purpose-built rental communities give these consumers the ability to still live in new homes and in new communities.”
Although higher interest rates have helped boost the inventory of homes for sale and slightly reined in price escalation, the median home price in in Fort Worth in June was 21 percent higher than it was a year ago, according to data provided by the Greater Fort Worth Association of Realtors, the Real Estate Research Center at Texas A&M University and Texas Realtors.
Separately, the new Re/Max National Housing Report shows that the Dallas-Fort Worth area led the nation with a 29.3 percent increase in the median home sale price between June 2021 and last month. Prices in DFW rose from $329,500 in June 2021 to $426,000 last month.
As homes are becoming more costly to buy, consumer attitudes about home ownership have shifted away from the necessity of owning a home, Thompson said.
“Consumers seem less tied to homeownership than in years past. For the same reason that people choose to lease cars, more consumers seem willing to choose to lease a home,” Thompson said.
ONM Living offers villas and cottage homes. Villas are traditional single-family homes built on 50-foot-wide lots and include two-car garages and private backyards. These homes are built in communities of 80 to 200 homes.
Cottage homes are regarded as “horizontal multi-family” with a smaller land footprint but have up to three bedrooms and a private backyard. Cottage OMN Living’s cottage communities contain between 150 and 400 homes.
The company has a portfolio of about 2,000, with about 60 percent of it in the city of Fort Worth.
Thompson predicts build-to-rent is a trend that will continue to grow.
“While we remain rigorous in underwriting with conservative assumptions, we are optimistic that the build-to-rent asset class can be a leader in housing, specifically in Fort Worth,” he said.
Wilson also predicted that build-to-rent appears to be “a trend that is here to stay.”