Once a relatively rare breed, build-to-rent homes are becoming a greater part of the housing mix in Tarrant County and the rest of the Metroplex.
Rising interest rates and the overheated housing price increases of the past few years are two primary reasons build-to-rent homes are making an impact in hot markets such as Fort Worth, according to Ted Wilson, owner and principal at Residential Strategies Inc., a Dallas-based real estate analysis and consulting firm.
“For a lot of reasons, some people don’t want to buy a home but want to live in a home rather than an apartment,” said Wilson. “Build-to-rent homes have become a very popular option and demand for them continues to grow.”
Sometimes described as “horizontal apartments,” build-to-rent homes are built for the sole purpose of renting, according to Wilson. The pandemic created a demand for more space and privacy as many employees worked-from-home, said Wilson.
Some build-to-rent home developments offer an option for purchase, but most of the current crop of build-to-rent homes are designed as rental properties, according to Wilson.
Wilson said the build-to-rent homes were already gaining popularity as home prices increased in North Texas.
“But as the mortgage rates have increased and are kind of all over the map, these products become a popular way to wait out the market,” he said.
Residential Strategies says that there were 4,162 build-to-rent home starts in the Fort Worth-Dallas area during the 2021-22 fiscal year, with more likely coming in 2023. That represents about 8.5% of Fort Worth-Dallas’ housing starts.
“Four or five years ago, there were probably around 1,000 build-to-rent home starts per year,” he said. “There’s no doubt build-to-rent homes are now a part of the DFW housing market.”
Along with home prices, low home inventory and higher mortgage rates, Wilson cites driving factors for the build-to-rent market as offering locations with desirable schools or access to transportation, larger living spaces and the ability to have a yard to accommodate pets. Some newcomers to an area also may want to get to know an area before buying, he said.
Wilson said the homes offer a variety of options, running from traditional, detached single-family homes to attached single-family styles such as townhomes. Rents are often $2,000 or higher, often tracking rents of Class A apartments, he said.
“Sometimes build-to-rent homes are called horizontal apartments, but they really offer a bit more than that,” Wilson said. “Many of these build-to-rent homes are in areas with plenty of amenities.”
That is the case with Hillwood’s Harvest community, which is located in Argyle and Northlake. Hillwood entered the build-to-rent market in partnership with BB Living to build 191 three- and four-bedroom homes. The sizes range from 1,800 to 2,500 square feet.
“Single-family for lease homes are in high demand,” said Fred Balda, president of Hillwood Communities. “This new product not only allows families who don’t want home ownership a chance to live in a great community like Harvest, they are a perfect solution for buyers in transition and relocation buyers new to the area.”
‘Our residents want a sense of community’
BB Living has been under construction with build-to-rent products for several years and sees an increased interest in the housing option, particularly in master-planned communities such as Harvest.
“Our residents want a sense of community and Harvest is very intentional about delivering that,” said Branden Lombardi, president of BB Living. “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.”
Grapevine-based HistoryMaker Homes has jumped into the build-to-rent market several years ago with its ONM Living division that offers a mix of single-family and multifamily cottage products.
“We have been able to capitalize on getting to market with build-to-rent ahead of, what now, seems like a really crowded field of players and competitors that have all rushed in,” said Nelson Mitchell, CEO of HistoryMaker. “Now you’ve got this burgeoning new market of build-to-rent or single-family rental and homes.”
The ‘missing middle’ housing need
Zac Thompson, president of HistoryMaker’s ONM Living unit, said the build-to-rent offerings serve the so-called “missing middle” housing market that focuses on providing attainable solutions for consumers who can’t afford some of the increasingly higher-priced offerings in the DFW market.
“As the rapid pace of growth in DFW and Houston continues, we plan to meet the need for attainable housing through targeted expansion across 75 communities over the next five years,” Thompson said.
Bart Calahan, a Realtor with Roots Real Estate Co. and current president of the Greater Fort Worth Association of Realtors, said with a tight market and rising home prices, the build-to-rent option offers a way for Realtors to serve clients who may not be able to afford a house currently.
“It can really help us provide a way to help our clients, particularly as home inventories continue to be tight and prices increasing,” he said.
Calahan said he expects the rental market to be a big factor over the next several years.
“For a lot of customers, it may be a good option,” he said.
Additionally, some of the build-to-rent properties may offer purchase options, said Residential Strategies’ Wilson.
“With so many people moving here, many people want to get to know the area before purchasing a home,” he said. “Living in a single-family residence gives newcomers a sense of the area before they commit to an area of Dallas-Fort Worth.”
According to a study by RentCafe, an online site for the consumer rental market, Dallas-Fort Worth was third in a ranking of metros with the most build-to-rent homes. Phoenix and Columbus, Ohio, topped the rankings.
Many build-to-rent communities are under construction on the outskirts of major cities, according to Residential Strategies’ Wilson. RentCafe says that 61% of the most recent build-to-rent properties are in suburban areas.
“That tends to be where the growth is,” Wilson said.
In late February, TruLife Communities and Advenir Oakley Capital announced the start of site work on a 200-unit build-to-rent development, LEO at Bethel Place, in Weatherford.
Zoning issue
While build-to-rent developments may seem like an answer to many housing issues such as rising costs and higher mortgage rates, they still face some issues.
Many cities require build-to-rent homes to have a specific zoning, said Wilson.
“One reason we see some hesitation in some cities is because those zoning regulations haven’t been updated,” said Wilson. “They are often lumped together with apartments and they’re really a different product.”
Wilson said that some neighborhood associations view rental properties as detrimental to the property values.
“The most recent developments are very high quality,” said Wilson. “If you look at what’s being built out there, it’s very comparable to new homes.”
Disclosures: Hillwood is a financial supporter of the Fort Worth Report. At the Fort Worth Report, news decisions are made independently of our board members and financial supporters. Read more about our editorial independence policy here.Bob Francis is business editor for the Fort Worth Report. Contact him at bob.francis@fortworthreport.org.
