Building rental housing was a hot topic of conversation at the Valley Partnership breakfast in September. Designed from the outset to be rental housing, these units are usually grouped together in an area, similar to a planned community, and all residents are tenants. While the term “construction for rent” can include townhouses and duplexes, the event’s panel of four experts focused primarily on detached single-family homes.

“5-10% of new homes are now built for rent,” says Heather Person, senior manager at Evolve Ventures. “Phoenix is ​​the third largest single-family and rental unit market by unit count, and has the lowest vacancy rate since 1984 due to persistent demand and our continued under-supply. “

Build-for-rental communities have become a popular option for families who are unwilling or unwilling to take on the responsibilities of ownership, but want more space than an apartment offers.

“It’s not a myth that people don’t necessarily want to own a home anymore. They want to be flexible, and they want to rent something before deciding if and where they want to live in a particular city. Building for hire definitely fills a niche, ”notes Keaton Merrell, Managing Director of Walker & Dunlop.

READ ALSO: Are Short-Term Rental Investors Ruining the Arizona Housing Market?

Chris Grogan, partner at El Dorado Holdings, agrees flexibility is an attractive feature. “These units are not necessarily intended for low-income tenants. We see people who are nurses and teachers. Building for rent fills the need for labor housing a bit, but it’s not section 8. People want a little more luxury.

Surveys of Mark-Taylor Companies rental residents show occupants in rental construction to be the most satisfied with the organization’s overall property portfolio.

“The people who live in this product are the happiest of all our residents,” comments Dustin Lacey, vice president of branding and marketing at Mark-Taylor Companies. “Our residents are people who want to put down roots, so the little things like dog doors really stand out. “

Tim Brislin, vice president of Harvard Investments, says his company views rental building communities as a mini blueprint. “We want the same elements of connectivity and amenities that you find in a comprehensive master plan. The small backyards and the units that face each other give the impression of being a neighborhood.

Lacey continues, “We call our demographic ‘the modern millennial’. Residents are on average 38 years old with double the percentage of pet owners. They are not all families, but household sizes are on average larger and household incomes range between $ 90,000 and $ 92,000. In terms of rent-to-income ratio, this is probably the highest ratio compared to our product types, which means they probably pose a higher risk of exposure if economic conditions change.

Despite this caveat, panel members stress that building communities for rent are reliable in the long run. Merrell points out that the average tenant in a rental building stays three times longer than in a multi-family unit.

“As a planned community developer, we wanted something that creates sustainable cash flow that you can count on in good times and bad,” says Brislin, who goes on to mention the specter of the Great Recession, which looms large. always on the industry. .

Grogan notes that some people are renters by choice, but that’s not always the case. “We all remember a time when one in four homes was foreclosed and sold short. If that was your house, you risk seven years until you can come back to the market and get a loan. Build-to-rent was born because people lost their homes and didn’t want to go to apartments, ”Grogan explains. “But this is a real class of product that doesn’t harm anyone else’s project. “

Merrell concludes that homes for rent are here to stay. He says, “There will be 80,000 units started this year, 120,000 started in 2022 and 700,000 over the next five years nationwide.

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