Build-to-Rent Model Offers New Lifestyle Options

After flying under the radar for years, there’s a segment of the homebuilding industry that’s exploding nationwide and across the state. And nowhere is that more evident than in Lakewood Ranch.

It’s a concept called build-to-rent.  These are housing developments built exclusively for renters that give them what builders say are the benefits of apartment complexes, along with the advantages — and comforts — of having a house.

There are four of these communities in Lakewood Ranch right now; two are open, and two are under construction. Another three are in the pipeline.

“This is one of the hottest real estate products out right now,” says Laura Cole, the senior vice president of LWR Communities. “It’s extremely well capitalized, and there are a lot of people out there trying to find deals not only in our region but within master-planned communities like ours.

“We get — and I’m not exaggerating — two to three calls or emails a week (from developers) seeing if there’s space down here.”

The build-to-rent concept has been around for years, starting mostly out west in Arizona. The idea behind it, proponents say, is to capture that portion of the market of people who either can’t purchase a home right now or don’t want to.

In many cases, these are younger families who can’t come up with large down payments to buy a home. Build-to-rent communities allow them to move to suburban areas that offer amenities better suited for working families raising kids. Another demographic is older adults who have sold their longtime residences and don’t want to deal with the hassles and costs that can be associated with homeownership. Finally, there are people who have sold their home and want to rent for a year or two as they decide where they want to live — without sacrificing the benefits associated with suburban living. Lakewood Ranch fits all those bills, which is what makes it an attractive option for developers.

“We’re a city, essentially, and we look at ways to diversify our housing choices to meet the market,” Cole says. “For some people, that means they want to buy new homes. For some people, that means they want to buy resale homes. In the past, if you were a renter by choice, your only alternative was an apartment.”

According to a market analysis from Walker & Dunlop, a commercial real estate finance firm that has a strong build-to-rent division, growth in the segment is expected to outpace construction in apartments, office, retail, storage and hospitality by 2022. And the firm believes that moving forward, 5%-10% of new homes built will be for rent.

At Lakewood Ranch, 17% of the community’s residential mix is made up of rental units. Of that, 20% are build-to-rent. Between existing units and those currently under construction, 659 homes in Lakewood Ranch are built-to-own. Another 802 are in the pipeline.

“It’s a magnet for money right now,” says Brad Hunter, of Hunter Economics, who has studied and written about housing for 35 years. “There’s so much emphasis right now on build-to-rent single-family and build-to-rent town homes. It’s a safe bet.”

Driving the demand, in large part, is the rising price of homes. Hunter says that with more and more people driven out of the home buying market, the demand for rentals, especially for young families, is overpacing supply. Many of these families have good incomes and are looking to get a piece of the suburban life but aren’t willing to go through the process of buying.

“They’d rather just go ahead and get into the living situation and the lifestyle this way,” Hunter says. “They want a space for a home office. They want to have a place in the suburbs where kids can play and go to a good school. All of that is driving this industry to the stratosphere.”

The mix of build-to-rent communities in Lakewood Ranch represents the type of developments builders are putting up across the country.

And, not surprisingly, they mirror what traditional developers build in style and availability of amenities. There’s the 22-unit Botanic Townhomes at Waterside Park, which are part of Waterside Place Town Center. Then there’s the 230-unit Estia at Lakewood Ranch, the first Lakewood Ranch entrants into the market, which offer “horizontal apartments.” These are one- and two-bedroom units with a small patio and backyard.

And coming early next year is Antigua, a development of 192 two-, three- and four-bedroom single-family homes with extensive amenities packages and integrated garages. These are being built by Arizona developers BBLiving, one of the industry pioneers, and homebuilder Toll Brothers.

Each offers on-site management and maintenance.

The bottom line is that build-to-rent as a concept doesn’t cater to a particular socioeconomic or age demographic but offers options for a broad range of the populace. And the only difference between these and homes built in more traditional developments is who the monthly payment goes to. Oh, and they also have all the benefits of being able to call someone when the dishwasher is on the fritz and getting it fixed without spending more money.