The Wall Street Journal recently posted an article titled, “The Rise of the Forever Renter.” The catchy-titled article goes on to discuss the current statistics for the renter population in the United States, focusing on a niche group living in build-to-rent communities. The build-to-rent concept is targeting non-traditional renters through higher end finishes, amenities, school districts, and maintenance-free service.
Many Americans who would traditionally be homeowners have instead become long-term renters, including some with no plans to ever buy a home. This decision can be attributed to the mobility of our population, the desire to not be locked into long-term financial commitments like mortgages, and the ever-rising costs of home ownership. Though interest rates have slowed their steep increases, current 30-year mortgages are hovering at 7%.
The article goes on to note that, “Sustained high interest rates in the U.S. have made mortgages unpalatable to many, though the Federal Reserve recently signaled an end to more rate hikes.” Compounding the challenge of moving new home inventory is the fact that only 64% of people in the U.S. are homeowners. This lags significantly behind China at 89% or even Brazil at 72%.
Build-to-rent communities often are found to have a population that would traditionally be homeowners. This includes families with incomes over $200,000, retirees, and families with children. The influx of higher-income renters has in part led to a decline in the number of lower-priced rental properties available in the U.S.
According to an analysis by the nonprofit trade organization the National Multifamily Housing Council, there were nearly 103 million people living in rental housing in 2022— representing a 15% increase from 2007. Based on this data, it would appear that renting is no longer the stepping stone to homeownership. By extension, homeownership seems to no longer be viewed as an asset that appreciates and someday helps fund retirement.
The new normal in rental real estate is becoming build-to-rent communities showcasing single-family and multi-family options. With higher end finishes, good school districts, and kid friendly environments, their popularity is surging.
KeyCity Capital is currently working on a ground up development capitalizing on this trend. This project in the Dallas suburbs is open to new investors and highlights many of these concepts. We look forward to discussing this opportunity with you.
