Understanding Build to Rent (BTR)

In a recent video interview, Ben Young, the Chief Investment Officer at Buckingham Companies, shed light on the concept of Build to Rent (BTR) and its significance in today’s housing market.

What is BTR?

Build to Rent refers to communities designed specifically with single-family homes that are available for rent, rather than ownership. This model serves as a perfect complement to both multifamily housing and traditional single-family homeownership. According to Young, BTR is "the missing middle" in the housing market.

Why is BTR Important?

Young describes BTR as a solution that fits perfectly into the natural progression of families. Typically, families start in multifamily buildings, which provide a suitable environment for smaller family units. As these families grow, their need for space increases. They seek larger homes and yards for their children and pets. However, homeownership can be challenging due to the high costs of down payments and the lack of available homes on the market. Many existing homeowners are reluctant to sell due to low mortgage rates they secured years ago, further constraining the supply.

This gap, or "missing middle," creates a unique opportunity for BTR communities. These communities offer spacious homes for rent, catering to families transitioning out of multifamily units who need more space but are not ready or able to purchase a home.

The Flexibility of BTR

One of the significant advantages of BTR is the flexibility it offers. In today’s dynamic world, many people cannot envision staying in one place for 30 years. They might be planning their lives in shorter increments—five, three, or even two years. Renting a home in a BTR community provides the flexibility to move without the friction costs associated with buying, selling, and refinancing properties. These homes are also professionally managed, ensuring a hassle-free living experience.

Changing Homeownership Trends

Young highlights a shift in homeownership trends. Historically, about 70% of people owned homes, but this figure has dropped closer to 60%. The rise of BTR is a contributing factor, as it offers an attractive alternative for those looking to rent professionally managed homes without tying up significant liquidity in homeownership.

Conclusion

Build to Rent communities bridge the gap between multifamily living and single-family homeownership. They provide an ideal solution for growing families needing more space and individuals seeking flexible living arrangements. As Ben Young emphasizes, BTR is a crucial addition to the housing market, offering professionally managed rental homes that meet the evolving needs of today’s residents.