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Realtor.com | The Hottest Rentals Are Single-Family Homes, and Boomers Are Snapping Them Up
By Rachel Mosteller | May 2, 2019
It was a lunch stop for burgers that changed Bonita and Bernie
Styers’ idea of the American dream.
The couple, both in their 60s, felt that their 3,000-square-foot,
Dallas-area house was too big for two empty nesters. They had considered buying
a smaller house, but it was tough to find one for the right price in such an
expensive market. That's when Bonita spied a gated community of compact,
cottage-style homes behind the parking lot of a fast-food restaurant.
She had found a single-family rental community—a neighborhood of
one- to three-bedroom, single-family, detached homes. The neighborhood of 122
rentals ranges from $1,275 a month for a one-bedroom house to $2,900 for a
“We feel like it’s our home, but we have a little bit of help
taking care of it,” says Bonita, 62, a medical receptionist.
These master-planned communities are aimed at those who don't
want to deal with the maintenance of owning a home—but aren't keen on living in
an apartment either. And they're gaining in popularity. That's because more
baby boomers are retiring and seeking a simpler life, as sky-high home prices
are pushing many out of the market.
The Urban Institute reported in 2017 that single-family
rentals—whether detached homes or townhouses—were the fastest-growing segment
of the housing market.
Builders have taken note. The number of newly built,
single-family rentals was up from 37,000 in 2017 to 43,000 in 2018, according
to the National Association of Home Builders. They make up only about 4% of all
single-family construction nationwide, but they're expected to jump to 6% over
the next few quarters, according to Robert Dietz, chief economist of the NAHB.
They're going up predominantly in the suburbs of Southern states
stretching from Arizona through Texas and into Florida and the Carolinas, says
Rick Palacios Jr., director of research for John Burns Real Estate Consulting.
There is more affordably priced land available in this part of the country, and
the cheaper property means rents don't have to be sky-high for builders to make
“The stigma of renting has ... gone away,” says Palacios, whose
firm advises builders and developers nationally. “Fewer and fewer people think
you need to own a home to make it.”
The perks of single-family rental communities
Audrey Kowalczyk, 58, and her sister, Sharon Kowalczyk, 68, are
moving from Virginia to Christopher Todd Communities at Marley Park in
Surprise, AZ. The security of the gated location and the lack of neighbors
upstairs helped shape their decision. The sisters, who are both retired and
share their rental home, also liked the idea of on-site maintenance.
“We are not too knowledgeable when it comes to anything needing
repair,” Audrey says. “Maintenance is only one phone call away.”
Knowledgeable or not, many aging boomers are simply growing
tired of the upkeep of their large houses. That's certainly the case with
Bonita Styers, whose husband travels frequently for his job as a vice president
in charge of franchise sales for a hotel chain.
"We didn’t want to have to take care of a yard and a pool
and all those things," she says.
But residents of many of these new developments don't have to
give up those amenities for the rental life, either. Single-family rental
neighborhoods frequently have features seen in a luxury condo or country club
setting, such as pools, dog parks, and communal open areas. The homes often
come with high ceilings and attractive landscaping. Plus, they're brand-new.
“You get the best of both worlds,” says Mark Wolf, founder and
CEO of AHV Communities, which has two rental communities in the San Antonio,
TX, area. “We take the best apartment attributes and marry that with the best
of single-family living.”
Where are these single-family rental communities popping up?
Many of these communities—between 100 to 250 homes on
average—are popping up on the outskirts of town where there is enough land to
hold an entire neighborhood. AHV’s next community is in suburban Katy, TX. It's
about 35 minutes west of downtown Houston.
Others are in areas with a more urban vibe. Many of these
build-to-rent communities in the Phoenix region are in areas prized for their
walkability, local schools, and close proximity to shops and restaurants.
But they're usually located outside the priciest parts of the
“You’re not going to see purpose-built, single-family rental
communities in coastal California or other very expensive metro areas,” Palacios
Not every renter in these communities has thrown in the towel on
eventual homeownership. Many just can't afford to buy right now.
That may explain why they're popular with older millennials,
aged 28 to 38, according to Wolf of AHV Communities. About a third of AHV's
residents have children. That means many of them are juggling child care costs
with student loan and car payments. That makes it hard to save for a down
payment on a home.
“Saving for a down payment is a challenge, particularly when you
have high expenses and limited income,” says Chief Economist Danielle Hale of
realtor.com. “Entry-level jobs in particular tend to pay lower wages.”
The downside is that these folks aren't building equity through
homeownership. That means they're missing out on any appreciation in the real
estate market that could provide them with a nice chunk of change down the
line. They also can't borrow against their properties through low-interest home
equity loans if they have any unexpected, hefty expenses.
Still, the appeal of these communities is hard to deny.
Audrey Kowalczyk, who is retired from AT&T, is also looking
forward to a life not tethered down by her house.
“As active adults, we love to travel and this rental lifestyle
makes that possible,” she says. "There is a new kind of life ahead, full
of experiences, just waiting to happen.”