Podcast Title: Build To Rent Report from Fannie Mae
Welcome to the Real Estate Espresso podcast. Your morning shot at what’s new in the world of real estate investing. I’m your host, Victor Menasce.
On today’s show, we’re looking at a new multifamily research report that was published two weeks ago by the folks at Fannie Mae. Dr. Doug Duncan is the chief economist of Fannie Mae, where he leads a team of economists. This group has consistently achieved accolades for having some of the best research in the industry. This particular report was authored by Nathaniel Decker, who’s a lead associate in the research department.
The report is focused on the build-to-rent trend that’s prevalent in the United States right now. Despite this, total production levels are still relatively low, estimated to be less than 10% of single-family completions. However, these have increased substantially over historic averages.
Build-to-rent projects are sometimes referred to as single random rentals because they’re composed of one-unit structures. They can be detached or attached properties consisting of large or small projects. Unlike single-family rentals, we define build-to-rent projects as being contiguous, large housing developments comprising 25 or more units, usually located on a single tax ID, and centrally managed by experienced, professional managers. They often have shared amenities, such as on-site maintenance, a swimming pool, indoor recreation facilities, and so on. This makes them similar to living in a garden-style apartment property but offering a single-family home rental experience.
Build-to-rent is relatively new in the context of housing. Definitions vary, but they typically fall under five different categories of property. These include townhouses, horizontal apartments, single-level row homes, single-family detached housing, and larger-scale developments of 25 or more units.
About 40% of these build-to-rent units are in-town home developments, and nearly a quarter are in single-family detached homes. Demand for built-to-rent has increased sharply during the pandemic, resulting in a larger increase in new construction than traditional rentals. However, the increase in production costs makes the numbers hard to work out.
The larger-scale developments of 25 or more units are a subset of the total. These units have never exceeded 70,000 units completed in a single year. As you think about that, have an awesome rest of your day, go make some great things happen, and we’ll talk to you again tomorrow.
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