couple moving into home making a champagne toast, surrounded by boxes, modern renter

Today’s modern renter isn’t who you think it is

When it comes to housing, renting in 2022 does not look like it did in the 1980s, and neither does the modern renter. St. Bourke, an Atlanta-based asset management and property development company provides an overview of the rental demographic and the driving force behind it.

“There are lots of misconceptions about who is renting,” St. Bourke President Ben Simpson said. “There are just as many misconceptions about why this is a red-hot market trend.

Build-to-rent (BTR) housing is the hottest sector in residential real estate right now and perhaps the most misunderstood. Major investment companies and local and national builders are expanding their focus to take advantage of growing demand for BTR homes.”

In terms of what is driving the BTR trend, people assume the pandemic was the main trigger for the growth of this sector because that is when BTR news really started hitting the headlines. While the pandemic and ensuing housing frenzy certainly accelerated BTR’s popularity and growth, BTR has outperformed traditional multi-family (MF) investments in terms of rental growth and occupancy rate for half a decade. The pandemic simply accelerated the trend, like it did so many other trends including suburb migration. video conferencing, work from home, outdoor living, etc.

The Modern Renter

So, who is renting homes today?  Hint, they are not broke, unemployed or destitute. Many of today’s renters are renters by choice rather than by financial necessity. It is the Millennial who wants a yard for their dog and does not want to share a thin wall with their apartment neighbor; it is the single professional who doesn’t know where their career will take them and does not want to be tied down to a particular location in the long-term; it is the empty nester who wants to cash in on their home’s equity and desires the lifestyle and flexibility that renting affords.

“There is a high level of financial literacy with our renters,” Parkland Residential President Jim Jacobi said. “They have an average income of $113,000, an average credit score of 652 and the mean age is 40 years old.

“In fact, 70% of my renters are single, whether they are single, divorced or never married. Most of the people can buy a house, they just can’t find it to buy, or they are choosing to rent. If you’re only going to live in the house for five years, it’s proving to be less expensive to rent than it is to buy, and people are starting to realize that.”

From 2009 to 2019, many Millennials were forced to rent due to a myriad of factors, but now many are renting by choice because the apartment industry lead the way in building popular, highly-amenitized communities in sought-after locations, according to MarketNsight Principal and Chief Analyst John Hunt.

“What’s really fueling BTR is obviously a lack of supply,” ResiBuilt Homes Co-Founder and Senior Vice President of Homebuilding Jay Byce said. “The millennials want more space, they want a yard, they want to have at least a dog and maybe one day they’ll have kids, but millennials make up only 40% of our renter base, so millennials driving this is actually not the full story.

“The other big cohort of our renters are early empty nesters. They’re selling homes and they want a different lifestyle where they don’t have to go out and mow the lawn every weekend. Ages 25 to 35 make up 40%, which is your millennial, and 55 to 65 is the second largest.”

Lack of Supply

“There is a huge lack of supply of homes for the missing middle, creating a surplus of rental demand for product in this niche,” Jacobi said.

Freddie Mac estimates the United States has an overall housing shortage of 3.3 million units while the Joint Centers for Housing Studies of Harvard University has put this shortage closer to 5.0 million.  This is largely due to the bottleneck created by all the regulations involved with housing production. It takes so much time to navigate the zoning, permitting, development and plat processes before home construction can even begin, which will cause housing demand to continue exceeding the pace of construction.

According to Hunt, Atlanta had 30,000 permits for housing starts last year, where in healthy supply years it was 60,000. For new construction to bear the entire weight of filling the housing gap, permit levels would need to increase to 120,000 permits per year. That is impossible.

“We have an infinite amount of demand based on what we can supply, and as long as that’s the case with millennials coming on board and boomers needing to move down, and the supply constraints we’re facing, build-for-rent is attempting to fill that massive gap,” Hunt said.

Lifestyle Choice

The BTR modern renter values simplicity. They look for all the benefits of living in a traditional home (privacy, yard, garage, etc.) without the headache of dealing with broken appliances, leaky roofs, pest control and lawn maintenance.

They also value flexibility and do not want to be locked into a long-term commitment to a single house, or in some cases a single city. BTR product presents these renters with the best of both worlds – a new, private home in a highly-amenitized community without a long-term commitment.

“It does not surprise me that we see a great demand or proclivity for single-family rental options,” Hunt said. “The pandemic proved that most people could work from anywhere and changed the way we live in terms of mobility. This makes rental increasingly an option.”

ABOUT ST. BOURKE

St. Bourke develops lots for single family home builders building both for sale and for rent communities.

St. Bourke is an asset management and property development company primarily focused on residential communities and commercial assets. Offering a full suite of placemaking services ranging from acquisition through detailed design and development to ongoing management, St. Bourke has helped a variety of both private and institutional clients achieve their project goals. Founded in 2015, St. Bourke creates thriving communities and drives significant value for its clients, partners and community stakeholders. Active in 20 U.S markets with 90 active residential projects, St. Bourke manages more than 12,000 acres and 25,000 lots. As Placemakers, St. Bourke makes places from the ground up. For more information call 678-853-2530 or visit www.StBourke.com.

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