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 three-bedroom model.
“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 ends meet.
“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 country.
“You’re not going to see purpose-built, single-family rental communities in coastal California or other very expensive metro areas,” Palacios says.
Who's renting—instead of buying—suburban houses?
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.”