Would you rather rent than own, but hate the idea of living right next to someone else?
There’s a new trend afoot: newly built, single-family houses that are for rent only.
In the latest twist on the housing market, builders and analysts say the trend, prevalent in the western United States, is moving east, including into Florida.
NexMetro Communities, a national home builder based in Arizona, is building a rental residential community in Tampa, and the company is eying Palm Beach County, too. NextMetro builds detached one- and two-bedroom single-family houses, and one-bedroom villas.
Meanwhile, plans are afoot to sell the closed Mizner Trail golf course in Boca Raton to an unnamed developer who plans single-family rental houses, according to housing analyst Brad Hunter. The golf course, now owned by Boca Raton-based Compson Associates, once was slated for 252 townhomes and apartments, but the project never was built.
Here’s why new, detached single-family homes for rent are in demand, said Hunter, owner of Hunter Housing Economics in West Palm Beach.
People already were seeking the space and privacy of single-family homes before the coronavirus pandemic, but now the stand-alone home is even more desired, especially in suburban locations.
People seeking to avoid the highly contagious coronavirus want to live in places where they can bypass a lobby, or enter a residence without having to stand by an elevator with other people, Hunter said.
Residents wanting to live in a single-family house may also be unable to afford to buy a home, which makes rentals an attractive option, Hunter added.
Despite low interest rates, many people do not have the money for hefty down payments on single-family houses, Hunter said. This is especially the case with millennials dealing with student loan debt and a tight job market. Consequently, renting is the only option for many residents, but some people still want to live in a house with a backyard and playground for children.
“Then there are the renters by choice, who could afford to buy a home and come up with a down payment, but prefer the lifestyle of renting,” Hunter added.
Among these renters are baby boomers dubbed the “Baby Chasers.” Hunter said these older residents want to live near their children and grandchildren, but they don’t want to be tied down by buying a house, especially if their children might be moving in the future, too.
Jacque Petroulakis, executive vice president of NexMetro Communities, said the company attracts three types of renters.
They are millennials who don’t want to be tied down; renters who are in a “life transition,” either newly married or newly divorced who do not want to make a mortgage commitment; and baby boomers selling their homes to get away from the hassle of household maintenance, but still wanting the privacy they had living in a single-family house.
“Consumers have fundamentally changed the way they think about the American Dream, what they value, and how they choose to live,” Petroulakis said. “And for a growing number of people, that means choosing to rent rather than own.”
Single-family rental homes long have been owned by individual real-estate investors. After the 2008 recession, however, something new happened: Big companies scooped up homes lost by homeowners to foreclosure.
Today, many homes for rent are owned by companies such as Invitation Homes, a unit of the Blackstone Group. But these homes are all existing houses, and in many cases, they are older and lack the technology and amenities sought by residents these days.
Petroulakis said a group of entrepreneurs saw the home-rental trends after the recession and began building a few rental-only housing communities in the Tuscon, Ariz., area.
One thing led to another, and they realized there was demand for new houses from people who could afford to buy, but instead, chose to rent.
But building for-rent single family homes in Palm Beach County is not an easy prospect, one builder said.
Dania Beach-based Stellar Communities is building, or will build, new homes for rent in Orlando, Port St. Lucie and Pompano Beach. The rental homes include townhomes, villas and detached single-family houses.
But two housing projects in Palm Beach County will be for-sale homes, said Larry Baum, Stellar Communities’ managing partner. One is a 40-home project planned in Delray Beach off Barwick Road; another is a 25-home community planned off Congress Avenue in Boynton Beach.
On both sites, the land is too expensive to build rental houses and realize a good return on investment, Baum said.
In addition, demand for home sales is so hot, “people are paying top dollar for homes. There’s no reason not to make less money.”
Baum said Stellar’s rental project in Pompano Beach, near Palm Aire Country Club, works because the company has owned the land for a long time. The homes, when completed starting in January, will rent from $2,500 to $2,900 per month.
Baum said he’d still like to build a rental-only community in Palm Beach County, and he even approached developers of major housing communities being built in western Palm Beach County.
All said they’d rather sell than rent new homes, Baum said.
That’s not to say the build-to-rent single-family housing market will be limited to only a few players. Toll Brothers, the national home builder, is teaming with BB Living to build new, for-rent houses in states throughout the country, including in Florida.
And NexMetro said South Florida remains a region of “specific interest” as the company seeks areas with strong population growth and occupancy rates.
NexMetro’s Tampa community, Avilla Suncoast, could be a harbinger of things to come.
The community is under construction and scheduled to open in June 2021. Rental pricing isn’t available yet, but other NextMetro rental house communities in Phoenix, Dallas and Denver start at $1,200 for a one-bedroom villa to more than $2,500 for a three-bedroom single-family house.