The Mortgage Bankers Association’s recent webinar: Explore Build-to-Rent Advantages, Trends & Opportunities, provided a closer look at the various vantage points and facets of "Build-to-Rent." Real Estate Partner Justin Barry served as a speaker with other industry leaders from JLL and ResiBuilt, and Real Estate Litigation Partner Bonnie Hochman Rothell moderated this insightful discussion. Here are the top takeaways from the webinar:
- Rental housing is not a new concept. At the peak of the housing market, 30% of housing in America was rental housing. After the economic downturn in 2008, the increase in the Build-to-Rent industry renewed a small portion of housing stock and helped to decrease foreclosure rates.
- The Build-to-Rent industry has grown significantly over the past few years. In 2019, nationally, there were only a few hundred Build-to-Rent communities. Today, there are approximately 1,000 Build-to-Rent communities across the country. The National Association of Home Builders states there are 51,000 Build-to-Rent homes nationally, which does not include homes that were originally listed for sale but then turned into rental properties, which would increase this number to around 80,000.
- Millennials are among the majority of those choosing the Build-to-Rent lifestyle, as well as young empty nesters and boomers, as the various amenities in these communities cater to these demographics. Renters like to be surrounded by other renters, which also helps to eliminate the rental stigma.
- In terms of funding BTR projects, Freddie Mac and Fannie Mae provide the majority of funding and are interested in creating more products to equalize supply and demand, along with traditional and regional banks for construction loans and life insurance companies. While HUD isn’t currently active in the financing of BTR, advocates are encouraging HUD to include BTR in its lending platform.
- From the legal perspective on policies and regulations for Build-to-Rent, there are various challenges in this industry, including zoning laws, environmental issues, and building permits within several municipalities. NIMBYism continues to pose a challenge for Build-to-Rent, especially in Georgia.
- Handling long-term capital expenses is an important topic in the BTR industry. Reserves have to be held by Build-to-Rent developers, and turn costs have to be kept under control. From the legal perspective, many deals are structured for flexibility, especially to exit the investment if necessary.
For questions or more information on Build-to-Rent, please contact Justin Barry or Bonnie Hochman Rothell.
