Rising home prices and interest rates have pushed homeownership out of reach for many working families in metro Orlando, Florida. But a new development trend is giving more renters the option to live in a single-family home.
Developers are buying up tracts and building typical suburban subdivisions but making every property a rental. Built-to-rent communities are popping up around Central Florida, and experts say it’s just getting started.
“It’s a somewhat innovative way to address the single biggest challenge for the housing market, and that’s a lack of supply,” said David Howard, executive director for the National Rental Home Council.
While built-to-rent communities have existed in Orlando since at least the 1980s, especially in tourist areas, right now the industry is seeing a fast-paced uptick.
Built-to-rent only accounted for 3% of the inventory of major rental home providers as recently as late 2019, according to the NRHC. By the end of last year, that had risen to 26%.
Capital investment firm Northmarq has been tracking development of built-to-rent properties in Florida and says Orlando has been a major target for developers.
“If you look at Tampa and Orlando, that’s the vast majority of the [built-to-rent] that’s being built in the state right now,” said Luis Elorza, Northmarq’s managing director of investment sales.
In the Orlando MSA, which includes Orange, Osceola and Seminole counties, Northmarq counts 335 built-to-rent units, with most of it built in the last 10 years. The region has another 1,174 units under construction and another 824 units planned, adding a total of 11 new communities in the next couple years.
Communities such as Sunbelt by American Homes 4 Rent in Kissimmee look like most other subdivisions, with homes ranging from three to five bedrooms. At American Homes 4 Rent, prices start around $2,095 a month for a four-bedroom house, depending on the location and the floorplan.
One of the main differences is that the builder often functions as both landlord and HOA.
“They’ll mow the lawns and take care of the maintenance, things like that,” Howard said.
Over the past five years, the inventory of homes that are built for sale has increased by 10% around the country, while homes for rent have fallen by 2%, according to the NRHC.
The lack of inventory is creating an attractive opportunity for traditional home developers, such as Taylor Morrison and DR Horton, both of which have built-to-rent projects in the works around Central Florida.
Howard says the industry is being driven by demand from two key demographics. The first is millennials with young children who can’t afford the down payment or other costs of buying a home but need something bigger than the typical apartment.
“They’re on the pathway to homeownership; they’re just not there yet,” Howard said.
Built-to-rent is also popular with empty nesters who have sold their homes and want to be closer to children and grandchildren. “They don’t want to be a homeowner again and take care of everything,” Howard said.
Part of the appeal is the size and features such as yards, especially as more people are sent to work from home. “People are at home more,” Howard said. “They need more space.”
Built-to-rent houses carry a 10% premium over apartment rates, according to Northmarq.
Elorza says there are other benefits for developers as well, such as being able to brand an entire community as their own. “It’s much more of a product type than if you’re buying single family homes and renting them,” he said.
Howard said believes that unless home prices come down built-to-rent is going to remain an attractive option for working families.
“There are huge affordability challenges in the housing market,” he said. “The reality is there just aren’t enough homes for people to rent.”
