May 19, 2023
In the ongoing battle of finding a place to call home, residents have always faced a classic conundrum: apartment community or house? Clearly, the current economic situation of skyrocketing housing costs and bubbling interest rates would indicate more people would lean toward renting and a strong environment for multifamily operators. On the other hand, the appeal of autonomy and more space keeps resident eyes locked on homeownership.
Enter player three: Built-to-Rent.
The rise of Built-to-Rent (BTR) communities are purpose-built housing developments popping up on the outskirts of cities that cater specifically to the needs of renters, mark a new trend in a renter’s choice for living arrangements, and have a potential to shake some trees in the multifamily industry. Leaders in multifamily space should keep their ears perked for development of these new communities in their target markets.
Although BTR is still an emerging trend, they have caught the attention of the market and are gaining serious popularity. According to Realtor.com, 3% of housing before 2022 were built specifically for rental purposes. By the end of last year that number reached a whopping 12%.
Here’s the deal: BTR communities present a new challenge for multifamily operators, serving up many of the things that previously set rental options apart from a single family home.These purpose-built housing communities often offer top-notch amenities, like fitness centers, co-working spaces, and communal areas, that give the most luxury buildings a run for their money.. Ian Peterson, owner of Integrate Properties, was quoted in a Minneapolis StarTribune article about a development in the area recently and described it as “...a class-A-plus apartment building on a horizontal scale.” Beyond that, BTR communities often provide professional management and on-site services, which can increase resident satisfaction and retention rates. What used to be a marginal market of individually rented houses or minor operators in the space is now a burgeoning market of professionally managed housing stock. Similar to Airbnb, what started as a strong option for a side gig now poses a significant financial investment for major operators.
Moreover, these BTR communities don’t just offer a private yard and an extra garage stall. They also focus on building a strong sense of community that leverages the traditional ideas of next-door-neighbors as well as the community events that multifamily buildings have incorporated in recent years. Think block parties, trick-or-treating, and all the fun events that bring neighbors together, but paired with the more coordinated events of a multifamily space like scheduled exercise classes and organized cookouts. Unfortunately for multifamily operators, this new breed of house may offer the best of both worlds.
To remain competitive against this new market, multifamily operators should look to invest in the resident experience. Amenities will continue to be a driving decision for renters and buildings may look to spruce up fitness centers and shared outdoors spaces (especially at aging assets). Multifamily communities should also lean into great service and building strong relationships with residents. Residents won't be so keen on the idea of going solo in a standalone house if they've got a responsive management team that puts service at the heart of the resident experience.
Curious to learn more about Kipsu and digital messaging? Connect with a member of our team to get all of your questions answered.