Austin has one of biggest build-to-rent home markets

The build-to-rent market in Central Texas has hit its stride. Developers are making massive bets on the single-family rental market, often devoting entire communities to the business model.

The investment seems sound, as data shows a notable hunger for these rental properties in Austin. The Austin metro has one of the highest concentrations of single-family build-to-rent units in the U.S., according to a new report by RentCafe.

RentCafe counts 1,390 of these rental properties in the metro, making the Austin area the 13th largest market for this housing type. The city of Austin alone has 760, according to RentCafe. The scope of the market makes sense, given the number of renters in the city. About 55% of residents rent rather than own, according to data from the U.S. Census.

We’re not the only Texas metro that’s eagerly adopted the trend — Dallas had the third largest market, with 4,290 units, and Houston had the fourth, with 3,600.

Nationwide, the trend has real growing power as builders attempt to keep costs low — and maintain control over land, the most valuable part of a home.

RentCafe analysts expect nearly 14,000 new build-to-rent houses to hit the U.S. market this year, more than double the 6,740 that were delivered last year. The market has significant capital behind it — about $40 billion nationally, by one estimate. One expert told Austin Business Journal there is “more equity in the space than there are deals.”

There’s a fairly straight line to be drawn between the pandemic and the rising trend, experts and developers agree. Renters crave more space and privacy as they work from home or try to avoid contact with neighbors, but historic housing prices have left homeownership out of reach for many residents. The median sales price for a single-family home reached $476,700 in the metro in December, according to the Austin Board of Realtors.

Because single-family rental homes often cost more than traditional apartments, developers and owners can recoup costs faster from tenants. Many developers are seeing the potential profits to be made by building out this sector in Central Texas.

This year, Banyan Residential LLC chose Pflugerville as the site for a new 230-home build-to-rent community, its third such community in the state. In 2021, Houston-based Wan Bridge Group, which specializes in build-to-rent products, announced plans to build duplexes in Georgetown. Walton Global Holdings, based in Scottsdale, pegged Austin as a target market for its new national build-to-rent line.

More dedicated build-to-rent divisions are popping up under traditional developers. Last year, UM Development LLC, which does business as Urbana, got approval from the city to bring its branded Urbana YardHomes, which are rented out like traditional apartments, to Leander. Austin-based Aspen Heights Partners LP launched a new build-to-rent brand, Bell Yard, in Hutto in September. Darwin Homes, another local company, recently created a platform for single-family rental property management.

Some developers are iterating on the concept even further. Last fall, Austin-based startup Casata Corp. wrapped construction on a South Austin community made up of for-rent micro homes that range in size from 400 to 758 square feet.

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