As the housing market has continued to become less buyer friendly throughout 2022, some future buyers have turned to the build-to-rent (BTR) market to achieve the feeling of single-family living while waiting for a better time to buy. Richard Ross, CEO of Atlanta-based Quinn Residences, has watched as the “renters by choice,” retirees, and young couples have found a place to call home in one of Quinn Residences’ 37 BTR communities.
BUILDER: How has the BTR industry evolved in the second half of 2022?
Ross: A lot has happened in the second half of 2022. Interest rates have continued to increase, which not only affects individual home buyers, but also those of us in the BTR industry, resulting in a reduction of available homes and construction delays. Additionally, when the industry became red-hot last year, everyone was trying to become a BTR developer. In recent months, we’re seeing many of those players retreat.
BUILDER: What are some trends you’ve seen coming into the sector?
Ross: All development is leaning toward being more sustainable. At Quinn, we feel it's our responsibility for both our residents and investors. We are working to install solar panels in every existing and future community. All our properties are also built to high energy-efficiency levels with double-glazed windows, high-quality insulation, and LED lighting. The savings from using solar energy not only help us, but also offset costs for our residents.
BUILDER: What amenities do you find renters are desiring most in BTR communities?
Ross: Our residents are a blend of renters by choice, young couples, and retirees, and, on average, have 0.46 children and 0.75 pets per household. Because we often see more pets than children, our most desired amenity is a dog park. All of our homes also come with fenced-in backyards, and some of our communities even have dog-washing stations.
Smart home technology is also an important amenity desired by residents. Smart locks and Wi-Fi thermostats and light switches provide our residents with the ability to control their indoor environment for added ease and comfort while reducing monthly utility bills.
BUILDER: What are some of the largest threats to BTR overall and for 2023?
Ross: NIMBYism is by far the biggest threat to BTR. Local municipalities are shutting down communities out of fear of the unknown. It is incumbent upon those in the housing industry to educate the public on what BTR is, and why it is so desperately needed amid the massive housing shortage.
Additional threats to the BTR industry are availability of land and high interest rates. With costs rising, we aren’t able to be as bullish with our acquisition strategy as we have been but are remaining judicious in our expansion.
BUILDER: Do you think there will be a larger shift of for-sale builders moving to the for-rent side? If so, what scale?
Ross: Yes, in fact, we see many home builders attempting to move into the industry as they are having a tough time selling homes to individual buyers.
BUILDER: How do you differentiate BTR from SFR?
Ross: Build-to-rent communities have notable distinctions compared with individual homes or scattered-site for-rent portfolios. BTR is bringing new inventory to the area, helping meet increased demand for housing, and potentially leading to more affordable housing options. These developments are often built on underutilized land, in areas of significant job growth, especially in secondary markets, providing reasonably priced housing in areas that desperately need it.
The BTR communities are also professionally run and well-kept, offering high-quality amenities that residents desire today. The maintenance and operational advantages at Quinn homes compared with scattered SFR portfolios are unmatched, offering aspects that multifamily projects do not and cannot offer.
BUILDER: Where do you think BTR is headed in 2023?
Ross: In 2023, I foresee larger operators who came in to develop in the BTR sector scaling back and smaller firms pulling out. With rent growth slowing, profits are also diminishing, which means smaller ROIs. Quinn and the BTR industry are here to stay, and we are on track to add 2,500 homes to our portfolio next year. However, I do think there will be some slowdown in 2023 in reaction to market conditions.