BFR Demand Might Be Greater Than You Think

The older millennials are getting, the more they’re spurring demand for a fast-growing property class—and that demand might be even greater than it appears. 

That’s according to Brad Hunter, president of Hunter Housing Economics, who said he wanted to “set the record straight” at the GlobeSt. MULTIFAMILY SPRING event on Tuesday.

Single-family homes built specifically for renters are not a new concept but they are enjoying fresh popularity, thanks to millennials and migration patterns accelerated by the COVID-19 pandemic.

However, many news outlets and market researchers have incorrectly quantified just how sought-after they are, in Hunter’s view.

The amount of built-for-rent units that were completed or began construction in 2021 is frequently estimated at around 45,000 or 50,000, but Hunter told an audience at the Seminole Hard Rock Hotel & Casino in Hollywood, Florida, that the real number is likely to be at least 85,000 to 95,000. 

That discrepancy stems from an incorrect reading of census data, according to Hunter, who noted the census isn’t able to properly count all the different types of built-for-rent. Many market researchers, for example, have only included homes built and held by builders. But once the houses that builders have sold to other entities are factored in, he said that adds another 3% to 4% of single-family housing starts.

‘Not Enough Housing’

Built-for-rent communities are being absorbed “as fast as the homes can be built,” according to Hunter, who said, “If they’re building eight a month, they’re leasing up eight a month.”

He estimated that demand will increase for the next seven to eight years.

That’s where millennials come in—a generation of roughly 80 million that Hunter described as “spanning from Mark Zuckerberg to people just getting into college.” On average, they’re tracking about 10 years behind their predecessors when it comes to getting married and having families, but it’s finally starting to happen.

“We’re seeing this huge hump of population aging through 27 to 31, which is the prime age for renting a single-family home,” Hunter said. “The millennials, 10 years late, are starting to get around to having children.”

That means more people are seeking houses with yards in the suburbs, close to parks and good schools, and “that’s where the single-family house for rent beats multifamily hands down,” according to Hunter.

In 2022, Hunter said he expects the number of new built-for-rent units will be between 110,000 and 120,000, and 135,000 by 2023. By 2025, that could rise to between 160,000 and 180,000, according to Hunter.

“Family demand is going to surge over the next several years, and not enough housing is being built that is suitable for families, especially young families,” Hunter said.

One of the reasons for that lack of housing is a general bias against density and rental housing, as many incorrectly assume they’re “riff raff,” as Hunter put it.

But the demand is not only stemming from those struggling to save enough for a down payment on a home, but also from families who are renters by choice – those who make enough money to buy but opt not to.