Build-to-rent, or BTR, refers to house developments – neighborhoods – that are built by developers with deep pockets.
These communities are not the same as apartment buildings. These are houses – typically large ones measuring, on average, 2,500 square feet, built on large lots. The houses often have four or five bedrooms, a piece of yard, and a garage.
The average BTR neighborhood has 120 houses, according to data from John Burns Real Estate Consulting; individual units tend to rent for about $3,000 per month.
These developments, says Don Walker, CFO of Burns, in San Diego, cater to tenants who typically have an annual household income between $100,000 and $150,000 per year.
While BTR communities have been around for more than 30 years, they weren’t something anyone was paying particular attention to until about two years ago, when whole-cloth residential communities started popping up in towns all over the country. Until the past few years, homes built only as rental properties tended to occur in smaller, or more specialized developments, such as senior housing. Lately, however, private equity-backed investment in BTR developments has targeted younger families.
But that’s actually close to the limit of any practical information about how BTRs might be affecting the American residential landscape. These family-centered neighborhood communities simply haven’t been around long enough to show any long-term trends.
What is known is that there are at least 66 active BTR communities in South Carolina, hosting about 8,000 homes, according to Burns; another 46 communities are pending (although no dates are attached to the data), and these new developments would essentially double the number of units in the state.
What’s also known is that these developments, current or pending, vary widely in scale – from a coming 26-unit development near Myrtle Beach to a pending 399-unit neighborhood near Charleston.
What is not yet understood, and what worries some who are keeping an eye on the escalation of BTRs in South Carolina, is what BTR developments could portend.
Joetta Talford, a real estate broker in Rock Hill, worries that BTR will crush the average person’s ability to live the American dream of building wealth through homeownership.
“If you want to kill middle-[class] America,” Talford says, “you do it with rental communities.”
Her worry is rooted in how wealth-building works with real estate. At its most basic, you build equity in your property and then leverage that equity to enhance the property or buy more property. For the average person, this is a slow process, unfolding one property at a time. For Wall Street-backed investors sitting on hundreds or thousands of properties, the ability to leverage equity is enormous.
“They can take an entire community and borrow against that and build other businesses, build other communities,” Talford says. “So if you're talking about … killing the opportunities for Americans to have the American dream, that’s how you do it. You create renters. Out of everybody.”
In fast-growing towns like Fountain Inn – a small city that lies across both Greenville and Laurens counties – the growth of rental home communities is already playing out. Mayor G.P. Mcleer says that when the city approved well north of 100 new homes in two developments a couple years ago, they were homes destined for sale.
“Out of the blue, someone comes in and buys the entire neighborhood,” Mcleer says. The original developer, in fact, had even begun construction, when private equity money bought the developments and built BTR homes.
This is not illegal, by the way. The new developer did not change the plans for nor the scale of the developments, only the terms of what living there would mean.
“You're seeing this push by private equity and large, large sums of money coming into communities, building build-to-rent in neighborhoods and basically saying, ‘You will, you will own nothing and you will like it,’” says Mayor Kevin Phillips of Port Royal. His small city in Beaufort County is having its own BTR issues – specifically that of a developer who had originally pitched around 90, mostly single-family homes but then came back with an expanded BTR proposal.
“They came to us and said they had a presentation,” Phillips says. “They came in and showed us this plan, just a picture, really, of a build-to-rent neighborhood with over 230 units, the majority of those being townhomes.”
Port Royal officials are still working on how to proceed.
These two small-city mayors say their experiences with BTR developers should sound the alarm for other municipal and county leaders that proposals for these developments will be coming, and that they’re very attractive to developers who can, remember, leverage large-scale equity.
Don Walker says some of the worries about build-to-rent developments are overblown – that while 15 million-plus homes are in private hands, Wall Street owns about 300,000 homes, a combination of post-Great Recession accumulation and newly built BTRs, for instance.
He also expects the growth of new BTR communities to slow through 2026, as new homes find tenants and the supply shortage evens itself out some.
But Walker also says that BTRs are serving a critical need by supplying houses in a broader market plagued by slow construction of for-sale homes. On this, Jay Rinehart, CEO of Rinehart Realty in Rock Hill, agrees.
“We need places for people to live,” Rinehart says. “With build to rent we’re providing that opportunity for somebody to have a home in this area that may not be able to find it for purchase because, we're just not building them fast enough to purchase. At the 30,000-foot level, I do think that there is a place for a build to rent.”
For the record, Rinehart does not own any BTR property.
Walker also says that some people simply want to rent. Some have owned homes and now want to live without the constant upkeep; and some BTR residents – 62 percent, in fact, according to a Burns survey – have moved in from a different city or state. This, Walker says, suggests to him that families are moving for new jobs and are testing out living in different cities without the commitment of buying a home – which he also says a high number of respondents say they want to do.
Under all of this, of course, is the specter of corporate landlording, which worries tenant advocates like Kenya Cummings of the South Carolina Housing Justice Network in North Charleston. Cummings says they routinely see clients dealing with corporate landlords in apartments and suffering the weight of fees tacked onto rents that keep tenants behind on their bills. And they worry that in a state with weak tenant protections and a powerful landlord lobby, residents of BTRs will eventually face the realities of renting from a corporation, rather than people they can call to work things out.
And if you think this kind of dynamic is only for people facing severe housing insecurity due to poverty, Cummings says, think again.
“When I started tenant rights work, folks had a very clear image of what they thought the tenant was who needed more tenant protections,” they say. “Like a black family or folks who have been laid off. I'm having conversations with folks who are working on a PhD; with lawyers, with lawyers, with all kinds of folks who are just impacted by what's happening in the corporate landlord space.”
