Mona Gass’ home is caught in the messy politics of America’s housing crisis.
Mona Gass’ home is caught in the messy politics of America’s housing crisis.
Gass, 72, pays $2,500 a month for a three-bedroom single-family rental she shares with her 94-year-old mother. It’s one of dozens of homes at Avilla Lehi Crossing, a gated community of detached single-family rentals outside Phoenix with a shared pool, outdoor grills and a maintenance team on site.
They moved into the roughly 1,200-square-foot home six years ago, after her mother sold her house. The ranch-style home with a private entrance and porch fits them well, even if it’s built “a little cheaply,” Gass said.
It was always going to be a rental for the two of them together — no worrying about fixing a broken AC or a leaky sink. With her mom getting older, Gass wasn’t sure how long she’d stay, and homes around Phoenix had become wildly unaffordable. Anything beat living in an apartment building with shared walls and neighbors upstairs.
“Apartment complexes in Phoenix are all two and three stories. I’m not doing stairs,” she said.
Rental communities like Avilla have expanded rapidly in the Sunbelt over the last decade. Roughly one in ten new US single-family homes is now constructed for renters, not homeowners.
Single-family rentals are a modern version of a starter home, which have gone nearly extinct in the United States. But their existence challenges the American ideal that suburban single-family houses are meant for homeowners, and their growth is now in jeopardy.
Congress’ largest housing package in nearly 40 years, designed to build more homes, includes a section restricting single-family rental communities backed by large investors. Large investors finance an estimated 62% of new single-family rental homes, Pew estimates.
But the provision favors homeowners at the expense of renters, say housing supply advocates. Middle-income households who prize the American dream of a single-family home with a backyard in the suburbs, but who can’t afford to buy or prefer the flexibility of renting, would lose out.
“There’s a mythology that single-family homes are for home ownership and renters need to be relegated to apartment buildings,” said Will Poof-Webster, the director of infrastructure policy at the think tank Institute for Progress. The bill discourages single-family rentals “just because they’re built by someone we want to scapegoat.”
Housing bill in Congress
The Senate passed the bill, co-authored by Republican Sen. Tim Scott of South Carolina and Democrat Sen. Elizabeth Warren of Massachusetts, 89-10 last month. It removes regulatory hurdles to build, expands loans to construct housing and increases manufactured housing to address the housing shortage and make home ownership accessible.
A late section added to the bill also forces institutional buyers — defined as investors controlling 350 or more single-family units — to sell any future single-family rentals individually after seven years.
Stopping corporate investors from outbidding families buying homes has united President Donald Trump with progressive lawmakers. Large investors own 0.6% of single-family homes in the United States, but they are more concentrated in markets such as Atlanta. Institutional investors have been criticized for driving up home prices, but there is little evidence that their presence is impacting the rising costs of buying a home.
“Homes are built for people, not for corporations,” Trump said in a February speech. “America will not become a nation of renters.” He signed an executive order directing federal agencies to ban large investors from buying existing single-family homes. The impact of the executive order is not yet clear.
The Senate’s bill extends restrictions on large investors to the rental market.
Supporters of these restrictions say investor-backed single-family rental communities will, if left unchecked, decrease the homeownership opportunities that drive household wealth in America.
“It’s really just stopping Wall Street from making this an asset class that will crowd out homes for sale to families,” said Laurel Kilgour , research manager at the American Economic Liberties Project. The limits on large firms would help smaller and non-profit home builders construct build-to-rent houses, she said.
But home builders, supply advocates and some lawmakers have mounted strong opposition to the section. They argue that one home built for rent does not mean one less home for a family to buy. Build-to-rent financing comes from a separate class of investors that would not otherwise be building homes for sale, critics of the provision say.
The bill has already frozen the build-to-rent market. Fannie Mae and Freddie Mac have paused new deals and private investors have stopped lending. The provision could decrease the number of rental units built each year by at least 72,000, according to the Urban Institute.
“Not everyone has the credit score, down payment or the income to buy,” said Laurie Goodman, a housing finance expert at the Urban Institute. “It doesn’t make sense why you would stymie the growth of this sector that’s adding new units.”
Build-to-rent grows
Large investment firms such as Blackstone entered the single-family housing industry after the subprime mortgage crisis in 2007 . They started buying homes at foreclosure auctions and later moved to building entirely new single-family rental communities to cater to the growing class of renters.
New communities boomed during the pandemic, when people were searching for more space in the suburbs but surging prices were putting ownership out of reach.
Cheap land, lax zoning and space to build horizontally made Sunbelt cities prime areas for new rental communities. Specialized build-to-rent developers formed, and large builders like Lennar got into the business.
Build-to-rent communities typically have 100 to 200 homes, and they can look similar to homes for sale from the outside. But they have subtle differences — no carpets, resilient flooring and wider hallways for renters moving in and out.
They are also usually smaller than homes built for sale and packed close together to keep maintenance costs down. Floor plans are designed to maximize efficiency.
It’s a completely different business model and type of housing than building homes for purchase, said Josh Hartmann, the CEO of build-to-rent developer NexMetro, which owns Avilla neighborhoods.
“There’s no customization. Every home is the same,” he said. “We start seven homes a week, and we finish those homes 105 days later. It’s just like bang, bang, bang.”
The Senate’s requirement for large investors to sell individual rental homes in these communities after seven years would be unworkable, Hartmann said. Unlike homes for sale on a single lot, Avilla neighborhoods have 200 homes on a single parcel. It would require local land-use changes to split them up, and common amenities like parking would also have to be subdivided.
“Our communities are designed in such a way that you could not sell them individually,” Hartmann said.
Proponents of the rental community model say it’s the only way many young parents and working professionals, who would not qualify for a mortgage, can access a three- or four-bedroom house in a good school system near job centers. The median income is $73,000 for households living in single-family rentals built after 2011 — lower than the median household for homeowners of $96,000 —and forty-two percent of these rental households have kids.
“Financially it’s a better move to rent right now,” said Sadie Morin, 29, who lives with her partner, four kids and three dogs in an Avilla community around Phoenix.
The family pays $2,700 a month for a three-bedroom home with a backyard and garage. It’s quieter and costs as much as their last apartment, which was half the size, shared walls with loud neighbors, and had no place for the kids and dogs to play outside.
“It was really hard on all of us,” Morin said.
The community is across the street from a public school and closer to her work. She and her partner are building up their credit score and saving money with the dream of owning a home in the future.
“Prices out here are ridiculous,” she said. “We want to stay here as long as we can until we can buy a house.”
Original source: edition.cnn.com