As house prices rise, construction of single-family rental homes soars in Charlotte metro
With the median cost of single-family homes on the rise, builders in the Charlotte region and across the state are leaning toward offering these spaces for renters.
The trend is called “build-to-rent.” And construction of single-family rental homes is soaring in the Charlotte region, according to a report from Point2Homes, a real estate website.
Over 5,300 build-to-rent homes are under construction in the Charlotte-Concord-Gastonia metro, making the area the fourth largest market for build-to-rent construction in the U.S. In Charlotte alone, there are more than 2,300 homes being built, according to the report.
Elsewhere in North Carolina, the Raleigh and Wilmington metros are also seeing a rise in single-family rentals with 2,900 and 1,800 homes under construction, respectively.
North Carolina as a whole will see over 12,398 new single-family rentals in the coming years, making the state the fourth highest market in the U.S. behind Texas, Arizona and Florida, the report stated.
Affordability, commitment and new residents
One of the major factors behind the trend is affordability.
The 16-county region surrounding and including Charlotte saw an increase in both the median and average home price last year, according to the Canopy Realtor Association’s January housing market report.
At the end of the year, the median sales price was $392,000 an increase of 3.5%. While the average price increased by 6.8% with year-end sales being $493,487, according to Canopy.
In Mecklenburg County alone, those numbers are higher. The median price of $445,00 was an increase of 4.7% and the average price of $592,670 was an 8.7% increase.
“Buying a home is increasingly out of reach as home prices continue to climb, down payment amounts are prohibitive and mortgage payments are simply discouraging,” Andra Hopulele, a senior writer with Point2Homes, said in an email to The Charlotte Observer. “As a result, many renters are forced to rent for longer.”
The increase in home prices, and mortgage payments, is a nationwide concern.
The average mortgage payment, including taxes, have increased by 75% since 2019, according to a December report from CBRE, a real estate firm. Nationwide, mortgage payments are about 35% higher than the cost of apartment rentals, the CBRE report continued.
The cost is shifting more people to continue being renters as opposed to venturing into the “American Dream” of owning a home.
“Affordability is the key driver behind the rise of the build-to-rent sector,” Hopulele said.
Renting a single-family home provides space and amenities such as backyards, privacy and less maintenance at a lower cost, according to Point2Homes.
The other factor driving the trend, especially in Charlotte, is the influx of new residents. About 117 people move to the region every day, according to the Charlotte Regional Business Alliance, and they need some place to live.
Renting a single-family home helps solves a need for housing and doesn’t require a commit if a person isn’t ready to purchase a house, Hopulele said.
The possible downside
More developers are adding build-to-rent communities to their portfolios.
Northwood Ravin has several single-family rentals in its new developments, including The Lodges at Fort Mill, which offers two- and three-bedroom homes starting at $2,656, Axios reported.
But other property owners in the nationwide trend include Wall Street firms such as Blackstone and Invitation Homes, the Wall Street Journal reported. Both companies have faced scrutiny over accusations of being shady managers.
In September, the Federal Trade Commission sued Invitation Homes for allegedly swindling renters with undisclosed fees, withholding security deposits and practicing unfair eviction proceedings, even during the pandemic. Invitation agreed to settle the lawsuit for $48 million.
Blackstone’s LivCor LLC is one of six corporate landlords being sued by North Carolina Attorney General Jeff Jackson, alongside the U.S. Department of Justice, for allegedly working with a software company to illegally raise rents.
In Mecklenburg County, corporate landlords owned about one-quarter of all rental homes, The Charlotte Observer and News & Observer found in its 2022 investigation, Security for Sale.
The build-to-rent trend may also have an adverse effect on homeownership rates as builders focus on rental properties as opposed to for-sale properties, a Moody’s economic researcher told the Wall Street Journal.
That is also a big concern for the FTC. The agency is seeking public comment on “mega single-family rental” operators, which may steer a study into how corporate landlords are affecting home prices and rents in the single-family rental market.
