TAMPA, Fla. — Housing experts describe the hybrid build-to-let model as “the biggest shift in residential real estate we’ve seen in our lifetimes.” But what does this mean for single-family home ownership and the future of housing?
NexMetro launched its first community 10 years ago in Arizona. The motto on their website is “rent like an apartment, live like a house”.
And, if something breaks down, it’s a rental, so you’re not paying for maintenance, and later transitioning to a product you can buy isn’t an option.
“This is a lease-only product, okay, so lease-only in perpetuity,” said William Hulton, NexMetro Florida vice president of development. “And we’re not developing this product with that (buy later) in mind. It’s intended initially and throughout its life to be a full rental product.”
Hulton told ABC Action News reporter Michael Paluska that the hybrid model is catching on.
“This is our flagship entry in Florida, and the first in Pasco County that I know of,” Hulton said. “And, we have several more in the pipeline in Pasco, Hillsborough and Manatee. The market is driving demand. And as an alternative, I don’t think there’s a better alternative for those looking for a different experience than the big traditional box.”
In our housing supply crisis, the build-to-let model bridges something that housing experts identify as the missing link.
“And it’s that middle ground between apartments and single-family homes, and there’s been very little construction in that middle zone over the last few decades,” said Brad Hunter, owner of Hunter Housing Economics. “So now we have this new, you know, 10-year-old real estate segment that’s starting to fill that missing middle. It’s still going to be a much smaller real estate segment than apartments. But it’s going to go up to that level. And, I think that’s a good thing. I think it’s going to help. It’s going to give people more options.
Hunter said his research shows there is a shortage of housing targeting the needs of young families. Millennials have kids now and want a suburban home with a yard. An estimated 95,000 units were built for rent last year (nationally), and BFR communities are renting as quickly as they can be built.
“My forecast is that for the next five years, we’re going to continue to see supply drive out demand,” Hunter said. “I think that will eventually come to around 160,000 to 180,000 a year being produced, which is still only around 40% of all the apartments that are being produced in the country.”
As property values hit historic highs, Hillsborough County real estate appraiser Bob Henriquez is trying to raise awareness of the issues we face.
“This is a remarkable increase in value. We could use the terms historic and extraordinary,” Henriquez said. “I don’t know if we’ve seen this before, this magnitude of increase in overall property value. What I fear most is that the average person will be squeezed out of, from what we know, it’s being, you know, very special community,” Henriquez said.
The data is still being analyzed, but Henriquez said on average, values have increased 20% across the county, in some areas even more.
“The ones that are going to be affected the most are new or new home buyers. People who are in new construction. And that’s overtaken people who are renting,” Henriquez said.
One of the main areas of concern is the exemptions for homesteads and the 10% cap for non-homesteads.
Once a home changes ownership or use, the value is appraised without the protections at the current market rate.
“Non-owner real estate investors who have come in and bought a part of the market where they wouldn’t have been protected by a 10% cap before, they’re going to feel the brunt of this increase,” Henriquez said. “Even if the market were to crash tomorrow, the trimming notice you received this year will be based on the value as it was on January 1, 2022.”
While increases in Tampa Bay push some locals out of the market, we remain more affordable than big cities like New York, San Francisco and Miami. And, Tampa’s secret is out.
“It’s pretty intense right now. But, you know, I love this area. I love the Tampa Bay area,” said Nancy Surak, chief broker for the Land Advisor’s Organization in Tampa. “I’ve been saying for decades that when the word got out, the secret got out about our region, that, you know, we wouldn’t be able to turn off the demand tap, and here we are.”
Surak said there were bidding wars in all asset classes. The only market in which it does not see demand is for offices. This makes sense as businesses are slow to get back to work. An industry that Surak also predicts we will grow in is build-to-let.
“So it’s not a new concept. It’s a new concept from a development perspective,” Surak said. “I don’t think it’s going to be a move from the single family home. I think it’s an alternative to people who have traditionally been served in the apartment rental space. A number of people want to put that in the bucket of its direct competition with the home builder and with the consumer so I go back to it being just another type of product and if the demand is there the market will solve the problem of asks, and that’s really where we are.
“Are we headed for price inflation so high that the American dream should now be rented rather than bought? Paluska asked.
“I think the better question is whether this next generation, what my generation and people older than me have defined as the American dream, think the American dream is being redefined by this group of younger people who don’t want maybe not what mommy and me daddy are trying so hard to achieve,” Surak said. “They want freedom and the ability to be flexible and fluid about where they live.”
Hulton agrees. So the question now is whether the definition of the American dream is changing.
“Is this the American dream? Building these homes where people can come and know they have a piece of it and not have to worry about all the other things that come with buying it?” Paluska asked.
“I think our position is that fundamentally, I think Americans or consumers, in general, have changed the way they view the American dream to a large degree,” Hulton said. “And, you know, that may mean avoiding buying a house that may delay marriage or prolonging your youth a little bit over the years before embarking on that total commitment of buying a house. So that’s a very , much needed niche in the market.”