BTR Quieted Down This Year. Now, DFW Developers Are Prepped For A Boom And Hoping Cities Go Along

Dallas-Fort Worth could be on the verge of an explosion of new build-to-rent projects as developers work to meet surging demand for the multifamily housing option that feels more like single-family residential.

2023 was a record year for BTR construction across the country, and DFW rode the wave harder than nearly any other city. Last year, the Metroplex was No. 2 behind only Phoenix for total existing BTR units, units delivered over the last five years and units under construction, according to an analysis from RentCafe using data from Yardi Matrix. 

A rough 2024 put an end to at least some of the frenzy, as did a 40% drop in investment volume in the sector. Through the second quarter, the metro saw its growth rate for new builds fall slightly behind the national average, the victim of the same struggle to find financing impacting the rest of the industry.

But that could be about to change, and developers and officials in the region's fastest-growing cities are cautiously gearing up for a boom — some with more enthusiasm than others.

A national Hunter Housing Economics analysis of BTR projects last month showed new starts had seen a “drastic reduction” since the start of the year despite accelerating demand. The analysis found that the U.S. will likely be short more than 63,000 BTR units this year and more than 76,000 in 2025 before the next significant wave of product comes online in 2026. 

Hundreds, if not thousands, of those units are likely to pop up in the Metroplex thanks to pent-up demand and loosening capital, according to those in the sector — if they can get local approval.

“The capital is going to chase those deals, so therefore the developers will … come over to that side and fill that need,” Welker Properties CEO Andrew Welker said. “It's a great product, and it solves a problem.

Welker Properties is in the midst of work on Wolf Creek Farms, a 343-unit BTR project under construction in Melissa. The project, which broke ground earlier this year, is under budget and ahead of schedule, Welker said. And though this is Welker’s first BTR project, his company has more lined up in Texas and Florida as he readies for what he expects to be the impending eruption for the housing type. 

With more than 2,100 BTR homes, McKinney is far and away the leader for the concept in DFW, according to Yardi Matrix’s data. The city had 1,500 more BTR homes than Arlington, which ranked second in the Metroplex with 519 units as of the end of 2023.

Though BTR projects can be controversial, enough have gone through McKinney’s planning process that its city council has grown relatively comfortable with the concept, McKinney Director of Planning Jennifer Arnold said. 

“They see it as a great transition from density and intensity of development,” Arnold said.

Celina, the nation's fastest-growing city, is also bracing for more. Executive Director of Development Services Dusty McAfee estimated the city has around six BTR projects that have been completed and several more in different stages of development. He said it is inevitable that Celina will be home to further BTR projects as it is only 20% built out with waves of growth on the way.

“We're going to get a lot more of everything,” McAfee said to Bisnow.

More Of Everything Not Always Wanted

DFW became an epicenter of BTR development amid a steady influx of people moving to the region for work, lower taxes or the promise of a cheaper lifestyle. That sparked a housing shortage in North Texas that has driven home prices out of the range of affordability for many residents.

Proponents of BTR see it as an opportunity to provide housing similar to single-family residential but at a better price point.

“All of the data we see points to the fact that renting is still more affordable than owning,” NexMetro Communities Chief Communications Officer Jacque Petroulakis said, noting interest rates and competition for limited supply are still impeding people from buying a home.

But developers said it can be a challenge to convince cities to allow projects to move forward. 

Finding a location for new BTR projects isn’t always a slam dunk, Younger Partners Executive Vice President Tom Grunnah said. As a land broker, Grunnah worked with NexMetro on some of their first BTR projects in the Metroplex and has been actively working with companies to find locations for these developments for most of the last decade. 

Some cities aren’t interested in allowing new BTR developments because of poor experiences they had with early projects or negative reviews of development elsewhere, Grunnah said. For a project to be successful, Grunnah said cities need to know it will be properly built and maintained so it remains looking good 15 years down the line. 

“Those are all valid concerns,” he said. “If you can … satisfy those curiosities then I think you might be successful.”

Some of the hesitancy toward BTR from cities also stems from fears it would be easy to do the newer housing type wrong, Arnold said. 

“You don't have a whole lot of examples on the ground,” she said. “And because it's newer, these development standards that you're crafting at the zoning stage, you don't always know how they're going to play out.”

BTR projects can also get lumped in with apartment developments, a black mark in cities experiencing a flood of multifamily properties.

Welker said he found 5,800 units have been proposed in North McKinney, Melissa and the surrounding areas over the next five years, though he expects less than half will actually be built. 

“A lot of people that bought sites moved too quickly,” Welker said. “They’re realizing that a lot of sites they bought, they're not really developable, or if they are, they’re not developable for a few years down the road until they get the right capacity for utilities and everything else lined up. Cities aren't in a hurry to get that to them because they think that they've already approved too much multi.”

'Strongest Niche In Real Estate'

Celina's McAfee, who calls more BTR inevitable, argued that BTR can be a handy tool for cities that don’t want commercial developments butting up to single-family neighborhoods.

“Say you overzone for commercial and you’ve got an extra 15 acres that won't develop as commercial because it's just oversaturated,” McAfee said. “Well, that's a great buffer between the commercial and the single-family because it's very limited in height [and] it looks and feels and smells and quacks like single-family.”

The common stigma against multifamily developments has been minimal toward BTR projects in Celina, she added, with many residents expressing support for the projects and demand growing.

Welker Properties, also in predevelopment on a 12-acre multifamily project that would bring 252 garden-style units to the property next to Wolf Creek Farms, hopes other cities will realize BTR is an important step on the property ladder.

“I'm bringing someone in that can start here in a garden style, which is still a beautiful Class-A, finished product in a nice neighborhood with great schools,” Welker said. “Then they could move over to the build-to-rent, it's a little bit pricier. And then it's like, ‘Well, we're almost there.’ They can slowly graduate into that home ownership, which would be my goal.” 

McKinney officials track CBRE data and pay particular attention to the types of housing being built in the city, Arnold said.

“I don't think we're at any risk right now of overbuilding on that product type because there really is not that much around,” Arnold said. “Those things are very popular.” 

While quality multifamily developments maintain much of their value over time, McAfee said he is curious whether BTR projects will maintain their value in a similar way. Time will be the ultimate decider on that, and it’s not something the development services executive worries much about for Celina.

“If they value low, the market will take care of that,” McAfee said of BTR projects down the line. “If you have 15 acres on the tollway and you’re lower value, [the market] will redevelop.”

NexMetro Communities sees BTR as one of the “strongest niches in real estate,” Petroulakis said, appealing to three types of consumers: professional millennials tired of big box apartments, divorced individuals disinterested in returning to apartment life and those aged 55 and over who are looking to simplify their lives. 

“I actually was talking to a resident at one of our DFW area projects neighborhoods and I said, ‘You guys have owned your home for the last 30 years. Why are you renting now?’ And she said, ‘I don't want my husband to get on a ladder ever again,’” Petroulakis said.