Turning 'Housing Into The Hunger Games': As Build-To-Rent Gathers Momentum, So Does Skepticism

As it becomes more difficult and costlier to find and buy a home in Houston and other Texas communities, housing developers are expanding their inventory of housing types, including build-to-rent. But not all developers are seeing the uncertain single-family housing market as an opportunity for growth.

Build-to-rent housing, which is growing more popular in new housing developments, particularly in the Sun Belt, is eyed as a lucrative new investment opportunity and an appealing housing option for those who want the space and a yard without pricey and tedious maintenance. But Alex Kamkar, managing shareholder with master-planned developer Bold Fox Development, is skeptical the industry won't prove exploitative for people looking to break into homeownership.

"We've got $50B going into build-to-rent. Why don't we put the $50B into just buying homes that mom and dad can buy?" Kamkar said April 7 at Bisnow's Houston Master-Planned Communities & Homebuilding event, arguing consumers are now being put in the position of renting the American dream.

Build-to-rent isn't typically used as an affordable alternative to homeownership, Bisnow reported previously. Build-to-rent housing in Houston rarely costs renters less than $1,500 a month, about the same as the average mortgage payment in Texas, according to Business Insider and several panelists at last week's event.

And developers aren't necessarily marketing it as affordable, instead pointing to community amenities and other advantages more commonly seen in multifamily complexes, like maintenance. Developers previously told Bisnow build-to-rent housing is mostly designed for empty nesters or young couples who are uninterested in or unable to keep up with housing maintenance, or who are trying a single-family housing lifestyle before shelling out for a down payment.

But inventory in Houston is becoming increasingly tight — the second-lowest on record as of January 2022, the Greater Houston Partnership reported — and Kamkar expressed concern that when given the option to build houses that families can own to build equity or build houses that will be rented forever, developers are spending their resources squeezing Houstonians out of homeownership.

"There is splatter when we do BTR," Kamkar said. "There are communities now where local officials do not delineate between a build-to-rent community and a master-planned community. They penalize it all the same. We're seeing that in Brazoria County. … They're anti-development now because BTR has made that so."

Among Kamkar's stated grievances with build-to-rent, which he says Bold Fox won't break into, is increasing public concern about investment firms purchasing single-family homes and driving up rent. Companies like BlackRock, which Kamkar specifically named, have made headlines for purchasing thousands of homes across the country. 

Kamkar also pointed to a January letter written by Democratic Sen. Elizabeth Warren accusing private equity firms and other big investors of "taking advantage of the housing shortage by purchasing large numbers of houses and raising rents for families, all to pad their bottom line."

Jay Young, vice president of build-to-rent with The Signorelli Co., argued that only selling build-to-rent to large Wall Street investors is impractical and that developers have to sell to individuals, too, for a diverse buyer pool.

"They view [build-to-rent] as gravy on top of their already-built business," Young said. "No builder is going to go out there and say 50% of all the homes is all going to be build-for-rent. Their business is building homes and selling them to mom and dad."

Kamkar isn't the only housing expert to express concern about build-to-rent. Affordable housing nonprofit Texas Housers has also warned build-to-rent can squeeze families out of building generational wealth, but developers say the industry is just another choice among the pool of housing options.

"This is a perception issue. 'Oh, the people who are renting cannot afford to buy.' But from our experience, that's not our case. It's pure options, especially when we're developing a move-up product," Wan Bridge CEO Ting Qiao said, referring to housing that is offered for those looking to upgrade their lifestyles.

Despite skepticism, Catherine Lee, chief operating officer and in-house counsel of Douglas Elliman, said build-to-rent will continue to be strong in Texas for developers and capital markets alike, stronger than the rest of the country.

"Why don't builders do more single-family? A lot of it really has to do with capital markets," she said. "That's the natural answer. Unfortunately, we're not doing it for nonprofit reasons."

Lee said build-to-rent is particularly appealing to capital markets because there are multiple exit strategies, like increased rent or selling the property, more akin to multifamily than traditional single-family.

Several developers worried aloud about the future affordability of housing, prompting Kamkar to bring up another comparison.

"We're all good capitalists here, and dollars are going to go find yield," Kamkar said. "But the idea that we want to put one of the sacred institutions like your home in the hands of BlackRock and its friends like [Ranieri Partners Chairman] Lewis Ranieri, who literally helped us get to the 2008 housing crisis, is not a good idea.

"Do we really want to be the generation that turned housing into The Hunger Games?"