Apr 1, 2024 - Real Estate

The DMV is seeing more built-to-rent homes amid tight inventory

A kitchen and open-concept living room.

A unit at CityHouse Ashburn Station. Photo: Courtesy of American Real Estate Partners

Amid high prices and tight inventory, more built-to-rent communities are popping up across the DMV.

Why it matters: Built-to-rent houses are an option for people who need more space but aren't ready to dive into Washington's competitive real estate market.

The big picture: The communities allow people to move into newly constructed homes with property management and amenities like clubhouses and fitness centers — without a mortgage.

  • Such developments have typically been popular in areas like the Southeast, Southwest, and Sunbelt, where land is cheaper, but they've slowly been arriving around D.C. over the last few years, John Burns Research and Consulting senior vice president Jeff Kottmeier tells Axios.
  • Of course, the idea of renting a single-family home or townhouse isn't new, but with built-to-rent, you're working with a management or development company instead of a landlord who owns your home.

What they're saying: "These built-to-rent communities are an indication of how challenging it's getting to become a homeowner," Bright MLS chief economist Lisa Sturtevant says.

  • "We have often, in the past, equated rental with apartments. And I think the fact of the matter is that people are staying renters for longer."
  • This comes as the median age of first-time buyers has increased, reaching 35 in 2023, compared to 31 in 2013 and 29 in 1981, per National Association of Realtors data.

Plus: Built-to-rent communities are also popular with empty-nesters who aren't interested in home upkeep, says Kottmeier.

Zoom in: Washington's built-to-rent inventory is concentrated outside the Beltway, where land is more available and affordable — think of City Center Townes in Dulles or the Collection at Scotland Heights in Waldorf.

  • It also helps that many locals are still working remotely. "They don't need to be in an apartment near their office," says Sturtevant.

Case in point: At the Ashburn development CityHouse Ashburn Station, 57% of its residents work from home or within a 30-minute drive, a spokesperson tells Axios.

  • A three-bedroom, two-and-a-half bath townhome starts at $3,295 a month with community tennis courts, a playground, outdoor kitchens, and a pet park.

The intrigue: CityHouse's developer American Real Estate Partners (AREP) wants to expand its local built-to-rent presence and is eyeing area office buildings that "have no economic value" post-Covid, AREP managing director Mark Taylor tells Axios.

Yes, but: While we're seeing more of these developments in the area, don't expect a local onslaught, as the cost of land around here is high, especially within the Beltway, says Kottmeier.

  • In expensive areas like the DMV, developers typically go for apartments when building rentals, as they're higher-density and generate more revenue to cover land cost, Kottmeier tells Axios.

Thought bubble: The idea of constructing denser, more affordable housing can often cause neighborhood NIMBY freakouts, so rental properties like these that more closely resemble existing single-family housing could be more appealing to nearby anxious homeowners.

What we're watching: It's possible we'll see more of these communities in Prince George's County, Loudoun County, or along the 1-81 corridor near Winchester, where there's more space, says Kottmeier.

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