Blog June 22, 2024

The Hidden Costs of Built-to-Rent Communities

The American Dream has long been symbolized by homeownership, a cornerstone of financial stability and personal success. However, an emerging trend in the housing market threatens this dream: built-to-rent (BTR) communities. While these communities offer modern amenities and convenience, they present significant economic dangers for renters and future homeowners, potentially eroding the foundation of homeownership for future generations.

The Allure of Built-to-Rent Communities

Built-to-rent communities are purpose-built housing developments designed exclusively for renting rather than ownership. These communities often come with appealing amenities such as fitness centers, pools, and communal spaces, making them attractive to a broad range of renters, from young professionals to families. The convenience and flexibility of renting in such a community can seem appealing, especially in a market where home prices are soaring.

The Economic Impact on Renters

While the upfront costs of renting might seem lower than buying a home, the long-term economic impacts on renters can be detrimental. Renting means paying monthly fees without building equity. In a BTR community, this translates to a continuous outflow of money to landlords, predominantly large corporations, without any return on investment for the renter. Over time, this can lead to a significant loss of potential wealth accumulation.

Lack of Equity Building: Renters do not build equity in their homes. Equity represents a significant portion of household wealth in the United States. The housing market holds an average value of $22.5 trillion annually, with $13.0 trillion in household equity. By renting, individuals miss out on this crucial wealth-building opportunity.

Financial Instability: Without the financial cushion that home equity can provide, renters are more vulnerable to economic downturns. Homeownership acts as a form of forced savings, providing financial stability that renting cannot match.

The Corporate Takeover of the Housing Market

Wall Street corporations such as Zillow, Tricon Residential Inc., Blackstone Inc., and Opendoor Technologies Inc. are increasingly investing in and developing BTR communities. Their goal is clear: to create a generation of lifetime renters. By controlling a significant portion of the housing market, these corporations can dictate rental prices and terms, further exacerbating the unaffordability of homeownership.

Rising Rental Costs: As these corporations gain more control over the rental market, they can increase rental prices, making it even harder for renters to save enough money to transition to homeownership.

Decreased Housing Supply for Buyers: By purchasing and converting homes into rental properties, these corporations reduce the supply of homes available for purchase, driving up home prices and making homeownership less attainable for average Americans.

Long-Term Consequences for Future Generations

The shift towards a rental-based housing market has dire implications for future generations. The inability to build equity through homeownership means that future generations will have less wealth to inherit, perpetuating a cycle of financial instability.

Wealth Gap Expansion: Homeownership has historically been a primary means of wealth accumulation for middle-class families. By undermining this path, built-to-rent communities contribute to widening the wealth gap.

Reduced Social Mobility: Without the financial stability and opportunity provided by homeownership, social mobility is likely to decline. Future generations may find it increasingly difficult to improve their economic standing.

Preserving the American Dream

If Americans do not awaken to the dangers posed by the proliferation of built-to-rent communities, the traditional path to homeownership may become a relic of the past. It is crucial for policymakers, community leaders, and individuals to take a stand against the corporate distortion of the housing market.

Policy Interventions: Implementing policies that limit corporate ownership of single-family homes and encourage homeownership can help preserve the opportunity for future generations to own homes.

Community Advocacy: Local communities must advocate for affordable housing developments that prioritize homeownership over rental properties.

Public Awareness: Educating the public about the long-term economic impacts of renting versus owning can help individuals make informed decisions about their housing choices.

The American Dream of homeownership is under threat, but it is not too late to act. By recognizing the dangers of built-to-rent communities and taking decisive action, we can ensure that future generations have the opportunity to build wealth and achieve financial stability through homeownership.