March 17, 2024
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Thousands of new homes have gone up in metro Phoenix during the past few years that homebuyers can't purchase.
Thousands of new homes have gone up in metro Phoenix during the past few years that homebuyers can't purchase.
But the new houses are for rent, and many people are opting for them over apartments.
Called single-family rentals, the Valley is considered "the birthplace" of houses that typically are just like homes built to sell. More houses are under construction in the Phoenix area than anywhere else in the U.S., and more have been built.
And the houses that rent for more than the typical apartment are drawing different tenants than apartments.
"It's simplified living," said Phil DiMartino, who moved from Southern California to a one-bedroom in the build-to-rent community called The Village at Camelback Park in west Phoenix last October. "It has a neighborhood feel that you don't get when you rent an apartment."
He worked at movie and TV studios in the Los Angeles area but was injured and moved to Phoenix to be closer to his daughter, who is attending Arizona State University.
Most single-family rental communities are gated and have security cameras, detached homes, community centers and small yards for each rental.
"Phoenix is really the birthplace for build-to-rent homes," said Trevor Koskovich, president of commercial real estate and research firm Northmarq. "Why Phoenix? Affordable land."
Also, the area's growth in residents means more renters. That demand has drawn more developers to build-to-rent projects, including big home builders that typically sell houses to buyers.
What's behind the boom in build-to-rent houses?
More than 8,000 build-to-rent houses are under construction in the Phoenix area now. That's more than any other city, according to Northmarq.
Dallas, Houston, Atlanta and Charlotte are the other U.S. cities ranking for the most construction of rental houses.
The Valley now has more than 17,000 single-family rentals in 100 developments.
The homes go up within bigger planned communities as well as on their own land with no other developments.
The Valley's median rent for single-family rental houses is $2,435, according to real estate research firm CoreLogic.
The median apartment rent in metro Phoenix is $1,670, according to real estate data provider Yardi Matrix.
Both single-family and apartment rents soared in the Valley during the first few years of the pandemic but have dipped slightly during the past year.
Metro Phoenix rents fell 5%: Here's where costs for tenants are down the most
Those higher rents drew more developers for rental houses and investors buying the communities.
Dale Phillips of Stellar Residential, the property management firm for DiMartino's complex, said rents at Empire Group's 15 Valley build-to-rent communities range from $1,800 for a one-bedroom to $2,700 for a three-bedroom home.
Empire, which developed The Village at Camelback Park, just opened two new developments: Village at Paseo de Luces in Tolleson and Village at Schnepf Farms in Queen Creek.
Part of the reason development is still going strong for these rental houses is they don't require an assured water supply. But a bill is moving through the Legislature that could change that exemption.
Who's leasing houses built just to rent?
On-site maintenance, security systems, close parking, more privacy and a yard are top draws for single-family house renters, according to Yardi Matrix, the real estate data provider.
About half of tenants leasing build-to-rent houses work from home part of the time, and renters between the ages of 24 and 40 who make $60,000 to $70,000 a year are driving the overall growth in new development of the houses, according to Yardi Matrix.
In 2020, when Empire opened its first build-to-rent community in the West Valley retirement community Pebble Creek, its research showed that the typical renters would be 65-plus women or retired couples, Phillips said.
But the community drew many single women 35 and younger. The larger, three-bedroom homes drew couples who weren't retired, downsizing to the rentals after selling homes.
In 2023, Empire's Valley single-family rentals began drawing more families with children, probably because they couldn't find starter homes they could afford, he said.
A benefit for developers is renters typically stay in the houses longer than apartments, according to multifamily analysts.
Pet doors are a big draw for tenants of build-to-rent homes. National research shows that 40% of renters now have pets.
DiMartino, who can walk to Walmart and the spring training ballpark Camelback Ranch from his home, said the houses' doggie doors and the dog park give it a neighborhood feel because residents get to know each other.
Build-to-rent communities have drawn criticism from housing advocates who say builders are taking advantage of a bad situation instead of working to alleviate it.
Arizona's housing shortage, elevated home prices and high interest rates have shut the door on homeownership for many potential buyers. The development of for-purchase homes rather than rental homes could push prices down and make homeownership possible for more people. Instead, developers are building houses that funnel wealth to rental owners and managers, not families.
But DiMartino said he can afford a rental more easily in Arizona than California and is happy not to have the upkeep and maintenance that comes with owning.
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