In the lakeside community of Flowery Branch, Georgia, 45 miles northeast of Atlanta, a new neighborhood called Beacon Lake Lanier is taking shape. It’s the kind of spacious suburban space found on the periphery of many U.S. cities, with curving roads and about 200 three-, four- and five-bedroom houses, each with its own fenced backyard. It’s a picture of the American Dream, the kind of homes that people imagine buying and raising families in.
But when the first residents move in later this year, it’s not the American Dream they’ll be fulfilling, but a new American reality. The single-family homes at Beacon Lake Lanier are being built specifically for renters.
The single-family rental home is a rapidly growing piece of the rental housing market in the United States, and developers are beginning to notice. An analysis from last August by RCLCO Real Estate Advisors found that an estimated 6% of new single-family homes are purpose-built to rent in the United States, and add up to a total of around 15 million homes. Demographic trends, including the forming of families among the 24- to 39-year-old age group, means demand for these homes is expected to grow for the next decade.
“As millennials have moved well into the family formation years, there’s demand for a different type of product. And the ability to afford a for-sale home that provides more space isn’t available to everyone,” says Todd LaRue, managing director of RCLCO.
RangeWater, the developer of the homes in Flowery Branch, is making an aggressive entry into this growing market. With an $800 million investment, the company will be building 15 single-family rental neighborhoods just like Beacon Lake Lanier in suburban areas across the Sun Belt over the next 18 months. While most single-family rental homes are owned by mom-and-pop operators, bigger players like RangeWater and institutional investors are beginning to represent a bigger part of a relatively underexplored sector.
For RangeWater, it’s just an outgrowth of market demand the company is already seeing. Founded in 2006, the company owns and operates apartment complexes in 10 states, totaling more than 50,000 housing units. CEO Steven Shores says a growing number of residents in those apartment complexes are eager for more space, especially those in the Millennial age group.
“We’ve noticed that our demographic that has been our renter for the past 10 to 15 years, that although they like the rental lifestyle and they like living in a rental community, their needs have changed and they need more space,” Shores says.
What the company is offering is the experience of living in a house without the expensive downpayment and mortgage, and with the ability to lock in a lease for only a year or two. But Shores says that while the homes operate like rental properties, the company’s approach to neighborhood-scale development and management means they won’t necessarily look like rentals.
“On the surface, they’re not going to look too terribly different than a single-family home neighborhood, and that’s really by design,” Shores says. “We want them to feel very much like single-family neighborhoods.”
That might mean the typical signs of a suburban neighborhood—driveway car washing on the weekends, an evening grill session in the backyard—but don’t expect to see the neighbors mowing lawns, or neglecting to. Maintenance in the neighborhood, including front yard landscaping, is handled by RangeWater.
“In a traditional single-family neighborhood with a bunch of different owners people may have different ideas about how their lawns and their exteriors should look and whether they should plant flowers or not,” he says. “We’ll take care of all of that so there’ll be a consistency and a level of quality that we’ll maintain.”
The company will also take on the other more serious hallmarks of homeownership—the maintenance and repair of the houses themselves. “The ongoing maintenance of houses is not cheap and a lot of people just don’t like dealing with the hassle of broken water heaters or clogged pipes or leaky roofs or things like that,” Shores says.
One way the design of RangeWater’s single-family rental neighborhoods may differ from a typical homeowner neighborhood is the addition of apartment complex-style amenities. Shores says that will likely include pools, pavilions, and neighborhood clubhouses.
Beacon Lake Lanier is not the company’s first venture in the single-family rental neighborhood. RangeWater began testing the concept in 2019, with two built-to-rent townhouse communities in Atlanta and Boulder. Shores says the company sees huge potential for growth, and it’s not alone. In partnership with a single investor, which Shores isn’t able to name, the company has raised $250 million in funding that will help finance the roughly $800 million worth of single-family home neighborhoods RangeWater is now planning and building. “There’s a lot of money that is interested in being in this sector, and we have a number of long-term partners who have been interested in doing this,” Shores says.
He says further investments are likely, and expects single-family rentals to eventually make up about a quarter of the company’s business. But that doesn’t mean the end of apartments.
“We have been an apartment company forever and will continue to be,” he says. “But what I think single-family rental will become is an increasingly larger share of what we do.”
LaRue of RCLCO says there are some challenges to building these kinds of projects, including the cost of construction, the cost of land, and NIMBY (not in my back yard) opposition. “There are communities that are against this type of product because they just don’t understand it,” LaRue says. “So there are some of those things that could impact the sector’s growth.”
But he does expect it to grow, and for more institutional investors to get into the construction of these built-to-rent developments. “There’s a lot of capital going into this. And those demographic tailwinds are a big driver of it over the next 10 years,” LaRue says. “We expect it to continue.”