Toll Brothers is embarking on a new business model that
may, depending on your outlook, increase the rental stock, provide new
opportunities for home builders, or further diminish new home sale inventories.
The company has committed to invest $60 million in a $400
million venture that will build homes for rent in seven major U.S. cities.
And it isn’t just Toll
Brothers and its partner in the venture, BB Living that see a build-to-rent
market. According to John McManus,
writing in Builder, a number of companies are already producing some of their
new homes specifically for rent although most are doing so to supply stock to single-family
property management companies. These companies provide services to the big
private asset management companies that bought up thousands of foreclosed
single-family houses during the financial crisis. Recently Clayton Homes revealed it is piloting build-for-rent home communities
within its huge market area. Clayton is the nation’s 15th largest
site-builder and its largest producer of manufactured homes.
During the recovery the
high-end apartment market took off, showing a demand from those who could
afford to buy but preferred to rent. McManus
says, “Renting by choice, one of the past decade’s “stealth” macro
consumer and housing preference trends, has shown the kind of staying power and
scalability that’s got all the big single-family for-sale home builders abuzz
about the strategic opportunities ahead.”
Toll chairman and CEO Doug
Yearley told McManus that his company and BB Living would expand their model
from BB’s current base in Phoenix to Las Vegas, Denver, Jacksonville, Florida;
Dallas, Houston, and Boise. The project
will be branded with the BB Living name.
The current plan is to
build primarily in masterplanned communities that have a wide variety of price points and products and to build new
single-families and townhomes that look much the same as what other builders
have constructed for sale.
McManus points out that masterplanned
communities have increasingly been allocating community tracts specifically for
single-family rentals, and some actually integrate for-sale and for-rent new
properties in the same neighborhoods.
Even though finished vacant lots are scarce and land prices are high and
regulation-laden everywhere, suburban masterplanned communities offer a
lower-cost alternative to urban and infill land expense.
is targeting primarily younger families that fall into two categories; those
that face economic hurdles that have put homeownership beyond their means, at least
temporarily and those who could buy but opt for the flexibility and “less
strings attached” lifestyle of renting.