The homes in Abbott Place, a half-built neighborhood in the town of St. Hedwig, about 15 miles east of San Antonio, look like any others in South Texas: pickup trucks resting in the driveways, U.S. and Texas flags hanging from the porches, live oak saplings setting roots in the front yards.
Yet the neighborhood represents a relatively new concept for the local housing market. These new homes — ranging from three to four-bedrooms — are not for sale. Instead, Canadian company Tricon Residential built them as rental properties.
Twenty homes are now available for rent in the neighborhood, according to Tricon’s website, each with granite countertops, a two-car garage, a professionally maintained yard and access to a community pool. The rents range from $1,969 to $2,439 a month.
This is what the housing industry calls a build-to-rent community, often abbreviated as BTR. Almost unheard-of a decade ago, such neighborhoods are now proliferating in Bexar County and other regions of the U.S. as developers cater to individuals and families who desire a suburban lifestyle but cannot afford to buy a home in an era of high prices and climbing mortgage interest rates.
Before 2019, San Antonio had only a “handful” of build-to-rent communities, Embrey research consultant Jeanette Rice wrote in a recent report. Four years later, there are 15 such communities in the local market with a total of 3,107 homes. Another six are under construction, expected to add a further 1,515 homes by the end of 2024.
Embrey, a San Antonio-based development firm that has long specialized in developing traditional apartment complexes, is now working on three build-to-rent communities across Texas, said Jeremy Williams, the firm’s senior vice president of development. Two are under construction now: the Collection at Gruene, in New Braunfels, and Collection Champions Circle in Fort Worth.
The firm recently announced that it had bought 27 acres along State Highway 46 in Boerne for a third community, named Collection at Boerne. Much like Embrey’s apartment complexes, it will feature amenities such as a clubhouse, a fitness center, dog parks and a pool, Williams said.
Those living in Embrey’s build-to-rent homes — which average roughly 1,000 to 1,100 square feet — won’t have to worry about taking care of their yards because the firm will do it for them, he said. High-speed Wi-Fi will be waiting for them when they move in.
“There’s a peace of mind for the resident, that they’re not having to take care of anything on the property,” he said.
Embrey began considering an expansion into build-to-rent about four years ago, Williams said. It offers a way for the firm to diversify its portfolio, he said.
“When we launched this, it was during the COVID pandemic,” he said. “One of the benefits is this semi-privacy, where you don’t have to walk past 30 or 40 doors in a hallway to get to your unit. You don’t have people living above you, or below you, and you don’t share a common wall. So you have this sense of peace and quiet. You have your own yard, lots of light.”
Embrey has a “big board” of build-to-rent projects in the pipeline, he said. Over the next year and a half, he expects the firm to move forward on another six to eight projects.
Spreading across the local market
Tricon, a publicly traded company based in Toronto, has been active in the San Antonio housing market since at least 2014, using shell companies to buy single-family homes and convert them into rentals. This has been another growing trend in the local market: Along with Tricon, other companies ranging from Austin-based Amherst Residential to the Japanese family conglomerate Yamasa Corp. have been buying local homes as rental properties.
As of the end of March, Tricon had at least part ownership of 1,296 single-family homes in the local market, according to public filings.
Like other single-family rental companies, Tricon has lately expanded into the build-to-rent sector. In other words, rather than buying existing homes here and there to rent out, it is building entire neighborhoods of rental homes.
In 2019, the company entered a $450 million joint venture with the Arizona State Retirement System to develop build-to-rent communities, according to its website. Two years later, it announced plans to build 23 such communities in the Sun Belt.
Along with Abbott Place, its website lists one other community in the San Antonio market: Trails at Culebra, near Alamo Ranch on the far West Side. A Tricon spokesperson didn’t respond to an email requesting comment.
Tricon and Embrey are hardly alone. Several other companies have lately jumped into the local build-to-rent sector.
Preston Hollow Community Capital, a Dallas investment firm, is constructing a 492-home community named Los Cielos at Brooks, the redeveloped former Brooks Air Force Base, according to a press release.
This would be the first build-to-rent community constructed within Loop 410, according to the report by Rice. Across the U.S., the communities tend to be built in “farther-out suburban areas,” she said in the report. In San Antonio, that includes the far Northwest Side, the far West Side and the Interstate 35 corridor.
Several build-to-rent communities are in the works as part of giant master-planned developments under construction along that corridor. Last year, Southstar Communities started building a 1,900-acre development in New Braunfels, with an untold portion of its 6,000 residential units set to be single-family rentals.
The I-35 corridor “has strong access to a number of different employment cores. You can have households that split-commute going to Hays County or Bexar County or Travis County,” said Cameron Pawelek, a principal at Austin-based RCLCO Real Estate Consulting who has studied the build-to-rent industry. “You have slightly lower cost of land, which makes these uses a little bit more supportable. Then you have a very large presence of family households.”
According to RCLCO’s research, between 3,700 and 3,800 build-to-rent units have either been built or are under construction in the San Antonio metro area, Pawalek said.
Though that number is rising, it still represents a small portion of the total local housing stock, he said — only about 0.4 or 0.5 percent.
Homeownership out of reach
Over the last decade — between March 2013 and the same month this year — the median price of a home in the San Antonio-New Braunfels metro area nearly doubled, rising from $159,900 to $310,000, according to the Texas Real Estate Research Center at Texas A&M University.
Meanwhile, interest rates for a 30-year fixed-rate mortgage skyrocketed from 3.42% in May 2013 to 6.39% this week. And higher interest rates mean higher mortgage payments.
It has become quite a bit harder, then, for the average person to afford a home in San Antonio over the last decade. This has pushed more people into renting, Rice said in an interview — a trend that has helped fuel the growth of build-to-rent communities.
Also, the work-from-home trend, arising from the COVID-19 pandemic, has driven some Americans to look for places to live that offer more space, she said. A single-family home with a yard might appeal more to them than an apartment with a balcony.
“People are renting longer, for all sorts of reasons, the cost of housing being the most obvious,” she said. “It’s harder to buy a home, so people are renting longer, and they need more space. That’s kind of the general framework.”
Yet some tenants are renters by choice, Williams said. They might not want to deal with the responsibility of maintaining a home, for example.
“We’ve seen the demographic skew toward more people becoming renters by choice,” he said. “The millennials, the younger generation, are seeing ownership as not really a requirement. As I was growing up, in my parents’ eyes and mine, buying and owning a home was the ideal thing to do. That’s not necessarily the kid coming out of college — their perception today is really different than mine was.”
Those tenants might want “to get the features of a home without owning a home,” he said.
Pawelek pointed to the Villages of Briggs Ranch, which began leasing in 2013 on the far West Side, as likely being among the first of the recent wave of build-to-rent communities. Belcara Luxury Townhomes, built in 2014 near the USAA headquarters, “is clearly a BFR project,” he said in an email.
Over the last six months, home prices in the San Antonio-New Braunfels metro area haven’t been rising at the blistering pace of 2021 and 2022.
In March, the local median actually declined by 1.4% compared to a year earlier. The number of listings that month was 9,189, more than double from two years earlier, which means a more accessible marketplace for aspiring homebuyers.
Rice said she doesn’t think the recent slack in the market will hurt the build-to-rent industry. Home prices are still very expensive by historical standards, she pointed out.
“Demand for multifamily today, very broadly, is not as strong as, let’s say, 2021, when it was through the roof, and early 2022. It’s moderated back to more normal levels,” she said. “That’s probably slowed the lease-up a bit, but it’s nothing dramatic. There’s still really strong demand for apartments in general, and strong demand for build-to-rent.”
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