An uncertain future
Ressler said. They provide a way to bring in households across different income brackets. The faster a community can grow, the sooner amenities such as grocery stores, restaurants and service providers can come in. And that improves its appeal.
Build-to-rent homes also offer builders a way to keep their crews and contractors busy when the for-sale market slows, reducing some of the cyclicality associated with home construction.
Supporters of build-torent argue the communities offer households priced out of the purchase market an alternative.
Detractors argue that institutional money helped drive up home prices by purchasing so many singlefamily homes after the housing crash. Now investors are soaking up resources for new for-sale home construction. Given lower land costs and greater availability, most large build-to-rent communities are locating on the periphery, raising worries about sprawl.
And while it has seen a surge of interest, the economic fundamentals of build-to-rent have become much more challenging.
Developers are tweaking their strategies or returning to the table with an entirely different game plan, he said.
Lewis, who estimates some of his projects have seen their holding costs double from PRE-COVID levels, is in that camp of developers struggling to make the math work.
“The overall cost as of now has made build-to-rent prohibitive,” he said, adding that he likely couldn’t replicate Dominic Row in today’s environment.
Land costs have gone up, as have material and labor costs. Interest rates are way higher, and so are property taxes and insurance costs. Projects take much longer to win approval adding a year or two of expensive dead time. A project Lewis has in the works in Arvada is in jeopardy after the city doubled its water and sewer tap fees from $25,000 to $54,000. At the same time, rent increases have gone flat in metro Denver, reflecting a large supply of new apartments hitting the market and slower migration from other states. Higher development costs can’t pass through via higher rents as easily as in the past.