It’s a growing trend across the Midwest: Developers are bringing build-to-rent homes to communities across the region. And according to a recent report from Northmarq, the Minneapolis-St. Paul market is one area that developers are targeting for build-to-rent communities.
Build-to-rent homes are a combination of rental properties and traditional single-family homes. These homes look like single-family homes. They usually come with their own garages and front and backyard spaces.
But people don’t buy these homes. They rent them, as if they were apartment units.
Proponents of this housing type say that build-to-rent homes combine the best of both apartment and single-family homes. Residents get the extra space, backyards and garages that come with single-family homes. But they don’t have to apply for a mortgage.
These residences have grown in popularity as mortgage interest rates have risen and single-family housing prices have soared. It’s not surprising, then, that developers are building more of these properties.
In its report, Northmarq says that the Minneapolis-St. Paul region features the strong employment growth and high-wage earners that the developers of build-to-rent communities seek. Since 2015, the Twin Cities region has added about 115,000 net new jobs, with a strong healthcare sector accounting for about half of these gains, Northmarq reported.
Developers, then, are bringing more of these homes to the Twin Cities market. Northmarq reported that in recent years, developers have delivered nearly two dozen single-family build-to-rent projects totaling around 1,600 units to the Minneapolis-St. Paul market.
These developers are shifting toward providing denser unit mixes, with townhouse properties accounting for a greater share of new construction. Northmarq reported that three build-to-rent townhouse properties were delivered in the Twin Cities market in 2023. These properties totaled about 450 units.
Those build-to-rent units that have come online have been concentrated in two main areas:
- Maple Grove has the most existing build-to-rent projects, with nearly 500 units located in Hennepin County
- Woodbury has the second-largest inventory of build-to-rent assets with about 300 units. An additional 180 build-to-rent units are expected to deliver in the Woodbury market in 2024.
Renting these homes isn’t cheap, though. Northmarq reported that build-to-rent properties in the Twin Cities market charge an average of nearly $3,100 in rent each month. This is far higher than the average of $1,895 in rent charged by Class-A apartment units in the Minneapolis-St. Paul market.
