A neighborhood of rental homes has opened in a fast-growing pocket of Southern California where developers say they can still afford to build.
Tricon Winchester will include 180 single-family rentals in Riverside County; 124 have opened, with half already leased to renters.
The development is part of real estate investor Blackstone's growing portfolio of residential holdings through Tricon, the owner, operator and developer behind the project. Woodbridge Pacific Group, a California builder, partnered with Tricon on the build-out.
Tricon Winchester is just the latest addition to the growing supply of build-to-rent homes. Tricon, for example, has about 5,500 such homes delivered or under development across the country.
Proponents of the industry have argued that it is one way to address the housing supply shortage, especially in places like California. But recently, build-to-rent properties have come under scrutiny from lawmakers who say these rentals can limit the supply of for-sale homes and exacerbate the nation's affordability crisis.
“From the beginning, our focus was on creating homes that residents would feel proud to live in," Andrew Murphy, president at Woodbridge, said in a statement on the opening of the Winchester project. "This site has long been vacant, giving us the opportunity to thoughtfully introduce new housing to the community."
The chance to live in a house without the burden of ownership
At completion, the Riverside development is expected to have 493 houses — 186 for sale and 307 for rent.
Houses will range in size from about 1,500 square feet to more than 1,800 square feet, with options for three or four bedrooms. Other features include attached two-car garages, fenced backyards, and smart home technology, including automatic thermostat control and keyless front doors. Prices range from $3,249 to $4,601 per month.
The neighborhood will also have an on-site elementary school set to open by the fall, and a regional park with a baseball field, basketball court, sports field, and children's playground, set to be available this summer.
Perhaps the biggest draw to the neighborhood, though, is the opportunity to live in a house and a neighborhood without bearing the burden of homeownership, according to Jesse Gundersheim, director of market analytics for CoStar.
Though home prices in the Inland Empire — the broader region encompassing Riverside and San Bernardino counties — have slipped in recent months, the area's median home price is still around $600,000, he told Homes.com News in an email. After a 20% down payment, that brings the monthly costs of ownership to about $3,500.
"Coming up with the 20% down, or even 10% of a home that costly can be a high hurdle to reach, and can act as a barrier to homeownership," he added. Build-to-rent "communities provide high-quality, resort-like housing to renters that can afford it, but don't want the burden of ownership, or are still saving for an eventual purchase."
To ease that burden even further, Tricon is offering six weeks of free rent and a half-price security deposit to residents who sign their lease before the end of the month.
Residents also have access to Tricon Vantage, a selection of financial resources including a credit builder program, financial coaching programs and a down payment assistance program offering eligible residents up to $5,000.
“In the Inland Empire, owning a home can cost roughly 40% more per month than renting a comparable home," Andrew Carmody, senior managing director at Tricon, said in a statement. "At Tricon Winchester, residents can enjoy a new, professionally managed home with a yard, garage, and modern finishes, while maintaining the financial flexibility that renting provides."
The Inland Empire is still affordable for builders in California
Winchester is Tricon's eighth build-to-rent development in California, and its fourth in the Inland Empire.
That level of development is somewhat rare in California, where land is expensive, if available at all, and where bureaucratic hurdles can make it hard to get projects approved. Taken together, those circumstances can weaken profit potential and deter builders and developers.
The Inland Empire, however, still has potential for the industry, according to Carmody.
"In Riverside and Winchester, we’re able to acquire land and develop this community at price points, both for sale and for rent, that are considerably more affordable than elsewhere in Orange County or Los Angeles."
More than that, the area's "growing population, good roadways and access to employment, good schools, and available neighborhood retail and services" make it a desirable spot for residents and developers alike.
In all, Tricon has added some 700 housing units to the region, but that hasn't done much to expand accessibility, Gundersheim said, noting that Tricon has expanded the market-rate rental building stock by less than 0.5%.
"Their communities developed in the Inland Empire have been well received and welcomed by incoming high-income residents," he added, "but there's not enough of them to significantly boost housing supply in the area or alleviate cost pressures."
Build-to-rent industry is under scrutiny in pending legislation
The completion of the first phase at Tricon Winchester comes as new legislation that could limit build-to-rent community growth is awaiting Congressional approval.
The 21st Century ROAD to Housing Act proposes several changes aimed at making homeownership more accessible and affordable — including policy that would put a 350-residence cap on the number of single-family homes institutional investors, like Blackstone, can own.
Build-to-rent properties, however, are at least partly excluded from that rule. The homes are considered exempt from the 350-cap, but the legislation would impose a seven-year limit on institutional ownership. In other words, the ROAD Act would allow investors to continue purchasing and operating build-to-rent communities, but after seven years of ownership, those operators would need to sell the property to an individual, non-institutional homebuyer.
Supporters of the bill have said the build-to-rent industry is taking homes away from would-be homebuyers, especially those looking to buy their first home.
Bigger-picture data from those who oppose regulations, though, paints a different picture. An analysis of Census data from the Urban Institute, a think tank in Washington, D.C., showed that institutional investors own just 3% of all single-family rentals, accounting for just 0.5% of the national housing stock.
The build-to-rent industry, too, has pushed back against the provision, with firms like Invitation Homes and AMH arguing that their rental properties add to the nation's housing stock and offer feasible alternatives to homeownership for buyers who are otherwise strained by housing costs.
Blackstone, too, suggests that it is "addressing the nation's housing shortage by adding permanent housing," according to its website. The investment firm says it has about 58,000 single-family rental homes and home sites, either under development or already completed.