New Hampshire is largely missing out on a new housing trend that’s starting to spread across much of the nation. 

Institutional investors are increasingly eyeing so-called “build-to-rent,” or BTR projects that focus on construction of smaller single-family homes that are rented out to tenants, rather than sold off to individual owners.  

BTRs are usually grouped together in communities with amenities that include pools, walking paths, playgrounds and other features intended to make the surroundings feel like cozy neighborhoods. 

According to a recent report by CBRE, BTRs – whose popularity have soared over the past five years amid a home-affordability crisis across the county – now make up anywhere from 2 percent to 5 percent of all single-family homes built in the U.S.  

“I think it’s a fantastic idea,” say Matt Mayberry, chief executive of the New Hampshire Home Builders Association. “It fits a real market need.” 

With BTR homes ranging in size from 1,500 to 2,000 square feet, each community usually has 50 or more units on a site, sometimes with six to 12 units per acre, according to CBRE. 

“We need all forms of housing in New Hampshire,” said Chris Norwood, president of NAI Norwood Group in Portsmouth and a member of the board of directors at the New Hampshire Housing Finance Authority, also known as New Hampshire Housing. “We need to think of a variety of options moving forward. And I think build-to-rent can be one of those housing options.”  

There’s only one problem: The same challenges that have stymied home construction in the past in New Hampshire are blocking the prospects of BTR projects getting underway in New Hampshire. 

Density Needed, Stymied by Laws 

The main culprits preventing widespread construction of new homes are the same local zoning restrictions and high costs of land and home construction that have hobbled all other forms of housing development in New Hampshire. 

“Build-to-rent is a phenomenon that requires low barriers to entry – and we’re not exactly known as a low-barrier state in New Hampshire,” said Norwood. 

A key to BTR single-family projects is density – or the ability to build as many smaller dwellings as feasible on a particular site. Even if you’re building single-family homes and townhouses, and not apartments, it can help spread the project’s costs over a larger number of renters or buyers. 

High-density housing is an important component of affordability for all types of housing, not just BTRs, industry experts interviewed for this story stressed. 

As a result, there’s a Senate bill now before lawmakers in Concord that addresses the density issue in New Hampshire. 

Today, some towns require anywhere from 2- to 5-acre lots to build just one single-family home.  

But SB84 would reduce those lot restrictions to between half an acre to 1.5 acres, said NHHBA’s Mayberry. 

Meanwhile, another bill at the State House would temporarily suspend for four years the current land-use-change tax that can add hundreds of thousands of dollars to a housing project’s costs. 

“They’re kind of like penalty taxes,” Mayberry said of land-use-change costs. 

The goal of both bills, Mayberry said, is to promote more new housing at more affordable prices. 

Northeast a No-Go for BTR Firms 

Jeff Kottmeier, a senior vice president at John Burns Research and Consulting, a real estate advisory firm, said other Northeast states are facing the same high-barrier challenges as New Hampshire. 

As a result, most BTR developments are occurring in states where land is less expensive and building restrictions are far less onerous, such as in Texas, Florida and other Sun Belt states. 

“You can make BTR projects work better in other parts of the country,” he said. 

Not that it’s impossible to build BTR communities in New Hampshire and other parts of New England. 

John Burns Research defines the Highfield Commons in Rochester as a BTR community, with 96 “townhome-style” units rented out to tenants.  

Highfield Commons was built in 2016 and is currently owned by Elm Grove Companies. According to the Highfield Commons website, available three-bedroom, 1,525-square-foot units are renting for $2,750 a month. 

A spokeswoman for Elm Grove said executives at the firm were unavailable for comment. 

In Massachusetts, a handful of BTR projects have recently been constructed in the towns of Norwell and Lancaster and Worcester, the state’s second-largest city. There are also some BTRs near Hartford, Connecticut, Kottmeier said. 

But national BTR developers and investors generally avoid the Northeast due to all the high-barrier challenges facing housing projects in the region, Kottmeier said. 

Developers also prefer to have several BTR communities located relatively close together so they can share, and thus reduce, their operational and maintenance costs, Kottmeier said. 

In all, John Burns Research tracks about 1,893 active BTR communities across the U.S., with a total of 256,800 rental units. John Burns only counts BTR communities with 25 or more units. 

Counting all build-to-rent projects, CBRE estimates there are about 350,000 BTR units across the country.  

Dover Development Echoes Concept 

According to CBRE and others, BTR single-family homes tend to attract tenants who want a little more privacy, living space and outdoor amenities than traditional multifamily apartment buildings.  

Among others, the units are popular with Millennial couples looking to save money to eventually buy homes, according to CBRE. 

In recent years, New Hampshire officials have stressed the need to build more “workforce housing,” or smaller and more affordable dwellings for people making middle- or working-class incomes in New Hampshire. 

Indeed, John and Maggie Randolph have attracted much media attention in recent years for building 44 “tiny” homes in Dover, each in the 540-square-foot range, that they rent out to tenants who work at their assisted-living operations in New Hampshire, as well as to members of the general public. 

Technically, the “Cottages at Back River Road” are not BTR dwellings. The Dover cottages are considerably smaller than typical build-to-rent homes and they include rent caps to keep the units affordable.  

But John Randolph, CEO of GSD Communities, said the concept of smaller homes is starting to catch on in general – whether they’re considered tiny homes, workforce housing or BTR units. 

“There’s a lot of interest today in going small,” Randolph said. 

Norwood, of NAI Norwood, agreed that building smaller living units — whether they’re single-family homes, townhouses or rental apartments — is part of the solution to easing New Hampshire’s housing crisis. 

But he said it all comes down to costs – the cost of land; the cost of building a utility infrastructure for projects; and the cost of labor and building materials for homes. 

“It’s all part of the housing riddle we face,” he said.