Housing affordability has plummeted to its lowest level since the 1980s, keeping many Americans in the rental market. As a result, some homebuilders have doubled down on the construction of built-to-rent (BTR) homes.
In 2023, a record 93,000 new single-family homes for rent were completed, up 39% from 2022, according to a report by The Wall Street Journal. The momentum is continuing as another 99,000 BTR homes are under construction in 2024, although the breakneck pace is expected to ease in 2025.
New rental homes are especially popular in the outer suburbs of cities in Arizona, Texas and Florida, as well as in other areas that are experiencing rapid population and job growth, the Journal reported.
Rent growth for single-family homes, although slowing from pandemic-era double-digit peaks, continues to outpace apartment rents, according to John Burns Research and Consulting. Occupancy rates remain more resilient in single-family homes compared to apartment buildings, indicating sustained demand.
In the city of Paso Robles, California, for instance, where the median home price hovers around $700,000, real estate developer STG Capital Partners is building 200 two- and three-bedroom rental duplexes, with monthly asking rents ranging from $3,000 to $3,700, the Journal reported.
Many builders feel bullish about places that are low on rental supply. But even in places with substantial rental supply, developers have been able to keep BTR homes mostly full. They have also enticed new tenants with concessions, such as a month of free rent, when needed.
Meanwhile, investors are flocking to the BTR sector. In another example cited by the Journal, Chicago-based asset manager Heitman launched a $235 million partnership with builder Crescent Communities to construct new rental homes across North Carolina, Texas and Tennessee.