The rise in remote work, Millennials’ growing space needs, and the deteriorating housing affordability and availability have created the perfect storm for the development of the housing market’s latest trend: Build-to-rent homes are having their best year yet.
After a 75% year-over-year increase, a total of 27,500 homes for rent were completed in 2023. And it doesn’t seem like it’s going to stop any time soon: According to a recent RentCafe study based on Yardi Matrix data, around 45,400 build-to-rent houses are currently under construction, with developers in a hurry to meet increasing demand in a sector that took off in the years following the pandemic.
In 2023, completed single-family homes for rent almost tripled compared to 2021. Up until the pandemic, the number of houses for rent hovered around 4,000 and then 6,000, but by 2023 it had increased exponentially.
Current market factors like dwindling inventory of homes for sale, high mortgage rates, and even higher home prices mean that many potential homebuyers have to defer their homeownership dreams and continue renting.
Despite these harsh market conditions, it was the pandemic that really jumpstarted the race to build more communities offering single-family homes for rent. Having a more spacious home and a backyard made all the difference during those difficult years.
However, nowadays it's not only about the work-from-home crowd. Young people who want to start a family or upsize for any other reason are increasingly priced out of the housing market: Being able to buy a home is hindered by student loans, high mortgage rates, and unaffordable home prices. If we add job insecurity and financial instability to the mix, it's no wonder homebuyers have a hard time. This is why single-family homes for rent make increasingly more sense: They offer the space, amenities and sense of community that people need, without the mental burden of a mortgage rate.
Single-family Rentals Reach 10-year Highs in 14 of the 20 Largest Metros
With each year setting a new record for single-family rental completions, 2023 was no different and actually increased the standards by quite a lot. What's even more surprising is that, of the historically high 27,500 new houses for rent, more than half are in the top 20 largest U.S. metros.
And even among these metros that already stand out, new single-family homes for rent in Phoenix reached a number that is higher than total completions in entire states, not to mention metro areas: The more than 4,000 houses for rent coming online in 2023 put the Arizona metro in a league of its own. This number represents a 10-year high and an impressive 164% growth compared to 2022. RentCafe's Alexandra Both underlined some of the reasons behind the metro's impressive numbers:
"Phoenix is blessed with the opportunity of building out, rather than up (like in major coastal locations), so this desert city continues leveraging the popularity of build-to-rent homes. Plus, the area is also one of the fastest growing in the country when it comes to population, which also helps new communities fill up before their official openings."
Next in line, but following at a considerable distance is Dallas. The 2,700 new single-family homes for rent in Dallas, all completed in 2023 represent more than half the completed houses for rent in Texas.
Atlanta rounds out the podium: Renters looking for roomier, single-family rentals in Atlanta have nearly 2,000 new units to choose from as of 2023. Together with Phoenix and Dallas, Atlanta is the only other metro where more than 1,000 new single-family homes for rent came online in 2023. There are nine more metros where 500 to 1,000 houses for rent became available for renters in the area, many of them recording 10-year highs.
Zooming out to state level, there were five states that stood out: Texas (4,800 units), Arizona (4,000 units), Florida (2,800 units), Georgia (2,181 units) and South Carolina (1,909 units) were the top five states for build-to-rent activity in 2023. Pushed both by the need for more space and renters' postponing homeownership, this growing trend of moving into more spacious single-family homes for rent might be here to stay.
Point2, a division of Yardi Systems Inc., covers real estate trends and news. Point2 studies are based on internal data, public records, governmental sources, online research and other reliable third-party agencies.
