Op-Ed: Rentals’ Importance in the American Housing Landscape Manifests in New Ways
By Michael Lucarelli June 25, 2024 3:15 pm
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In today’s rapidly evolving housing landscape, the rental market has become increasingly important for a multitude of well-reported reasons, and persistent affordability issues and changing lifestyle preferences will only intensify the trend.
The build-to-rent (BTR) housing market, in particular, is experiencing an unprecedented boom, with a record 27,500 single-family build-to-rent homes completed in 2023 — a 75 percent increase from the previous year, according to Rentcafe’s analysis of Yardi Matrix data.
Several factors contribute to this surge. One of the most significant is the rise of hybrid work models, which allow people to live away from their workplaces and seek homes that offer more space and amenities. Additionally, a growing number of millennials are reaching their prime homebuying age but are finding it difficult to afford homeownership. This trend is further fueled by strong interest from institutional investors and established builders, who see the potential for growth in this market segment.
Phoenix, Dallas and Atlanta have emerged as the top three metros for BTR construction, collectively accounting for nearly one-third of all units added last year. Phoenix led the pack with over 4,000 units completed, followed by Dallas with approximately 2,700 units, and Atlanta with nearly 2,000 units. Other significant markets include Austin and Charlotte, which rounded out the top five with 840 and 714 units completed, respectively.
While traditionally, the Southwestern United States has been a stronghold for BTR homes, this trend is now expanding nationwide. Florida is currently experiencing significant activity, with nearly 8,300 rental homes under construction, and California is also emerging as a key player with 2,400 units underway. This geographical diversification highlights the growing acceptance and demand across various markets.
Currently, more than 45,400 houses are under construction. Most of these new units are expected to be completed by next year, signaling a continuation of this growth seen in recent years. This construction boom is likely to moderate in pace, but the overall trajectory remains upward.
One of the key attractions of BTR homes tends to be high-quality amenities, as around 41 percent of all BTR homes have been built in the last five years. This modernity, combined with professional management and maintenance services, has made it an increasingly popular choice for a number of renters.
In addition to the leading metros, several other regions are seeing notable BTR activity. The Midwest, for example, has seen significant developments in Kansas City, Columbus, Akron and Indianapolis. In Texas, nearly 4,800 units were completed in 2023, the highest of any state. The Lone Star State’s metros, including Dallas, Houston, and Austin, are major contributors to this tally, reflecting the state’s overall population growth and economic growth.
All this growth in the build-to-rent space is not without challenges as the general focus on upscale and more expensive rental options in these communities doesn’t address the housing needs of lower-income families. However, the addition of new rental inventory is ultimately beneficial across the board, providing more options in a market that is chronically underserved.
The build-to-rent market is experiencing a historic peak, driven by demographic shifts, economic conditions and evolving lifestyle preferences. As more renters seek the benefits of single-family homes without the commitment of ownership, the BTR sector is likely to continue its growth, offering new opportunities and challenges in today’s evolving housing landscape.
Michael Lucarelli is the CEO and co-founder of RentSpree.
