By Adam Graham
August 31, 2023
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This report explores the growth, demand, and future of build-to-rent housing. We also speak to top experts to get their insights.
Build-to-rent (BTR) homes are among the strongest and fastest-growing real estate sectors. However, a housing downturn this year will likely affect the progress of BTR housing units that we’ve seen in recent years before bouncing back in 2024.
BTR homes and communities give those who seek the suburban, single-family home life the opportunity to live in the conditions they want but have limited funds to get on the property ladder. However, the popularity of these homes stretches beyond just avoiding current mortgage rates.
We spoke to top experts in the home construction industry to get their insights and take on BTR in 2023, why the demand is continually increasing, and what to expect moving forward.
BTR home construction rate is higher than you think
The NAHB estimated that 69,000 BTR homes began construction in 2022. However, this does not consider a large portion of the sector. As Robert Dietz, SVP and Chief Economist at NAHB, points out, “The estimates exclude homes that are sold to another party for rental purposes, which NAHB estimates may represent another five percent or higher of single-family starts”. Fixr.com, therefore, predicts the total number of BTR homes constructed in 2022 to be roughly 119,250, much higher than many sources claim.
Following these same calculations, and taking into account that in 2020 and 2021, the NAHB estimated around 3% to 4% of the total of newly-constructed single-family homes were sold to other parties for rental purposes, and in 2018 and 2019, around 2%, we predict BTR home construction to have approximately doubled in the last five years.
Looking at recent figures, there was an increase of 27,805 more built-to-rent starts in 2022 than in 2021.
Construction experts confirm growth
Of the 52 home construction experts in the field, we asked whether or not they have received more requests for BTR projects in recent years. The results speak for themselves, as 58% responded yes. This majority further highlights the ongoing increase in popularity of this real estate area.
A momentary drop in pace in 2023
However, this upward trend is likely to dip in 2023. The Census provisional data for the first quarter of 2023 suggests that numbers for single-family home starts will be lower than any other quarter in the previous three years.
According to Hunter Housing Economics, the slowdown of BTR housing starts already began at the end of 2022 due to costs of capital and concerns about the economy. They expect to see a gradual recovery throughout 2023 and estimate a rise again in 2024/25 due to predicted heightened demand.
According to data from RentCafe, we can see that Phoenix (Arizona) has seen tenants move into 6071 rental properties in the last five years, jumping from 2168 units in 2017 to 8239 in 2022. Yet percentage-wise, the largest increase can be seen in Charlotte (North Carolina), which has seen a mighty 621% growth.
Out of the top 20, the top 5 metro areas with the most BTR units over the past five years are all in southern states (Texas and Georgia) except for one, Detroit in Michigan.
Build-to-Rent Is Built to Stay
Continued strains on people’s economic situation mean that BTR homes and communities are an attractive prospect for many. Avoiding maintenance, homeowner fees, and mortgage payments, on top of being able to live in the suburbs in a single-family home without having to pay a costly deposit, is driving this sector forward, especially among the youngest generations.
Koskovich claims, “This segment of the market is here to stay, it will continue to expand and evolve, and we expect it to be the fastest-growing residential sector in the U.S. in the year ahead.”
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