Between 2005 and 2019, the share of single-family homes under construction built expressly for renting rose from 1.9% to 4.5% as the build-to-rent business model slowly gained momentum. Then came the easy-money era during the pandemic, with cash-flush institutional firms looking for ways to deploy capital. By 2023, build-to-rent made up 9.3% of single-family housing starts.
While build-to-rent (BTR) single-family home development still represents a small share of all single-family homes being constructed, more BTR communities continue to pop up across the country.
To find out which markets are at the front of the pack for single-family build-to-rent development, LendingOne analyzed the latest data.
Our key findings:
- Build-to-rent is still a growing asset class.
- Markets in the Sun Belt are driving the bulk of new development.
- Phoenix and Dallas are the epicenters of the build-to-rent boom.
Build-to-rent investors want to develop in markets where rental demand will remain strong in the long term, seeking high-growth markets with favorable demographics. Younger generations tend to be the primary demographic for single-family rentals, as many would like to live in a single-family home, but are currently priced out of the purchase market.
Some Midwestern markets like Columbus are starting to ramp up BTR development.
That said, Sun Belt markets like Phoenix, Atlanta, Orlando, and Southwest Florida are still the big go-tos for BTR developers, due to robust single-family housing demand, sufficient land availability for community development, and their long-term rental outlooks.
While high interest rates have made investors weary over the past couple of years, there is still significant interest in the build-to-rent market.
Look no further than single-family landlord giant AMH (American Homes 4 Rent), which back in 2017 formed its own in-house homebuilder to focus on build-to-rent. Of AMH’s nearly 60,000 single-family rentals, 10,000 are build-to-rent units developed from scratch by its in-house homebuilding team. AMH is now the nation’s 39th largest builder and has another 10,000 units in its build-to-rent pipeline
Big Picture: Investor interest in the build-to-rent space remains substantial despite higher interest rates. Build-to-rent single-family rentals continue to pop up across the nation—particularly in the Sun Belt, where the long-term outlook for single-family rentals is strong and there’s room for development.