Build-to-rent communities growing across US as home prices remain high
What are the long-term projections for the growth of the build-to-rent sector according to industry analysts?
According to industry analysts, the build-to-rent sector is expected to continue its growth in the coming years. The sector has been flourishing, with a noticeable uptick in both interest and investment. According to a report from the Urban Land Institute, the build-to-rent segment represented a substantial portion of all new home constructions, signaling a shift away from traditional home buying. Moreover, investment in this sector has skyrocketed, with real estate investors allocating more funds to build-to-rent multifamily projects.
Several factors are driving this demand, and they can be categorized into renter demand drivers and investor demand drivers. Renter demand drivers include favorable millennial demographics, the high cost of homeownership, the need for financial flexibility, the shift towards remote work, and the appeal of less dense neighborhoods. Investor demand drivers include outsized rent growth & low vacancy rates, strong net absorption & lower resident turnover, and the diverse set of consumers that BTR properties appeal to5.
The build-to-rent market is currently experiencing a supply challenge. Currently, the market sees only 40,000 new built-for-rent homes annually. Unless this pace accelerates, there could be a significant supply shortfall by 2030, with only about 16.2 million homes available to meet this burgeoning demand. However, as long as a shortage of for-home sales exists, experts see a bright future for the nascent build-to-rent industry4.
How many build-to-rent residential homes were completed in 2023, and what percentage increase does this represent from the previous year?
In 2023, an estimated 97,000 build-to-rent residential homes were completed, which is a 45% increase from the previous year.
What are the main reasons build-to-rent communities are becoming a popular choice among Americans?
Build-to-rent communities are gaining popularity among Americans due to several reasons:
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Affordability: Rising home prices and economic factors have made homeownership unattainable for many. Build-to-rent communities offer an alternative, providing the benefits of a single-family home without the need for a down payment or mortgage.
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Flexibility: Renting in a build-to-rent community allows residents to avoid the long-term commitment of homeownership. This is particularly appealing to millennials and Gen Z consumers who enjoy the flexibility and stress-free living that comes with renting.
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Community and Amenities: These communities often come with amenities such as swimming pools, fitness centers, and communal lounges. They also foster a sense of community through organized social events and networking opportunities.
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Maintenance-free Living: Property management companies handle maintenance and repairs, allowing residents to focus on enjoying their homes without worrying about upkeep.
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Space and Privacy: Build-to-rent homes often offer more space and privacy compared to traditional apartments, making them ideal for families or individuals looking for a more comfortable living arrangement.
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Investor Appeal: On the investment side, build-to-rent properties offer stable and predictable income, potential for long-term appreciation, and high demand from renters. They also provide exit optionality, allowing investors to sell individual units or the entire property.
In summary, build-to-rent communities cater to the changing economic conditions and lifestyle preferences of U.S. residents, providing an attractive alternative to traditional homeownership.