Built-to-Rent communities are having their day in the sun throughout the U.S. Sunbelt and beyond.
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Anyone prepared to argue there’s really nothing new under the sun in the U.S. housing market hasn’t glimpsed RentCafe’s annual Build-to-Rent Construction Report, out just last week. The niche comprised of single-family houses built expressly to be rented has established its fifth straight yearly record, with more residences than ever being constructed.
Approximately 27,500 build-to-rent (BTR) houses were completed last year, a number 75% greater than 2022. Sunbelt metros in the South, Southwest and Southeast saw the greatest construction, and accounted for almost one-third of all units built last year.
Even more striking, 41% of all BTR homes, or about 68,000 homes, were constructed in just the last half decade. The explosive growth of the market, especially in the last three years, is evident in the following figures. In 2015, 3,771 BTR homes were built. That number grew to 6,434 in 2016, 9,978 in 2021, 15,691 in 2022 and 27,495 last year. Another 45,000 BTR homes are currently under construction.
In sizing up the numbers, RentCafe observed that the Covid-19 pandemic’s impact should not be underestimated. In the years before Covid turned our worlds upside down, an average 6,600 BTR houses were constructed annually nationwide. Once the pandemic fanned the desire to live in a house with a private backyard, even if it had to be rented rather than purchased, the numbers skyrocketed into the five-figure range, leading to 2023’s blowout results, which were three times the number built in 2021.
Sunbelt sensation
The largest number of new BTR homes last year were constructed in the Phoenix metro area, where more than 4,000 units were completed. Dallas came in second with almost 2,700 and Atlanta was third with approximately 1,980. Austin and Charlotte, with 840 and 714 respectively, were the next metros on the list.
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While BTR is concentrated in the Sunbelt, the phenomenon is by no means limited to that region. Detroit came in sixth on last year’s list, with 651 completed, followed by fellow Midwestern markets Kansas City, Mo. with 636 BTR homes finished in 2023, and Columbus with 625 homes completed.
Kansas City’s numbers were particularly remarkable, given that the year before it completed more than 600 BTR houses, the metro tallied just 80 completed in 2022.
The leading emerging metros for BTR homes are found in Florida and North Carolina. The North Port and Lakeland markets were the new markets with the greatest activity within the Sunshine State. In North Carolina, Raleigh is a fresh new BTR market, while in Georgia it is Savannah and in Michigan, Ann Arbor.
In Alabama, the dramatic growth of jobs and residents in Huntsville has supercharged the production of BTR houses. The metro had a total of 262 units, and is now readying another 2,500.
In fact, Huntsville is topped only by Phoenix, Dallas and Houston among the metros with the most BTR homes under construction. At the opposite end of the spectrum, Denver, Sacramento, Riverside and Minneapolis bring up the bottom of the top 20, each of them with fewer than 1,000 BTR units under construction.
Glimpse ahead
RentCafe reports most of the 45,400 BTR homes currently being constructed will open their doors next year. After that, the pace of new completions is likely to moderate, the nationwide apartment listing service observed.
A number of other observers are in agreement.
BTR as a sector is facing many of the same headwinds the rest of the home building industry confronts, with persistently elevated interest rates and inflated construction expenses near the top. Still, most envision a bright future for BTR, especially given Millennials’ desire for home ownership, even if it comes with a monthly rent payment rather than a mortgage expense.