{"id":172114,"date":"2024-05-22T14:58:59","date_gmt":"2024-05-22T20:58:59","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=172114"},"modified":"2024-05-22T15:05:25","modified_gmt":"2024-05-22T21:05:25","slug":"real-estate-investors-built-single-family-rentals-at-record-rates-in-2023","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/real-estate-investors-built-single-family-rentals-at-record-rates-in-2023","title":{"rendered":"Investors Are Putting Their Money in Build-to-Rent Homes at a Record Rate\u2014What’s Causing the Frenzy?"},"content":{"rendered":"\n

Investors are building single-family rental properties at an unprecedented rate, catering to a growing segment of renters seeking more space without the commitment of buying a home or the budget constraints of a high mortgage payment. A record-high 27,500 build-to-rent homes were completed in 2023, almost triple the number of completions from two years prior, according to an analysis of Yardi Matrix data from <\/span>RentCafe<\/span><\/a>.<\/span><\/p>\n\n\n\n

Starter homes are in short supply. In many areas of the country, entry-level homes listed below the area median home price are scarce. Even where these smaller, no-frills homes are on the market, they might not be affordable to the typical family due to a combination of stubbornly high home prices and high mortgage rates. <\/span><\/p>\n\n\n\n

First-time homebuyers have <\/span>come up with<\/span> several solutions to the <\/span>affordability<\/span><\/a> crisis, including <\/span>co-buying homes with their friends<\/span><\/a> and <\/span>living with their parents<\/span><\/a> to save for a down payment. Some are also settling for less square footage and shared walls, which has led to a boom in new <\/span>construction of <\/span>townhomes<\/span><\/a> or using the <\/span>house hacking<\/span><\/a> investment strategy to offset mortgage costs.<\/span> <\/span><\/p>\n\n\n\n

But for other millennials, finding a single-family home with plenty of bedrooms and a backyard in a neighborhood with good schools is still a top priority\u2014even if it means they <\/span>have to<\/span> rent there. And some <\/span>remote workers<\/span><\/a> who prefer the amenities of a single-family home are choosing to rent for the freedom it provides. Therefore, demand for single-family rental homes has drawn interest from institutional investors and fueled a massive increase in the construction of homes intended for rent. <\/span><\/p>\n\n\n\n

More Rental Homes on the Way<\/span><\/h2>\n\n\n\n

Build-to-rent housing completions have rapidly increased since 2020, when only about 7,700 single-family rental homes <\/span>were completed<\/span>. The trend will continue over the next couple of years, as more than <\/span>45,400 rental properties<\/span><\/a> are currently under construction, most of which will be available for rent in 2025. <\/span>RentCafe anticipates moderation in new rental property construction in the coming years<\/span>, however<\/span>.<\/span> <\/span><\/p>\n\n\n\n

In some cases, investors build single-family rental homes within communities <\/span>that have<\/span> a mix of renters and owners. But there\u2019s also been a rise in the construction of single-family rental communities. <\/span>These planned <\/span>build-to-rent communities<\/span><\/a> are neighborhoods of single-family homes, sometimes including <\/span>multifamily<\/span><\/a> units as well<\/span>, all<\/span> of <\/span>which<\/span> share a common property manager and may feature community amenities such as outdoor spaces and fitness centers.<\/span> <\/span><\/p>\n\n\n\n

Build-to-rent housing draws interest from renters who not only want more space, but also the newest home features. About 41% of the country\u2019s build-to-rent houses were constructed within the last five years. A build-to-rent neighborhood holds similar appeal to a newly constructed for-sale development while often requiring a lower housing payment and allowing renters the freedom to move on without the hassle of selling. <\/span><\/p>\n\n\n\n

Investors and developers have noticed the growing demand for these communities, and institutional investment in the asset class <\/span>is poised<\/span> for growth<\/span>, according to a report from <\/span>Cushman and Wakefield<\/span><\/a>.<\/span> <\/span>For example<\/span>, over the last few years<\/span>, Blackstone has poured <\/span>over $9.5 billion<\/span><\/a> cash into single-family rental property investment.<\/span> <\/span><\/p>\n\n\n\n

Metro Areas with the Most Build-to-Rent Activity<\/span><\/h2>\n\n\n\n

In<\/span> 14 of the top 20 major metro areas for build-to-rent housing<\/span>, the number of completed units reached a 10-year peak<\/span>.<\/span> <\/span><\/p>\n\n\n\n

In 2023, Phoenix stood out as a hotbed for build-to-rent activity, with more than 4,000 units completed. That\u2019s a 164% year-over-year increase in newly built rental properties. <\/span>The<\/span> city has a growing population and plenty of land for expansion<\/span>, according to <\/span>RentCafe<\/span><\/a>.<\/span> In some <\/span>high-demand coastal cities<\/span>, limited space for development has prevented the build-to-rent movement from taking hold. <\/span><\/p>\n\n\n\n

In Dallas, almost 2,700 rental homes <\/span>were finished<\/span> in 2023, and Atlanta followed behind with <\/span>almost<\/span> 2,000 build-to-rent completions. Those three cities also saw the highest numbers of build-to-rent housing completed over the last five years, with a rapidly increasing availability of single-family rental properties <\/span>when<\/span> compared to 2018. <\/span>For example, <\/span>there were<\/span> only about 500 build-to-rent units available in Atlanta as of 2018.<\/span> By 2023, that number increased to over 4,000. <\/span><\/p>\n\n\n\n

The top five states for completed build-to-rent homes in 2023 were all in the Sunbelt:<\/span><\/p>\n\n\n\n