Build-to-Rent: A Growing Trend Amidst America's Housing Crisis

The United States is experiencing a significant housing affordability crisis, with a projected housing shortfall exceeding 4 million units by 2025.

In response, a growing trend of "build-to-rent" housing is emerging as a potential solution. These are new single-family homes constructed specifically for rental.

The Rise of Build-to-Rent

This niche market is expanding rapidly. About 7% of new single-family houses entering the market are now built for rent, representing a more than tenfold increase in completions in 2024 compared to a decade prior. Firms like NexMetro specialize in these developments, with notable growth observed in regions such as the Sun Belt, Ohio, and Utah.

Who Are the Tenants?

Initially, developers anticipated attracting former homeowners facing foreclosure. However, the primary residents are often young professionals, many of whom are pet owners, along with older individuals. These tenants frequently seek the lifestyle of a single-family home without the immediate commitment or responsibilities of ownership, viewing it as a lifestyle choice.

Contributing to Affordability

Advocates contend that build-to-rent homes contribute to overall housing affordability by increasing the total housing supply. This can help stabilize or reduce costs for both renters and potential homebuyers. The median U.S. household income is currently insufficient to afford a typical home, which requires an annual income of approximately $110,000. Increased housing supply, whether for rent or sale, is deemed crucial to prevent further price escalation, especially if more buyers enter the market due to factors like fluctuating mortgage rates.

Redefining the American Dream

While homeownership has traditionally been a central aspect of the American dream and a primary method of wealth building, recent surveys indicate evolving perspectives.

A study of single-family renters found that only 8% defined the American dream as homeownership.

Furthermore, the U.S. had approximately 800,000 fewer single-family rental houses in 2024 compared to a decade prior, partly due to investors selling rental properties to homebuyers.

Renting's Financial and Lifestyle Appeal

Financially, renting is often more affordable than owning in the country's 100 largest metropolitan areas. Renters can also build wealth by investing the money saved on housing costs. Many renters also value the convenience of not being responsible for home maintenance and repairs.

Community Acceptance

Build-to-rent developments can also help mitigate local opposition (often termed "not in my backyard" or NIMBYism) sometimes faced by apartment constructions. Because build-to-rent homes are typically stand-alone, single-story, and often smaller, they are frequently perceived as less disruptive to existing neighborhood aesthetics than multi-story apartment complexes.