In the face of a deepening affordable housing crisis, the construction of built-to-rent (BTR) homes has surged, with a record-breaking 93,000 single-family rental homes completed in 2023, marking a 39% increase from the previous year. This trend emerges as housing affordability hits its lowest point since the 1980s, compelling a significant portion of Americans to remain renters.

The Wall Street Journal highlights that the BTR sector’s growth is set to continue, with an additional 99,000 homes currently under construction in 2024. However, experts anticipate a slowdown in this rapid expansion by 2025.

BTR homes are gaining popularity in the suburban fringes of rapidly growing cities in Arizona, Texas, and Florida. Despite a deceleration from the pandemic’s peak rent increases, single-family home rents are still outstripping those of apartments. John Burns Research and Consulting notes that occupancy rates for single-family rentals are proving more robust than those for apartment complexes, signaling a persistent demand.

A case in point is Paso Robles, California, where median home prices are around $700,000. Here, STG Capital Partners is developing 200 two- and three-bedroom rental duplexes, with rents projected between $3,000 and $3,700 per month.

Builders are optimistic about markets with a dearth of rental options, and even in areas with ample rental properties, BTR homes maintain high occupancy levels. Developers are drawing in tenants with incentives like a free month’s rent when necessary.

Investor interest in the BTR market is also on the rise. For instance, Heitman, a Chicago-based asset manager, has initiated a $235 million venture with Crescent Communities to erect new rental homes across North Carolina, Texas, and Tennessee, further underscoring the sector’s robust investment appeal.