As homeownership becomes increasingly elusive, Wall Street is reshaping the housing market by investing billions in build-to-rent communities. These single-family rental neighborhoods are rising as an alternative to traditional homeownership, particularly in Sunbelt states, where demand for affordable living is surging.

A Solution for a Housing Shortage or a Missed Opportunity?

The U.S. housing market faces a crisis of affordability, with mortgage rates hovering near 7% and home prices at record highs. For many Americans, renting has become the only viable option. According to Redfin, the number of renter households has outpaced homeowners for the first time in two years, growing at three times the rate of new homeowner households in Q3 2023.

In response, institutional investors like AvalonBay Communities, Blackstone, and Invitation Homes have poured billions into the build-to-rent (BTR) market. This sector, where developers create entire neighborhoods of single-family homes for lease, now accounts for 10% of all single-family housing starts. “We’re at the early stages of what could be a transformational asset class,” said Matt Birenbaum, Chief Investment Officer at AvalonBay, which recently expanded its BTR portfolio in Austin, Texas.

These developments appeal to middle-class families seeking the lifestyle of homeownership—spacious homes, backyards, and quality schools—without the financial strain of buying. Communities like AvalonBay’s Bee Cave neighborhood near Austin feature high-end amenities such as pools, gyms, and terracotta-roofed homes, offering a suburban experience tailored for renters.

Why Investors Are Betting Big

Daniel Kaufman of Kaufman Development sees tremendous potential in the BTR townhome sector, particularly for addressing the “missing middle” housing gap. “Build-to-rent offers an innovative solution to our housing crisis. It provides families with high-quality living options while delivering attractive returns for investors,” Kaufman explains.

Through projects under Kaufman Development and partnerships with platforms like Mission10K and Elevation Development , Kaufman emphasizes that BTR developments meet growing demand while contributing to long-term market stability. “This is about creating value—not just for tenants but for entire communities and investors alike,” he adds.

The Sunbelt’s Role as a Hotspot

The Sunbelt region, with its affordability, job growth, and available land, has become the epicenter of BTR activity. Markets like Austin, Raleigh-Durham, and Tampa are seeing a surge in these developments, attracting workers and families seeking more bang for their buck. Kaufman points to these areas as prime opportunities for investors looking to capitalize on a fast-growing market.

The Downsides of Institutional Involvement

However, the rise of institutional landlords raises questions about equity and market dynamics. Critics, including housing officials, warn of higher eviction rates and the diversion of new housing supply from ownership to rental markets. Moody’s Economic Research notes that in the Sunbelt, much-needed housing supply is being absorbed by BTR developments instead of entering the for-sale market.

Daniel Kaufman acknowledges these concerns but stresses the importance of balance. “We’re not competing with traditional homebuyers. Our focus is on meeting the demand for rental housing without cannibalizing the ownership market,” he explains.

What’s Next?

As the gap between renting and owning widens, build-to-rent communities offer a practical, if imperfect, solution to the nation’s housing challenges. For real estate developers and investors, the sector presents an opportunity to generate strong returns while addressing a critical societal need.

To learn more about Kaufman Development’s projects and strategies, visit Mission10K, Elevation Development , or Kaufman Development.

Wall Street’s bet on rentals may not solve the housing crisis entirely, but it’s reshaping the market—and creating new opportunities for those ready to adapt.