More single-family built-for-rent homes are being constructed in the United States

According to the National Association of Home Builders, more single-family houses are being built in the United States for rent, which analysts attribute partly to the housing affordability dilemma.

“When mortgage rates rise, and it becomes more difficult to buy a home, renting becomes a more attractive option,” said Robert Dietz, chief economist of the NAHB.

According to NAHB, construction began on about 18,000 single-family, built-for-rent homes in the first quarter of 2024, a 20% increase over the first quarter of 2023, based on data from the U.S. Census Bureau’s Quarterly Starts and Completions by Purpose and Design.

“People need a place to live, and they have a choice,” said Molly Boesel, principal economist at CoreLogic, a real estate data company.

“And if they can’t find what they need in the for-sale market, they’re going to go to the rental market,” she said.

‘We see this expanding move.’

Single-family built-for-rent starts increased to 10% of total housing in 2023 from 5% in 2021, nearly doubling in two years, according to the National Association of Realtors, which reviewed data from the U.S. Census Bureau’s Survey of Construction Data.

The National Association of Realtors stated that single-family built-for-rent starts increased to 90,000 units in 2023, up from 81,000 in 2022.

“We are seeing a growing trend of built-for-rent properties in the United States,” said NAR’s deputy chief economist Jessica Lautz.

The increasing number of built-for-rent single-family houses is in response to demand from “people who can’t afford today’s very expensive, out-of-reach housing market,” according to Lautz.

According to the Mortgage Bankers Association’s Purchase Applications Payment Index, homebuyer affordability fell in April. According to Dietz of the NAHB, builders see “an expansion” in renters in their 30s and 40s.

Young folks are interested in built-for-rent “as a growing share who can’t afford to purchase a home today,” according to Lautz.

“They have no choice but to look into rental properties,” Lautz remarked.

With a scarcity of properties for sale, “potential buyers either can’t find what they’re looking for or it’s too expensive,” Boesel stated.

And, with mortgage rates still hovering around 7%, monthly mortgage payments are rather high, “keeping a lot of potential buyers in rentals.”

“And if they’re at the stage of life where they would rather be in a single-family home, a detached single-family home is going to be the next best thing,” she told me.