93,000 Build-to-Rent Homes Completed in 2023

New York, NY, May 14, 2024-"Developers are building new houses for rent at an unprecedented rate, aiming to capitalize on the steep home prices and higher mortgage rates that are forcing many Americans to keep renting,” reports the Wall Street Journal. 

“In 2023, 93,000 new single-family homes for rent were completed, according to estimates from housing consulting firm John Burns Research and Consulting. That was 39% more rental homes than in 2022, and the most in any year ever. The breakneck pace is poised to continue this year before easing by 2025.

“New rental homes come in all shapes and sizes, from one-bedroom cottages to five-bedroom spreads with big backyards. Some are townhomes, others are detached houses. They are sprouting up especially in outer-ring suburbs of Arizona, Texas and Florida cities, and in other places with fast population and job growth. 

“While rent growth has slowed from its double-digit-percentage pandemic peaks, rents for houses are still trending higher than those for apartments, according to JBRC. Occupancy, which has been slipping in multifamily buildings, has also been more resilient in the rental-house sector, indicating more sustained demand.

“Rental builders are betting that the lowest level of home affordability since the 1980s means that even relatively affluent Americans will remain renters, squeezed by near record home prices, mortgage rates above 7% and other rising home-related costs. A large number of people also simply prefer to rent a house, builders say.

“In Paso Robles, Calif., real-estate developer STG Capital Partners is building more than 200 two- and three-bedroom rental duplexes. Monthly rents will range from $3,000 to $3,700, while the median home price in the Northern California town is about $700,000. 

“‘We’re comfortable with that market because there haven’t been any large projects built there in years,’ said Rand Sperry, STG’s managing partner.

“After last year’s record levels, another 99,000 new rental homes are under construction this year. Plans for new projects have slowed, however, as lending conditions have tightened. Many homes that are in the planning stages won’t get built because of the lender pullback that is also undermining multifamily construction, analysts and builders said.”