The construction of built-for-rent single-family homes is on the rise in the United States, with the National Association of Home Builders attributing this trend to the housing affordability crisis. As mortgage rates increase and buying a home becomes more challenging, renting is becoming a more viable option for individuals. According to Robert Dietz, chief economist at the NAHB, construction of single-family built-for-rent homes increased by 20% in the first quarter of 2024 compared to the same period in 2023.
Molly Boesel, principal economist at CoreLogic, highlights the fact that people need a place to live and are now faced with the decision of whether to buy or rent. The lack of suitable options in the for-sale market is driving individuals towards the rental market, leading to a surge in the construction of single-family built-for-rent properties. This shift is evident in the data, with the share of built-for-rent housing starts growing from 5% in 2021 to 10% in 2023.
Jessica Lautz, deputy chief economist at the National Association of Realtors, notes a growing interest in built-for-rent properties among renters in their 30s and 40s who are unable to afford homes in the current market. Young adults, in particular, are turning to rental properties as they face challenges in purchasing a home. The affordability of homes has been on the decline, making rental properties a more feasible option for many individuals.
As the housing market continues to present affordability challenges, potential buyers are either unable to find suitable homes or are deterred by high prices and mortgage rates. With monthly mortgage payments remaining substantial, renting a single-family home has become an attractive alternative for many. The rental price for single-family homes has seen a steady increase, indicating a growing demand for such properties.
Potential renters need to carefully assess their financial situation and understand the true cost of renting a single-family home. In addition to the rent payment, renters should consider maintenance, repairs, taxes, and insurance costs that come with renting a property. It is essential to clarify responsibilities with the property owner, especially regarding the upkeep of the exterior of the property, such as yard work. Proper budgeting and consideration of future needs are crucial when opting for a single-family rental home.
The rise of built-for-rent single-family homes in the U.S. is a direct response to the challenges posed by the housing affordability crisis. With increasing demand from individuals unable to afford traditional homeownership, rental properties have emerged as a practical solution. Renters must carefully evaluate their financial capabilities and long-term plans before committing to a single-family home rental to ensure a sustainable and comfortable living arrangement.