The U.S. housing market is experiencing a surge in build-to-rent (BTR) homes, with a record-breaking number of approximately 27,500 BTR homes completed last year. This marks the fifth consecutive year of growth in the BTR niche, with construction primarily concentrated in Sunbelt metros in the South, Southwest, and Southeast regions. The market has seen exponential growth in recent years, with 41% of all BTR homes being constructed in the last five years.
The Covid-19 pandemic played a significant role in driving the demand for BTR homes, as more people sought out single-family houses with private backyards to rent rather than purchase. This shift in preferences led to a surge in BTR construction, surpassing the average of 6,600 homes built annually before the pandemic. The demand for BTR homes has been particularly high in Sunbelt metros such as Phoenix, Dallas, and Atlanta, with Phoenix leading the pack with over 4,000 new BTR units completed last year.
While Sunbelt metros dominate the BTR market, other regions such as the Midwest and Southeast are also seeing a significant increase in BTR construction. Emerging markets for BTR homes include North Port and Lakeland in Florida, Raleigh in North Carolina, and Savannah in Georgia. Cities like Detroit, Kansas City, and Columbus have also experienced notable growth in BTR construction, reflecting the nationwide trend of increased demand for rental homes.
Huntsville, Alabama, has emerged as a hotspot for BTR construction, fueled by job growth and population influx. The metro has seen a dramatic increase in BTR production, with 262 units completed and another 2,500 in the pipeline. Huntsville ranks among the top metros with the most BTR homes under construction, along with Phoenix, Dallas, and Houston. On the other end of the spectrum, cities like Denver, Sacramento, Riverside, and Minneapolis have fewer than 1,000 BTR units under construction.
Looking ahead, RentCafe predicts that most of the 45,400 BTR homes currently under construction will be completed next year, with the pace of new completions likely to slow down thereafter. Despite challenges such as high interest rates and construction costs, experts believe that the future looks promising for the BTR sector. Millennials, in particular, are driving the demand for BTR homes, as they seek homeownership without the commitment of a mortgage, opting instead for the flexibility of monthly rent payments. This demographic shift is expected to fuel continued growth in the BTR market in the years to come.