The construction of new build-to-rent (BTR) homes hit a record in 2022, with more than 14,500 houses completed, according to a RentCafe analysis of Yardi Matrix data. This is a 47 percent increase in deliveries from 2021.
Now, approximately 44,700 BTR homes are under construction across America, triple the number of new homes completed in 2022. Prior to 2020, RentCafe notes, only about 6,000 BTR units were completed annually.
RentCafe cited data from the firm’s sister company, Yardi Matrix. The data includes properties defined as single-family homes for rent that are in build-to-rent, professionally managed communities covered by Yardi Matrix research. The study is based on data related to BTR communities comprising at least 50 units.
“In the wake of the 2008 housing crisis, the number of renter-occupied single-family houses in the United States increased by more than 2.5 million between 2009 and 2016, according to the U.S. Census Bureau,” comments Doug Ressler, manager of business intelligence at Yardi Matrix.
“Institutional SFR (single-family rental) growth remains focused on BTR product, as home sales have declined in recent months due to lack of inventory and rising mortgage rates,” continues Ressler. “Although home prices have remained surprisingly firm, the number of homes on the market for sale is less than half of what it was in the years before the pandemic.”
Development hotspots
According to the data, Dallas led the nation in BTR deliveries by a significant margin. Developers delivered 2,773 BTR units in the Dallas MSA in 2022, which is five times higher than the 500 units completed in 2021. Phoenix followed behind Dallas with 1,500 units delivered in 2022.
Atlanta rounded out the top three, with 808 units completed. Other metros that made the top 10 include: Greenville, South Carolina (584 units); Charlotte, North Carolina (475); Detroit (458); Myrtle Beach, South Carolina (383); Panama City, Florida (357); Charleston, South Carolina (354); and Austin, Texas (324). Notably, Detroit is the only metro to make the top 10 that is not located in the southern half of the United States.
Additionally, eight of the top 10 metros for BTR construction hit 10-year highs. Phoenix (which saw 9 percent fewer deliveries in 2022 than in 2021) and Detroit were the exceptions.
RentCafe’s analysis predicts the magnitude of BTR development in the South to amplify further as 2023 progresses. Phoenix tops the list, with approximately 5,500 BTR units under construction. Texas metros follow close behind, with 4,400 units underway in Dallas and 2,600 units underway in Houston. Atlanta comes in at fourth, with 2,200 units incoming. Charlotte rounds out the top five, with more than 1,700 units under construction.
“An undersupply of housing combined with increasing rates of households seeking rental housing has intensified demand,” explains Ressler. “That demand, rising mortgage rates and the removal of some tax incentives for homeownership portend continued housing cost inflation and longer rental household occupancy durations.”
The national occupancy rate for BTR units currently stands at 97 percent, which is above the 95 percent occupancy for apartment units.
RentCafe also analyzed trends in development to discern the top 20 metros for BTR completions in the last five years. The data indicated that the number of BTR units in Phoenix tripled from 2018 to 2022. This means that out of the 8,200 build-to-rent units currently available for rent in the Phoenix metro, 6,100 were built within the last five years.
Behind Phoenix is Dallas, where the number of new houses for rent more than doubled between 2018 and 2022 to a total of 7,800 single-family rentals.
Texas is the leading state when it comes to BTR development in the last five years, with four cities making their way onto the list. Houston comes in at fourth place (with 1,875 BTR units delivered between 2018 and 2022), Austin comes in at seventh (1,096 units) and San Antonio at eighth (1,001 units). Of these three, Austin saw the highest spike in single-family rentals added between 2018 and 2022, with an increase of 153 percent.
RentCafe attributes the growth in hubs such as Atlanta (1,452 units), Charlotte (1,148 units), Denver (888 units) and Salt Lake City (578 units) to factors such as job growth, tech talent migration and an ongoing work-from-home agenda fueling demand for more spacious rentals.
Other metros in RentCafe’s top 20 metros for build-to-rent completions in the last five years include Kansas City, Missouri; Indianapolis; Columbus, Ohio; and Des Moines, Indiana.
To read RentCafe’s analysis, click here. For Yardi Matrix’s May multifamily market report, click here.
— Channing Hamilton