The National Association of Home Builders reports that there is a significant increase in the construction of single-family homes built for rent in the U.S. This rise is a direct response to the housing affordability crisis that is currently impacting many individuals. According to experts such as Robert Dietz, the chief economist at the NAHB, factors such as higher mortgage rates are making it more challenging for individuals to purchase homes, leading them to consider renting instead.
In the first quarter of 2024, construction began on approximately 18,000 single-family, built-for-rent homes. This represents a 20% increase compared to the same period in 2023. The demand for these types of properties is growing as more individuals find themselves unable to afford the expensive housing market. Molly Boesel, a principal economist at CoreLogic, highlights that when people cannot find what they need in the for-sale market, they turn to the rental market, driving the surge in construction.
The share of all housing starts represented by single-family built-for-rent homes has grown from 5% in 2021 to 10% in 2023, almost doubling in just two years. The National Association of Realtors reports that in 2023, there were 90,000 units of single-family built-for-rent homes, up from 81,000 units in 2022. This shift in trends emphasizes the increasing preference for rental properties over homeownership due to affordability constraints.
There is a noticeable uptick in renters within the 30s and 40s age group, as highlighted by NAHB’s Dietz. Young adults are particularly interested in built-for-rent properties since they are unable to afford purchasing a home in today’s market. Jessica Lautz, the deputy chief economist at the NAR, emphasizes that individuals in this demographic have no alternative but to turn to rental properties. This transition is also attributed to the shortage of homes for sale and high mortgage rates, which are deterring potential buyers.
Financial Considerations
The typical asking rent for a single-family home was $2,262 in May, marking a 4.7% increase from the previous year. In comparison, the rent for a multifamily building was $1,896 in the same period, indicating a 2.6% uptick. Additionally, the national median mortgage payment applied for by purchase applicants saw a 6.8% increase from the previous year. These financial factors play a significant role in driving individuals towards built-for-rent single-family homes.
Responsibilities as a Renter
As people navigate their options, it is crucial to consider the true costs and responsibilities associated with renting a single-family home. Factors such as maintenance, repairs, taxes, and insurance are often hidden costs that need to be factored into the overall budget. Understanding the upkeep responsibilities, both inside and outside the home, is essential. Individuals must also assess if the rental property aligns with their needs and future plans.
The rise of built-for-rent single-family homes in the U.S. is a direct response to the housing affordability crisis and changing market dynamics. As more individuals seek alternatives to homeownership, rental properties are becoming increasingly popular. Understanding the financial implications and responsibilities associated with renting is crucial for individuals considering this housing option. By carefully evaluating their needs and budget constraints, renters can make informed decisions that align with their long-term goals.