HOUSTON – (By Dale King, Realty News Report) – With interest rates running high, and many folks short of cash for the down payment on a domicile of their very own, the build-to-rent (BTR) industry is churning out new single-family rental housing at a record-setting pace, says RentCafe’s just-released Build-to-Rent Construction Report.
Renters like the suburban BTR houses with backyards, a garage and neighborhood schools. And investors love the income projections of the BTR sector.
“Combine renter demand with interest from institutional investors and well-established builders and it’s safe to say we’re witnessing this niche at its historical peak,” says the firm’s analysis.
RentCafe reports the nation’s build-to-rent segment is setting a new record this year, as it has for the past four. In all, 45,500 BTRs are under construction in 2024. More than in any other year.
The report does predict “a slight moderation in the pace of deliveries in the years to come,” but for now the BTR section is hot.
The third edition of RentCafe’s Build-to-Rent report includes numbers indicative of explosive construction momentum. The document also places Houston – and the state of Texas as a whole — at the heart of the build-to-rent boom.
Here are just a few of the report’s highlights:
- Build-to-rent homes just had their most successful year on record. A total of 27,500 houses for rent were completed in 2023 — 75 percent more than the year before. Phoenix, Dallas and Atlanta are the top three metros for build-to-rent construction, accounting for nearly one-third of all units of this type added last year.
- The wave of build-to-rent projects peaks this year with close to 45,500 new houses under construction. The top five metros with the largest number of units being built — Phoenix, Dallas, Houston, Huntsville and Charlotte — account for half of that total volume.
- 41 percent of the total number of existing build-to-rent homes were constructed in the last five years. That’s about 68,000 rental residences. Most of the new BTR houses are in Texas, Florida and California.
- Texas was the leading state for build-to-rent development in 2023 with nearly 4,800 BTRs completed. The Dallas metro accounted for more than half of these units.
This momentum has led to more than 45,400 build-to-rent houses now under construction that are expected to welcome renters during the next couple of years, the report says.
Sunbelt Growth
The South, West and Midwest seem to have cornered the market for BTRs, at least according to last year’s figures. Phoenix is the reigning metro with 4,030 single-family homes for rent opening their doors in 2023, a 10-year high and a notable 164 percent growth compared to 2022.
Next, Dallas follows with roughly 2,700 rental homes built in 2023, a slight decrease compared to the year before, but still its second-best year for build-to-rent construction in a decade.
Then, the Atlanta region was third in the top 20 with almost 2,000 single-family homes-for-rent completed in 2023 for another 10-year high. Next up were Austin and Charlotte with 840 and 714 houses for rent, respectively.
The BTR sector surged in the Covid era, when some consumers wanted more space. Crowding into an elevator at a multi-story apartment tower was unappealing to many.
After 2022 marked a record year for build-to-rent development, 2023 exceeded expectations with close to 27,500 rental homes completed nationwide. And more than half of these homes are in the top 20 metros with the largest number of units added last year, 14 of which achieved 10-year highs.
Texas (4,800 units), Arizona (4,000 units), Florida (2,800 units), Georgia (2,181 units) and South Carolina (1,909 units) were the top five states for build-to-rent activity in 2023, says the report.
Houston is hardly a slouch when one considers this extensive array of construction. While it ranked 15th in the top 20 list in 2023 by delivering 488 new build-to-rent homes, it ranked Number 4 among communities offering the newest BTRs. The report says 2,402 houses just for renters were completed in the Space City in the past five years.
Some builders construct hybrids. BTR communities may include a blend of new single-family homes, duplexes, triplexes, upscale patio homes, townhomes and other rental dwellings.
Last month, Houston-based BTR builder Wan Bridge opened phase one of the Crystal View of Lago Mar in Texas City near Galveston. Wan Bridge CEO Ting Qiao, who formerly worked in the Asia’s housing business, said international investors are enthusiastic about BTR in the U.S.
Phoenix was again at the top of the list of BTRs built in the last five years, constructing more than 9,300 units. But Texas came along and placed four metros in the Top 20 newest homes starting with Dallas at Number 2 with more than 6,500 single-family homes-for-rent built in the last five years. That’s 62 percent of all BTRs in that metro.
Next were Houston at Number 4 with 2,400 units and Austin at Number 7 with 1,700 units. Not far behind was San Antonio, which came in ninth on the list with 1,300 houses for rent built between 2019 and 2023.
Texas Number One in BTR Construction
Texas earned another kudo this year. The Lone Star State is one the top metros with the most build-to-rent homes currently under construction.
Of course, Phoenix is Number 1 on that list, too, but Dallas ranks second with 6,481 BTRs being hammered and nailed in 2024. Houston places third with 4,836 homes now being built for renters. San Antonio has 1,886 in various phases of construction and Austin will add 1,851 this year.
It’s significant – and perhaps coincidental — that the build-to-rent construction trend began to soar five years ago. The RentCafe report makes note of this: “Clearly, construction activity picked up significantly in the post-pandemic era.”
The notion of constructing houses with the specific intent of marketing them to renters isn’t brand new. But when consumers, builders and investors are singing in unison, it’s no wonder BTR is setting construction records.
April 25, 2024 Realty News Report Copyright 2024
Photo credit: Wan Bridge (BTR home in Conroe, Texas)
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