The Quiet ‘Build-to-Rent’ Boom

It’s easy to get caught up in the doom and gloom surrounding new-home construction, but if you glance to the horizon, you’ll probably see workers desperately attempting to keep up with demand in the build-to-rent market.

As the broader economy weakens, it’s difficult to ignore the dynamics driving a build-to-rent sector that frequently operates in the shadows of the much bigger housing market. Current demographics favor renting because many buyers are priced out of the housing market and there is a significant undersupply of rental apartments.
According to Zonda, the build-to-rent sector would supply 13,981 units in 2022, an 81% increase from 7,724 in 2021.
That’s not to say the sector won’t confront significant hurdles as the country approaches a retraction like most other corporate sectors. After all, build-to-rent builders are still builders who must spend the same money on commodities whose prices have risen due to supply chain disruptions. Inflation is also raising the cost of every facet of construction, from nails to salaries.
One principle remains: If you can build it, you can rent it
If you can build it, you can rent it.
Builders are succeeding with high-end rentals, cottages, townhomes, single-family detached homes, horizontal apartments, 55-plus communities, and even “motel type” offers across the country. The good news for the for-sale market is that many of those moving into these freshly painted rental properties aren’t staying.
The most common reason renters choose to rent is that they cannot find a location they like enough to make a permanent purchase. Another typical response is that they live in rentals until they marry and establish a family. In other words, rentals do not appear to reduce new-home sales.
Most of these people are renters by choice, and the desire to possess home is the primary reason they break their leases. Today’s renters will become owners tomorrow.