Build-to-Rent Construction Rates Tripled in 2022 and Hit Record Completions

The build-to-rent industry has gone to town by constructing their own, according to Yardi’s RentCafe. The completion volume jumped from 9,928 in 2021 to 2022’s 14,500 houses. The company pointed to long-term pandemic effects, including social distancing and work-from-home, as “the wind in the sails of this new trend.” Or wind in the sales.

But other factors are also at work. House prices in many areas remain at historical highs. National average mortgage rates are at 7.12%, according to BankRate.com. And while household incomes advanced some, they have not kept up with inflation. Additionally, pandemic savings have fallen, credit card use is at historical highs, and institutional investors have been actively picking up the more affordable units for single-family rental. These factors have left many consumers forming families unable to purchase a home but still needing additional space and amenities than apartments offer.

While BTR completions had grown since 2013 but then hovered in the low-to-mid 6000s, 2020 saw swift growth, with completions in 2020 hitting a then-record 7,469 and then growing in 2021 and 2022. According to RentCafe’s analysis of Yardi data, occupancy rates for BTR houses are 97%, above the 95% level for apartments.

A current 44,700 units under construction suggest that 2023 has the chance to be another banner year, though that will depend on supply chains and financing. Although a debt ceiling deal, if it clears Congress, will create a little more stability, it will also drive shorter-term interest rates up without the Federal Reserve taking action because the Treasury will pull in an estimated $1 trillion or more in capital, causing a liquidity problem in credit markets.

Over time, properties have become “larger or denser, with about 130 units on each property.” In addition, individual unit sizes have grown 2.6% between 2021 and 2022, reaching 1,361 square feet.

Dallas had the most single-family rentals completed in 2022 at 2,773. The rest of the top 10 metro areas for completions were Phoenix, AZ (1,527); Atlanta, GA (808); Greenville, SC (584); Charlotte, NC (475); Detroit, MI (458); Myrtle Beach, SC (383); Panama City, FL (357); Charleston, SC (354); and Austin, TX (324). All but two of the cities—Phoenix and Detroit—saw 10-year highs.

Detroit is an exception in another way, as it is the only metropolitan area listed that isn’t in the south or southeast.

Looking beyond 2022 to the last five years, Phoenix has had the most BTR construction, with 6,071 deliveries. Dallas came second with 3,955. Third, fourth, and fifth were Detroit (2,229), Houston (1,875), and Atlanta (1,452).