Built to Rent Will Put a Cramp in Homes for Sale

Realtors and Lenders face a new problem creating more scarcity. I have closed 1500 new construction loans over the past 20 years, but my builder clients are now building rental units instead of for-sale units.

A building boom is underway across the country in communities designed for renters, according to a new report by Point2Homes.

A total of 110,727 single-family homes are in the construction pipeline in “built-to-rent” communities, the listing portal reported this week based on data provided by its sister company Yardi Matrix.

These units are in various stages of construction or have been permitted, according to Point2Homes. Once completed, the total inventory in the 613 communities nationwide will increase by more than 50%, the company said.   

Yardi Matrix defines built-to-rent communities as professionally managed communities where at least half the units don’t share walls with other units or, alternatively, do share walls but have no neighbors living below or above them, or have a direct-access garage.

Among states, Texas has the most units in the pipeline at 21,812 homes, while Arizona and Florida each have nearly 14,000.

Among cities, Phoenix has the most single-family homes under construction at 13,113. Other cities with a large pipeline of homes include Dallas (8,470 units), Atlanta (6,885 units), Charlotte, North Carolina (5,368) and Austin, Texas (4,313).

Many states are expected to have eye-popping gains in the overall stock of homes in built-to-rent communities.

Nebraska, for example, is projected to have a 255% gain, Point2Homes reported. The stock of homes is expected to more than double in Rhode Island, Delaware, New Hampshire and North Carolina, among other states.

Younger people especially are renting in these communities as an alternative to paying high prices and elevated mortgage rates for starter homes, said Doug Ressler, a senior analyst with Yardi Matrix.

On average, renting a built-to-rent unit is “cheaper than buying a starter home,” Ressler said, noting it can save around $1,000 per month.