The trend of constructing more built-for-rent single-family homes in the U.S. is gaining momentum, with a 20% increase in construction during the first quarter of 2024 compared to the same period in 2023. This surge is attributed, in part, to the housing affordability crisis, which is forcing many individuals to opt for renting instead of buying a home. As mortgage rates rise and the cost of homeownership becomes more prohibitive, renting is becoming a more viable option for a growing number of Americans.
Data analyzed by the National Association of Home Builders and the National Association of Realtors reveals a significant shift in housing trends. The share of single-family built-for-rent starts has doubled in just two years, growing from 5% in 2021 to 10% in 2023. This shift is indicative of the increasing demand for rental properties among individuals who are unable to afford homes in today’s expensive and competitive housing market.
Builders are observing a notable increase in renters in their 30s and 40s, as young adults and middle-aged individuals are turning to built-for-rent properties due to affordability constraints. With mortgage rates hovering around 7%, many potential buyers are finding it challenging to meet the high monthly mortgage payments, leading them to explore renting as a more feasible option. The appeal of living in a detached single-family home is prompting many renters to choose built-for-rent properties as a desirable alternative to traditional homeownership.
While the typical asking rent price for single-family homes is on the rise, it is still a more affordable option compared to purchasing a home with a mortgage. Rent prices for single-family homes saw a 4.7% increase from the previous year, while multifamily building rents increased by 2.6% during the same period. Additionally, renters need to consider hidden costs associated with homeownership, including maintenance, repairs, taxes, and insurance, which are not factored into a mortgage payment.
As more individuals contemplate renting single-family homes, it is crucial to assess their financial situation and future needs. Understanding the true cost of renting a single-family home, including additional expenses beyond rent, is essential for making an informed decision. Prospective renters should inquire about property upkeep responsibilities, such as yard work, to ensure clarity on who is responsible for maintaining the property.
The rising popularity of built-for-rent single-family homes in the U.S. reflects a changing real estate landscape shaped by the housing affordability crisis. As more individuals explore renting as a viable housing option, understanding the financial implications and practical considerations associated with renting a single-family home is crucial for making informed decisions about housing choices.