The National Association of Home Builders has reported a significant increase in the construction of built-for-rent single-family homes in the U.S. According to experts, this growth is strongly linked to the current housing affordability crisis, where escalating mortgage rates are making it increasingly difficult for individuals to purchase homes, pushing them towards the rental market. Data from the U.S. Census Bureau’s Quarterly Starts and Completions by Purpose and Design reveals a 20% surge in the construction of these homes in the first quarter of 2024 compared to the same period in 2023.
As the housing market becomes less accessible to many due to rising prices, people are turning to rented accommodation as a viable alternative. Molly Boesel, a principal economist at CoreLogic, emphasizes the importance of having a place to live and the choices individuals have to make in response to the challenges presented by the current market conditions. The share of single-family built-for-rent housing starts increased from 5% in 2021 to 10% in 2023, nearly doubling in just two years, highlighting the shifting preferences of potential homeowners towards rental properties.
Response to Affordability Challenges
The growth in the construction of built-for-rent single-family homes is a direct response to the demand from individuals who are unable to afford homes in the current expensive and unattainable market. Young adults, in particular, are showing interest in these rental properties, as they represent a more feasible option compared to purchasing a home. Jessica Lautz, deputy chief economist at the National Association of Realtors, acknowledges the trend towards built-for-rent properties and emphasizes the need to cater to those who cannot afford traditional homeownership.
Financial Considerations and Responsibilities
With the increasing scarcity of homes for sale and soaring mortgage rates, many potential buyers are left with no choice but to explore rental options. The typical asking rent for single-family homes has seen a 4.7% increase from the previous year, reaching $2,262 in May, according to Zillow. While multifamily building rents also rose, single-family home rents remained higher, indicating a growing demand for this type of accommodation. However, individuals considering single-family home rentals need to be aware of hidden costs such as maintenance, repairs, taxes, and insurance, which are not included in mortgage payments.
As the trend towards built-for-rent single-family homes continues to grow, prospective renters must carefully evaluate their budgets and responsibilities. Understanding the true expenses associated with renting a single-family home is crucial, and individuals should approach this decision with the same level of scrutiny as renting an apartment. Questions regarding property upkeep, such as yard work and other external maintenance, should be clarified with the property owner to avoid any misunderstandings in the future.
The rise of built-for-rent single-family homes represents a significant shift in the housing market, driven by the escalating challenges of affordability. As more individuals seek alternatives to traditional homeownership, the demand for rental properties, particularly single-family homes, is expected to increase. By understanding the financial implications and responsibilities associated with renting a single-family home, individuals can make informed decisions that align with their current circumstances and future needs.