Economists' Outlook

Housing stats and analysis from NAR's research experts.

Built-for-Rent is a Growing Market Segment

There is good news to be celebrated in the new home sector. All measures, from new home sales to housing starts to building permits and housing completions, are up year-over-year. Given the dearth of housing inventory in the Existing-Home Sales sector, this is cause for celebration. Many current homeowners are unlikely to ditch their golden handcuffs of low-interest rate mortgages and may have some separation anxiety with moving. New home inventory helps to alleviate this problem. Additionally, another segment is growing within the housing starts sector: built-for-rent (BFR).

BFR is just that: the concept of new single-family home construction with the intent of renting. While there has been growth in new home sales and construction activity, there has also been growth in multi-family home construction. However, for some renters, an apartment may not be enough square footage. Just as many homeowners have felt the need for more space throughout the pandemic, the same is true for some renters. With this concept, a yard for a pet, a home office, and room for a new baby becomes more within reach.

In calculating data from the U.S. Census Bureau's Survey of Construction Data, one can see the one-year growth in BFR single-family housing starts from 60,000 units in 2021 to 81,000 units in 2022.

Bar graph: Built-for-Rent Single Family Housing Starts, 1974 to 2022

However, while the number of units rose, the share of all housing starts is an important number to watch. The share of BFR single-family homes grew from 5% in 2021 to 8% in 2022. Both the share of homes and the number of units are the largest collected since 1974 for this market segment.

Line graph: Share of Built-for-Rent Among All Single Family Housing Starts, 1974 to 2022

The data by region also showed notable one-year growth in BFR single-family homes in the Midwest from 5% to 12% of the market. The Northeast also saw a rise from 3% to 8%. While the increase in the South was more minor, from 6% to 8%, followed by the West, from 5% to 7%.

Line graph: Regional Share of Built-for-Rent Among All Single Family Housing Starts, 1999 to 2022

Millennials and first-time buyers have been sidelined in the last year from the buying market as interest rates and rising prices have closed the homeownership door for many. First-time buyers dropped to a data series low of 26% of primary residence buyers from a historical norm of 40% of buyers. BFR homes may be their solution—albeit temporary, as they save for their first home downpayment.