Single-Family Build-to-Rent Special Report: Rapid Supply Growth Presenting Both Challenges and Opportunities

Many of the trends being recorded in the national economy are being reflected in the performance of single-family build-to-rent (SF BTR) properties. Economic growth has been stronger than originally forecasted and the labor market continues to expand. This is fueling renter demand for SF BTR units, and developers are bringing new projects to the market to meet this demand.

To this point in 2024, new supply has outpaced demand, causing vacancy rates to trend higher and providing a drag on rents. Looking ahead, the prospect of declining interest rates should support the investment market and debt and equity conditions, but could also result in lower residential mortgage rates, which may encourage some renters to move into home ownership.

Report Highlights

• The single-family build-to-rent (SF BTR) market is in a period of heightened supply growth and renter demand. Developers remain active, bringing new projects online, while a healthy pace of economic expansion is fueling absorption.
• Jobs are being added faster than originally expected. At the beginning of this year, forecasts called for net job growth of approximately 1.5 million net new jobs, a figure that was already surpassed as of September. Unemployment has remained low, holding steady in the low-4 percent range.
• The for-sale housing market has been largely stalled in recent quarters, slowed by low inventories of available homes and elevated residential mortgage rates. In recent months, mortgage rates have trended lower, and are now down more than 100 basis points from 20-year highs recorded in October 2023. The average rent on a SF BTR unit is $878/month lower than the average monthly mortgage payment on a median-priced single-family home.
• Construction of SF BTR units is elevated, particularly in the high-growth South region. Single-family rental housing starts and deliveries are on pace to surpass 2023 totals this year.
• Vacancy rates have pushed higher, with the greatest increases occurring in markets where inventory levels have expanded the fastest. The national average vacancy for SF BTR units ended the third quarter at 8.6 percent. Despite supply-side pressures, rents have ticked down just 1 percent in the past year to $2,269 per month.
• Year-to-date investment transaction totals in single-family rentals have closely tracked 2023 levels. Prices have trended a bit lower, while cap rates have averaged between 5 percent and 5.5 percent.
• The capital markets should be supported by anticipated declines in interest rates. Treasury yields have begun to creep lower and future interest rate cuts by the Federal Reserve are forecast in the coming months and into 2025.

Download the full report below or explore our Build-To-Rent page to learn more.