Input Stories

Finding themselves priced out of home ownership, more millennials are renting houses (The Wall Street Journal, subscription).

What’s going on: “A growing number of those their age, or even older, are turning instead to upscale single-family rentals [near suburban neighborhoods]. Developers are eager to capture that demand, even if that sometimes means building fewer homes for sale.”

• One of the largest U.S. multifamily real estate trusts recently bought its first set of build-to-rent townhouses in Bee Cave, Texas, because it believes “we’re really in the early stages of what could be a pretty significant, almost new asset class,” according to its chief investment officer.
• From 2021 to 2023, build-to-rent housing starts “doubled to 10% of overall single-family housing.
• Wall Street firms are also expanding their build-to-rent portfolios.

Why it’s happening: “For the first time in more than two years, the growth of the U.S. renter pool has outpaced that of homeowner households for the past four quarters, according to a Redfin analysis of U.S. census data.”

• The growing share of renters “is a direct response to the widening gap between how expensive it is to rent versus own a home in the U.S., especially as mortgage rates stay heated at nearly 7% with no immediate signs of cooling.”
• Housing prices remain near record highs, and the average monthly mortgage payment on a new home is 38% higher than an apartment rental.
• Renters say they like the convenience of not owning, and many of the communities being built offer the same “high-end suburban” features, such as communal swimming pools and gyms, they would get with a home purchase.  

Where it’s happening most: The U.S. South and West has the most demand for build-to-rent homes, thanks to their greater supply of available land and the growing numbers of workers moving to the regions.

Why it could be a problem: “[S]ome economists say that the build-to-rent movement is shifting developers’ attention away from the home-buying market where more supply is needed to normalize prices.”

• In the Sunbelt area, for example, housing supply is “being diverted” to build-to-rent activities rather than traditional housing supply.
• Government regulators are keeping a close watch, too. In September, the largest single-family housing rental operator in the U.S. settled charges with the Federal Trade Commission “related to deceptive rental pricing practices and unfair evictions.”