Build-to-Rent Construction Continues Its Record-Breaking Ascent
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- SFR/BTR housing starts hit another all-time high, totaling 83,000 units over the year ending in the second quarter of 2024.
- BTR accounted for 8.1% of all single-family housing starts, another record high.
- Institutional investors have begun to favor purpose-built development over acquisitions.
Increasingly, single-family rental (SFR) operators have been relying on build-to-rent (BTR) development to bridge the housing gap, accelerating the momentum of SFR construction through 2024’s halfway point. Both total SFR/BTR housing starts and BTR’s share of all single-family housing starts reached new record highs in the second quarter, setting the stage for another banner year.
SFR/BTR Construction Surges
As detailed in Arbor’s Single-Family Rental Investment Trends Report, acquisitions only narrowly outpaced dispositions among SFR REITs in recent quarters. Instead, institutional investors have focused attention on ground-up, purpose-built development. SFR/BTR construction starts eclipsed 83,000 units in total over the past four quarters, representing an all-time high and an annual increase of 20.3% over the same period one year ago (Chart 1).
BTR’s share of all single-family construction also reached an all-time high of 8.1% through the second quarter of 2024, representing a significant change in residential development (Chart 2). Before investment accelerated into SFR after the 2008 housing crisis, the BTR share of single-family construction never eclipsed 3.1%. Today, it rests 5.0 percentage points higher.
The decreasing affordability of homeownership in the U.S. continues to be a significant driver behind the expansion of SFR/BTR. According to data from the Federal Reserve Bank of Atlanta, buying a home is about 38% less affordable today than in 2020 as mortgage rates remain elevated and U.S. home prices continue to move upwards. SFR/BTR’s strong demand profile, which is bolstered by lifestyle renters and downsizing Baby Boomers, continues to provide a solid backbone for growth.
Outlook
As the level of SFR/BTR investment grows and the affordability of homeownership weakens, the number of housing starts should continue to ramp up, and the BTR share of single-family development should continue to widen, amplifying its performance over the short and long term.
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