Even with concerted public and private initiatives, the affordable housing shortage has persisted in cities and communities across the U.S. Arbor’s Affordable Housing Trends Report Spring 2023, developed in partnership with Chandan Economics, analyzes the challenges and assesses the outlook of a sector that has gained more investor attention amid growing economic headwinds.

While the 2008 financial crisis prompted a cyclical shift in U.S. housing — impacting everything from home prices to who can qualify for a mortgage — an equally impactful demographic change was just taking shape. The unprecedented wave of Baby Boomers that began retiring would disrupt the balance of the housing market.

Even as some developers have pumped the brakes on single-family construction, construction starts of single-family rental (SFR) units soared to a new record high in 2022 — a signal that demographic and structural tailwinds continue to outweigh cyclic recessionary headwinds.

Even as the economy’s momentum slowed in 2022, multifamily construction continued to ramp up, reaching highs not seen since the 1980s. As the number of new units increased rapidly last year, the multifamily sector’s share of all new residential construction also expanded to make up more than one-third of all starts.

The outlook for the single-family rental (SFR) sector continues to be upbeat even as rent growth cools nationally. Build-to-rent (BTR) communities have been expanding their footholds in neighborhoods across the U.S. These starts hit a new record high as rental demand has risen from would-be home buyers priced out of ownership by high interest rates.

Because single-family rental (SFR) properties tend to be located in the suburbs and away from public transportation hubs, the typical tenant drives to work. As a result, an area’s typical commuting time is a factor that is often weighed heavily by residents — impacting rental demand and pricing.