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The United States is building more single-family rental homes, according to the National Association of Home Builders, and experts say that’s in part due to a housing affordability crisis.
“When mortgage rates rise and it becomes more difficult to buy a home, renting becomes an option,” said NAHB Chief Economist Robert Dietz.
NAHB analyzed quarterly U.S. Census Bureau construction starts and completions data and said approximately 18,000 single-family rental housing starts began in the first quarter of 2024, a 20% increase compared with the first quarter of 2023 by purpose and design.
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“People need a place to live and they need to have a choice,” said Molly Boesel, chief economist at real estate data firm CoreLogic.
“If they can’t find what they need on the for-sale market, they go to the rental market,” she said.
‘We’re seeing this growing movement’
The National Association of Realtors analyzed survey data from the National Association of Realtors and found that single-family rental housing starts will increase from 5% in 2021 to 10% in 2023, nearly doubling in two years. Census Bureau Building Information.
The National Association of Realtors reports that single-family rental housing starts will increase from 81,000 units in 2022 to 90,000 units in 2023.
“We’re seeing more and more people in the U.S. start building rental properties,” said Jessica Lautz, deputy chief economist at NAR.
Lautz said the growing share of single-family rentals is a response to demand from “people who can’t afford today’s very expensive, out-of-reach housing market.”
Homebuyer affordability declined in April, according to the Mortgage Bankers Association’s Purchase Application Payment Index.
NAHB’s Dietz said builders are noticing an “expansion” of renters in their 30s and 40s.
Lautz said young people are interested in rental housing “because more and more people can’t afford to buy a house now.”
“[They] Having to turn to rental properties because there is no other option,” Lautz added.
With a shortage of homes for sale, “potential buyers either can’t find what they’re looking for or it’s too expensive,” Boeser said.
She said that with mortgage rates still near 7 percent, monthly mortgage payments are quite high, “putting rent out of the reach of many potential buyers.”
“If they are at a stage in life where they would rather live in a single-family home, then a detached single-family home would be the next best option,” she said.
Rent or buy?
The typical asking rent for a single-family home in May was $2,262, up 4.7% from a year earlier, according to Zillow data. By comparison, the real estate website found that multifamily rental prices were $1,896 in May, up 2.6% during the same period.
The national median mortgage payment requested by homebuying applicants in April was $2,256, an increase of $55 from March, according to the Mortgage Bankers Association. That’s an increase of $144, or 6.8%, from a year ago.
But keep in mind that mortgage payments depend on several factors, such as down payment amount and interest rate.
Homeowners are also responsible for “hidden costs” that are not factored into the mortgage repayment, such as maintenance, repairs, taxes and insurance.
As people consider their options, they need to understand what a realistic budget looks like. Also consider how long you plan to live in the home, or whether the house will meet your needs in the near future, Lautz says.
Understand your true costs and responsibilities as a tenant of a single-family home. Ask the same questions you would ask if you were renting, Dietz said.
Also, it’s important to find out who is responsible for maintenance of the property outside the home, such as yard work, Dietz said. Typically, he said, these tasks fall to the owner, but can vary.
