Strong Gains for Single-Family Built-for-Rent

The single-family built-for-rent sector continues to expand as housing affordability headwinds increase.

According to NAHB’s analysis of data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, there were approximately 13,000 single-family built-for-rent (SFBFR) starts during the first quarter of 2022. This is a 62.5% gain over the first quarter 2021 total. Over the last four quarters, 57,000 such homes began construction, which is a 32.6% gain compared to the 43,000 estimated SFBFR starts in the prior four quarters.

The SFBFR market is a way to add inventory amid concerns over housing affordability and downpayment requirements in the for-sale market, particularly during a period when a growing number of people want more space and a single-family structure. Single-family built-for-rent construction differs in terms of structural characteristics compared to other newly-built single-family homes, particularly with respect to home size.

Given the relatively small size of this market segment, the quarter-to-quarter movements typically are not statistically significant. The current four-quarter moving average of market share (5.1%) is higher than the historical average of 2.7% (1992-2012) and near a three-year high.

Importantly, as measured for this analysis, the estimates noted above only include homes built and held by the builder for rental purposes. The estimates exclude homes that are sold to another party for rental purposes, which NAHB estimates may represent another three to four percent of single-family starts. Indeed, the Census data notes an elevated share of single-family homes built as condos (non-fee simple) in the first quarter, with this share standing at 4.8%. Some but not all of these homes will be used for rental purposes. Additionally, it is possible some single-family built-for-rent units are being counted in multifamily starts, as a form of “horizontal multifamily,” given these units are often built on single plat of land. However, spot checks by NAHB indicate no evidence of this data issue occurring thus far.

With the onset of the Great Recession and declines in the homeownership rate, the share of built-for-rent homes increased in the years after the recession. While the market share of SFBFR homes is small, it has been trending higher. As more households seek lower density neighborhoods and single-family residences, a growing number will do so from the perspective of renting. This will be particularly true as mortgage interest rates increase. Thus, the SFBFR market will expand in the quarters ahead.