For the past several years, investors have flooded the build-to-rent (BTR) market as priced-out would-be homebuyers made their way into the rental sector for more affordable housing options, but according to Forbes, many now fear that this booming segment is becoming too crowded. While rent growth is still in the range of 8% to 10% gains on a year-over-year basis, slower demand due to rising inflation and recession fears could lead to a sharp slowdown of rent growth in 2023.
The long-term outlook for 2024 and beyond reveals yet another BTR boom, especially as more Millennials seek out family-friendly housing options during a period of slower income growth while the economy softens.
Income growth is not going to stay at 11%-12% in 2023/2024 perhaps, but 8%-10% earnings growth is not unreasonable for people in their 30s to expect. That will support rent growth at single-family rental communities. A recent analysis by RealPage showed that market-rate renters are currently only spending 23% of their income on rent, which is well below the 30-33% that is considered a ceiling. There seems to be room to run, at least after the economy gets past this slump and demand starts roaring again.
Advertisement
Related Stories
Build to Rent
Build-to-Rent Housing Starts Pick Up During Q1 2024
Build-to-rent inventory increases while affordability challenges persist in the for-sale market
Build to Rent
Single-Family Rent Growth Remains Elevated, Despite Dip in Multifamily Rental Rates
Multifamily rent growth, specifically, is decelerating since its year-over-year peak of +16.3% in 2022, but in many markets, single-family rents are continuing to rise
Affordability
How Much Must American Renters Earn to Afford Average Rental Prices?
US rents have increased 3.6% year-over-year, pushing the amount renters must earn to afford average rents to around $80K