Single-family rent growth is down, while built-to-rent communities—comprising single-family houses and often funded by Wall Street giants—are up. Is there a connection?
Many mom-and-pop real estate investors have long favored single-family homes because they occupy much of America’s real estate landscape and often provide greater financing opportunities and long-term stability. After the housing crash of 2008, investors started to buy single-family houses en masse due to low interest rates and the ease of financing.
In the first quarter of 2021, investor purchases of single-family homes peaked at 28% of all investor sales, according to Harvard University’s Joint Center For Housing Studies. By the end of 2024, the typical asking rents for single-family homes reached $2,174, up more than 40% from pre-pandemic levels, according to an analysis by Fortune based on Zillow data.
“Rent growth has eased, but rents are still too high,” says Orphe Divounguy, a senior economist at Zillow, to Fortune.
Why Rent Increases Are Dropping
This year, rent increases have dropped significantly nationwide. There are a few reasons for this.
An increase in supply
In 2024, developers completed nearly 39,000 units in suburban America, according to Point2Homes, a Yardi company, marking an increase of almost 16% compared to the previous year. The rise in supply helped accommodate the 6 million renter households in the 20 largest U.S. metros and surrounding suburbs, which increased by 231,000 between 2018 and 2023.
Built-to-rent has gone mainstream
The increase in single-family rental housing comes in part from Wall Street’s embrace of built-to-rent housing. Packed with amenities but located in the suburbs with the space and land associated with single-family housing, BTR communities have attracted billions of dollars from established REITs such as AvalonBay and Invitation Homes.
“We think we’re really in the early stages of what could be a pretty significant, almost new asset class,” AvalonBay chief investment officer Matt Birenbaum told The Wall Street Journal in 2024.
Approximately 23,000 single-family built-for-rent starts during the second quarter of 2024 was almost 10% higher than the second quarter of 2023, according to the National Association of Home Builders (NAHB) analysis of U.S. Census Bureau data.
Fixr.com estimated that the total number of BTR home starts nationwide in 2024 was 130,520, representing a 134% increase since 2019. This includes the 90,000 homes NAHB estimated were built to rent in 2024, as well as around 40,520 units sold to investors for rentals.
Clearly, BTR homes have struck a chord with renters who prefer single-family living over apartment complexes. “One clear driver behind the growth of build-to-rent (BTR) is the post-COVID shift in consumer preferences toward larger, more private living spaces; an evolution that has made traditional multifamily housing less appealing for many,” Ryan Kang, co-founder and president of Market Stadium, a company that provides real estate and housing data to investors, told Fixr.com.
Single-Family Landlords May Struggle to Compete
Well-capitalized BTR players boasting economies of scale have certain advantages over mom-and-pop single-family investors. These include amenities, organized management, and the benefits of being newly constructed.
However, that comes with a price, and smaller investors can have an advantage by keeping nimble and relatively affordable. Also, BTR construction is susceptible to the whims of Wall Street, which has been spooked by tariff talk, the cost of capital, and rising construction prices.
Forbes reported in March that BTR starts fell by 38% between the first quarter of 2024 and the first quarter of 2025. That doesn’t mean BTR has fallen off the radar. Many communities have not yet been completed, and Forbes estimates the sector will rebound in 2027 once the current inventory is completed and rented.
The Advantages of Investing in a Build-to-Rent Community
In the meantime, there is an opportunity for smaller investors to take advantage of the lull.
There’s a lot to like about buying into a BTR community as a passive income opportunity. Here are some of the obvious advantages.
Amenities
You are buying into a complex with fitness centers, clubhouses, landscaping and gardens, walking trails, dog parks, and co-working spaces.
Choice of units
BTR communities usually offer a selection of homes, including single-family residences, townhouses, and duplexes.
The ability to piggyback off community marketing
You can use your stylish BTR website to advertise your vacant unit(s).
Scaling up within the same community
If you like the idea of buying at scale, it might be possible to purchase several units within the same community.
Easy to outsource management
There is likely one management company that handles all the rental units within a community, making oversight and maintenance easy to coordinate.
Disadvantages of Investing in a BTR Community
Any investment comes with risks, and a BTR community is no different. Here are a few of the disadvantages of investing in one.
Expense
There is not likely to be much price negotiation if you are picking up a single home in the BTR community. It’s not as if you are finding a house that needs work or through a short sale. In addition, you are also paying for the amenities and prestige of being in the community.
While you can charge premium rents, don’t expect your cash flow to be too exciting in the early years if you’re getting a mortgage at current interest rates. BTRs are a long-term vehicle and place to park cash rather than leverage it.
Market saturation risk
BTRs have been all the rage on Wall Street amongst the big REITs, but it is possible to have too much of a good thing. If the market gets saturated, many units will sit vacant, making it tough to stand out from the crowd.
Limited rent increases
Owning within a BTR community means you are restricted in how much rent you can charge compared to the other rentals in the community.
Final Thoughts
Rent growth is determined by supply and demand. There has been an influx of single-family home construction in the last few years, and builders are currently hesitant to proceed with more projects until there is some clarity about construction costs.
However, rent growth is likely to continue at quite a pace once the current inventory is absorbed, because the U.S. housing market is in an inventory deficit of around 4.7 million homes as of July numbers, according to a recent Zillow analysis of census data.
Investors need to be strategic about their investment choices, basing them on their investing capability and the amount of time they want to dedicate to a project. If you wish to invest as your full-time or part-time occupation, driving for dollars, making multiple offers, attending auctions, and getting involved in the rehab process will likely enable you to pick up some deals at discounts in a currently slow market.
However, if you want a completely hands-off experience and have deep pockets, buying BTR homes for cash and outsourcing the management and leasing could be the way to go.