As high-end units continue to flood the rental market, builders look to newly built detached homes for rent Reverberations from last decade’s housing crisis have and are reshaping the rental market.
For one thing, if renters crave brand new construction, there is more to choose from. Developers in 79 U.S. markets built 173,000 apartment units in 2014, will build about 220,000 this year, and are projected to construct 190,000 units in 2016, notes Ryan Severino, senior economist at Reis Inc., a commercial real estate data firm. These figures compare to a historical average of just 120,000.
Since many Americans aren’t buying homes — either by choice or because they financially are unable to — more builders are turning to apartment construction.
However, the financially pinched won’t easily find affordable new rentals, since much recent construction is high-end, says Severino.
In fact, some 19 million families currently pay more than half of their income in rent, according to the Urban Institute.
In aftermath of the foreclosure crisis, many families rented single-family homes — often the home they once owned — since institutional investors bought and rented those properties, says KC Sanjay, senior real estate economist with data firm Axiometrics. But the supply is dwindling, as investors decide to sell, he adds.
But it may soon be easier for renters who desire a single-family home to find a new home built to be a rental, not for purchase. Homebuilders are “seizing the opportunity to build single-family detached homes” to rent, according to a recent report from John Burns Real Estate Consulting.
Mara Sloan, spokeswoman for the National Rental Home Council, agrees. “With one in 10 households now living in single-family rental homes, our industry will continue expanding in the home building economy to meet this rising demand and provide an excellent resident experience through high-quality, professionally managed rental homes,” she says. But supply and demand continue to dictate costs, and Sanjay forecasts rental charges to rise 5.1 percent in 2015 over 2014, the biggest increase in a decade. But, he projects annual rent increases should slow to just 3 percent or so in years ahead, as an improving job market spurs more renters to buy homes.
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