After an “exceptionally strong second quarter” for rental housing production, single-family built-for-rent (SFBFR) construction leveled off during the third quarter of 2022. The trends SFBFR reflects trends in the overall housing market, which slowed during the third quarter as well. According to an NAHB analysis of data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, there were approximately 16,000 SFBFR starts during the third quarter, 6% lower than the third quarter of 2021.
Over the last four quarters, 68,000 such homes began construction, which is a 42% increase compared to the 48,000 estimated SFBFR starts in the prior four quarters.
The SFBFR market is a source of inventory amid challenges 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.
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 five percent or higher of single-family starts based on industry surveys.
While the market share of SFBFR homes is small, it has clearly 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 remain elevated and increase. Thus, the SFBFR market will expand in the quarters ahead.
