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Why Build-to-Rent Developments May Be Making Homeownership More Elusive

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Why Build-to-Rent Developments May Be Making Homeownership More Elusive

Build-to-rent developments traditionally give entry level buyers an affordable stepping stone to homeownership, but as rental costs surge, experts say they may actually be doing more harm than good

October 3, 2022
Single-family homes in build-to-rent development
Image: Stock.adobe.com

First-time homebuyers are struggling to find and afford available starter homes in a high-cost, fast-paced housing market, and rather than waiting for affordability to improve, many are leasing homes in rental-only developments, The Washington Post reports. By the end of the year, builders expect to add 105,000 new homes to build-to-rent developments nationwide, and by 2050, total supply could rise by another 50%. 

As decades-high mortgage rates make home purchases unattainable for a growing number of Americans, rental demand is on the rise, especially among younger generations without an equity cushion. While helpful in the short term, experts worry that build-to-rent communities are actually pushing homeownership further out of reach by making it harder for would-be buyers to save for a down payment.

But critics, including local housing economists, say build-to-rent arrangements are exacerbating long-simmering inequalities by replacing entry-level homes with rentals that make homeownership even more elusive.

Buying a home has long been one of the most direct and reliable paths to building wealth. But when renters face constantly rising rents, it becomes much harder to save for a down payment to buy a home. Data shows that renters spend much more of their incomes on housing than homeowners do, in part because rents tend to rise every year.

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