The market share for single-family homes built for the purpose of renting them out (rather than selling to an owner-occupant) is down from its peak reached in 2013, but in the last few quarters it has been trending upward.

The most recent New Residential Construction report from HUD and the U.S. Census Bureau, which measures quarterly housing starts and completions by purpose and design, found that single-family built-for-rent homes comprised 4.3 percent of all housing starts during the first quarter. That share is higher than the historical average of 2.8 percent but down from its peak of 5.8 percent which occurred in early 2013.

For the last four quarters, single-family homes built-for-rent have totaled about 32,000, according to the National Association of Home Builders (NAHB). That number has been on the rise—research indicated that approximately 25,000 single-family detached homes were built for renting in all of 2014.

Real estate industry experts feel the build-to-rent strategy is gaining popularity because it is more of a sure thing for investors. The base of it is truly to have a predictable asset that comes with embedded equity. Investors are also able to choose components of the home based on its desired use.

Because the homes are new, operational expenses, turn times, the cost of repairs and maintenance, and capital expenditures are all lowered through the lifestyle of the investment. In addition, builders select durable materials that can withstand tenant behavior.

With the onset of the Great Recession, the share of built-for-rent homes rose. Despite the current elevated market concentration, the total number of single-family starts built-for-rent remains fairly low in terms of the total building market. However, after falling during 2013, the market share has shown signs of gains over the past year.

The 2013 American Community Survey reported that the single-family portion of all rental housing stock in the country was 35 percent, with the built-for-rent share of single-family homes comprising a much smaller percentage. This is because single-family homes often transition to rental housing stock as they age. It is estimated that approximately 10 percent of single-family detached households (12.7 million out of 120 million) in the country are renting.

To learn more about the need for build to rent homes contact a member of the 9 Core Realty team today!