Phoenix leads the nation in built-to-rent houses
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Built-to-rent homes are on the rise nationwide, and nowhere more so than in Phoenix.
Why it matters: Once famous for its affordable and abundant homes, the Valley has a shortage in supply contributing to skyrocketing housing costs.
State of play: With mortgage rates perched near record highs for the year, those communities have proliferated, offering amenities, property management perks — and no mortgages.
Driving the news : The Phoenix metro area by far saw the biggest increase in the nation last year, when more than 4,000 built-to-rent homes were completed, a 10-year high.
- Dallas was a distant second, with about 2,700.
- The Valley also leads the country in new built-to-rent houses completed in the past five years, with 9,345, and under construction now, with more than 7,200.
The big picture: Nationally, about 27,500 built-to-rent homes were completed last year, a 75% increase from 2022, according to a recent report by RentCafe.
- There was a huge jump in 2022 as well, increasing from about 10,000 in 2021 to 15,700.
- Such developments are typically popular in the Southeast, Southwest and Sunbelt, where land costs less, but they've been slowly moving into other parts of the country.
The intrigue: Built-to-rent communities are particularly appealing to those who want more space but can't afford to buy a house, and empty nesters seeking less home upkeep, experts say.
- A 2022 report by the Arizona Department of Housing found that the state faced a shortage of 270,000 housing units, while rising prices have made available homes unaffordable for many Arizonans.
What they're saying: RentCafe wrote that Phoenix can leverage the popularity of built-to-rent homes because it's "blessed with the opportunity of building out, rather than up," unlike major coastal cities.
- Additionally, the city's rapid growth helps new built-to-rent communities fill up before they officially open.
Between the lines: Phoenix leads the nation in new built-to-rent housing largely because of the city's population growth and its status as a developer-friendly city, National Rental Home Council CEO David Howard tells Axios.
- Last year, institutional investors in the single-family rental home industry bought 30% fewer houses and built 75% more than in 2022, he said.
- The industry shifted from purchasing to building houses because of increasing costs to buy and a lack of available inventory.
- Howard said his organization's data show it costs about $1,000 less per month to rent a house than to own one.
Yes but: Nicole Newhouse, executive director of the Arizona Housing Coalition, tells Axios that any new supply helps but says she is skeptical it will do much to drive down prices.
- She says what's needed more than anything to alleviate the crisis is higher density and more affordable multifamily housing.
Catch up quick: How to increase Arizona's inadequate housing supply has been a hot topic of conversation at the Capitol this year.
- Gov. Katie Hobbs recently signed two bills aimed at encouraging construction of more rental units — one that would require larger cities to permit accessory dwelling units on single-family lots, and another that would require them to permit "middle housing" like duplexes and triplexes in certain areas.
- She vetoed legislation that would have removed some municipal authority over zoning restrictions to boost construction of lower-priced starter homes.