By Vincent Salandro
The housing market in 2025 did not hit the growth targets many projected heading into the year. Weaker consumer confidence, challenging affordability conditions, and general economic uncertainty contributed to a flat year for the for-sale market.
Many of these factors also limited growth in the build-to-rent (BTR) sector in 2025. After rapid expansion in the years following the pandemic, capital has tightened and not as many new projects have been started. As a result, new deliveries of BTR will decline in 2026 and beyond.
“I would somewhat describe it as running in place. For those who have operating properties [and] properties under development, there is a lot of work but not a lot of movement in the market,” says Josh Hartmann CEO of NexMetro Communities.
Hartmann’s NexMetro Communities develops Avila Homes neighborhoods, which offer cottage-style villa homes across its eight markets of operation.
“In the fourth quarter of 2024, we were all thinking that things were getting a little bit better and that we would see growth in the market in 2025,” Hartmann continues.
Tariff uncertainty and rent stagnation were among the headwinds working against the BTR sector in 2025. However, demand across a broad demographic group remains positive, fueling optimism for the sector.
“Depending on who you talk to, things suck, they are frozen, or they are ‘meh’,” Zonda chief advisory officer Tim Sullivan explains. “But in the long term, with demographics and particularly with the lack of affordability, to me BTR is the solution [to many challenges].”
BTR Sector Matures
There is no one-size-fits-all approach within the BTR sector. The BTR umbrella spans a wide range of product types, including townhomes, cottage-style villas, purpose-built detached single-family rental homes, and horizontal apartment communities.
Operating models are equally varied: Yardly, backed by public builder Taylor Morrison, exemplifies a builder-supported platform; VineBrook Homes operates as a real estate investment trust focused on acquiring, leasing, and managing single-family rentals; and Middleburg Communities represents a fully integrated developer active in the multifamily and BTR sectors.
The tenor in the sector has shifted from the heady years of 2020 to 2022. However, softening has helped the sector mature.
“[BTR] is a product type that didn’t exist 10 years ago. It’s continuing to develop and mature as a sub-asset class,” says Chris Finlay, founder and CEO of Middleburg Communities. “There is a spectrum of things that are like horizontal apartments all the way to townhomes and true single-family rentals. Under any of those [product types], you are seeing institutional ownership, professional property management and maintenance, better leasing and payment tools, and more widely available product. That is creating this alternative that is gaining steam.”
For renters-by-choice, a BTR community with backyards, dog parks, and garages can be considered a step up from the traditional one- or two-bedroom apartment unit. Empty nesters, young professionals, high-income individuals or couples, and married couples without children are common cohorts for many BTR communities.
For frustrated renters sidelined from homeownership due to high costs, the BTR product offers a stepping stone between renting and homeownership.
“Housing is a monthly payment business. That is universal. I think BTR becomes the missing middle,” Sullivan says. “The missing middle is supposed to be affordable homes you can buy. When affordability is $750,000 in San Diego or $450,000 in north Dallas, that doesn’t work for people making $60,000 or $70,000.”
It is through the missing middle lens that operators like HARMON by Crescent Communities were founded. BTR, says Tony Chen, senior managing director of single-family BTR at Crescent Communities, can provide something for renters that is not available in the current market.
“Our thesis for solving this housing shortage across our markets in the Sunbelt is what is someone in a two-bedroom [apartment] looking for? They need more space, [but] they still want the same level of professional service from the property manager,” Chen says. “They want the quality of construction, with the benefits of homeownership, but may not be there on savings for a down payment. Going from a 1,300-square-foot, two-bedroom apartment, you don’t need a 2,200-square-foot, four-bedroom [home].”
The solution for HARMON by Crescent Communities is smaller homes with smarter designs: Two-bedroom homes with first-floor primary bedrooms or smaller three-bedroom units.
“When this industry first started, you saw a ton of three bedrooms, all of which were the exact same floor plan, and fours and fives,” Chen says. “For where we are, we think our product is shifting to more efficient, smaller homes than what has existed in the industry over the past five plus years.”
Operators have also adapted to optimize their leasing and property management teams. Hartmann says when NexMetro Communities began in the sector, it operated communities remotely without a leasing office or on-site team to reduce staffing and costs.
“We have seen a decent percentage of our prospective residents show up and do self-touring. However, they often want to talk to a leasing agent when they want to close,” Hartmann says. “Today, all the discussion in multifamily and rental housing is centralization [and] reducing the number of on-site staff. We have already learned that lesson and are trying to split the difference. We are always evolving as we try and find how much on-site presence is the right amount. Every community has a different personality.”
One of the clearest examples of the BTR sector’s maturation is market expansion and land selection within markets. Suburban areas that are more conducive to single-family for-sale communities do not always translate to strong BTR locations. Sullivan says the guiding principles for BTR have returned to the core fundamentals: proximity to an employment base, strong in-migration, and a younger population.
“If you go back three years ago when the market was on fire, there was a lot of products built in tertiary areas that just probably should not have been built,” Sullivan says. “We are finding that the markets where this works are contracting to the more classic markets. There are a few unknowns, but for the most part we know [where BTR works]. Huntsville has been found; Greenville has been found; the Carolinas are doing great. I don’t think there are a whole lot of surprises now.”
Optimizing Amenities
Following a period of amenity escalation in competition with garden-style multifamily communities, the BTR sector has simplified its approach to amenities.
“Focusing on the resident experience is critical. They want service [and] they want a wet amenity. Outdoor green space is an absolute must [but] that doesn’t have to be a golf course or a big thing,” says Richard Ross, CEO of Quinn Residences, with more than 30 communities with townhomes and detached single-family homes across the Southeast. “Walking trails, fire pits, playgrounds, [and] dog parks are important. You don’t even need a large clubhouse.”
Dog parks, pools, and on-site leasing centers still sit well with renters, while outdoor spaces are also popular.
“Amenities that deliver privacy, functionality, and a true single-family living experience resonate most strongly with build-to-rent renters, and these often differ from traditional multifamily preferences,” says Lacey Edwards, marketing director of Freehold Communities.
When designing communities, Ross says having an on-site leasing office front and center is important and that it must be open and viable when leasing the first quarter of the community. Technology, such as AI chatbots for off-hours questions and virtual touring, are becoming “table stakes.”
“[AI] is a potential boon for this business in the next year to three years, both operationally and with resident management,” Ross says. “[Residents] need to be able to go 24/7 online and get the toilet fixed or find a place to live. If they can’t, they will just go to the person that has it.”
Beyond dog parks and garages, though, the most important “amenity” is the ability to create connection and community. A focus on front porch living by HARMON by Crescent Communities helps facilitate social engagement.
Additionally, social programming or events help people in similar life stages—like new parents—meet and connect. Middleburg Communities designs with clusters of cottages centered around a “pod” with trees, sidewalks, and gathering spaces, understanding the value of community.
“We want people to walk out the front door, not hide in the backyard. We are trying to develop and cultivate that sense of community by getting people to interact with their neighbors,” Finlay says.
He adds that if somebody makes a connection with another resident in their rental community, they are five times more likely to renew.
“We have a property in Richmond, Virginia, [Hamlet Falling Creek] with one pod that’s in the shape of a triangle,” Finlay says. “The residents have gotten so close that they had T-shirts made for their little triangle pod. It’s fantastic. Those are the types of things that create a happy consumer and add value beyond the physical structure.”
Differentiating the BTR Sector
The BTR sector occupies a middle ground between multifamily and single-family for-sale, combining elements of both while solving potential problem points in each.
BTR communities offer residents a true home experience, with garages, fenced backyards, larger floor plans, and green spaces.
“If you are going from an apartment to one of our communities, you are expecting the same level of service and resident experience, but the difference is that you also have a home,” Chen says. “There are shared amenity spaces, but the confines of your home are more private.”
As a result, many BTR communities can deliver what renters want in a multifamily community—shared amenities and maintenance handled by the property—in a more residential setting that feels fundamentally different from vertical apartment living.
Compared to for-sale housing, price and location are key differentiators. Ross said Quinn Residence renters can expect rent that is “40% to 50% less on a monthly basis” than owning a comparable home. Edwards says BTR can meet demand because increasingly renters are not seeking just housing, but a lifestyle with connectivity to jobs, schools, and daily conveniences. Freehold subsidiary 360 Communities has communities of single-family detached homes and townhomes across Florida and Georgia.
BTR communities can also offer greater proximity to urban areas, employment centers, and retail spaces.
“[Residents] want to be close to the non-core downtown of the suburban market. We are more dense, typically [than for-sale housing],” Hartmann says.
The smaller scope of BTR communities and higher density means that operators can build on land closer to more desirable areas for renters.
“People drive to own; they don’t drive to rent. If you want to capitalize on the growth in an area in a particular employment node, you have to be proximate to that,” Finlay says. “People will drive an hour to buy their first house; nobody is driving an hour to rent anything. If you want to leverage an area, you have to be proximate to where those jobs are.”
Unsticking the Market
While the long-term runway for the BTR sector is strong given underlying demographics and demand patterns, the sector has felt stuck. A lack of transaction volume has had a compounding effect across the sector and investors are not likely to feel comfortable investing until they know there is a market to sell.
A renewed increase in rent growth is likely to be the first domino that falls to help re-accelerate the market.
“I would want to see a couple months and quarters of rent growth. I think that unlocks transactions [in the capital market],” Hartmann says. “Once you start to see sustained rents, then people will get more comfortable that we are back to a more normalized market.”
Even in the current market, capital has not completely frozen, though it is more selective. Ross says while the days of easy money flooding the sector are over, experienced operators with a demonstrated track record of success are still able to access the capital market.
The challenges facing the sector are likely more cyclical than structural, though, given the strong underlying demand and overall housing shortage. Hartmann describes the incoming inflection point for the sector as something that cannot be perfectly timed, only recognized as conditions begin to align.
“It’s like surfing,” Hartmann explains. “You’re waiting for the set to come in; you’re watching from a distance and you start to see the positive momentum from the waves.
“There’s a lot of factors that go into [the perfect wave]. If you are going to put a pin on it, I think I’m first going to see rent growth because it is going to lead to all these other things: an increase in values, institutional capital coming back into the space,” he continues. “You have to be watching and have your board pointed in the right direction.”
Regulatory Challenges and the Stigma of Renting
Even amid the growth and sophistication, the BTR sector continues to face headwinds that have less to do with market demand and more to do with perception, policy, and process.
A common hurdle remains regulatory friction and the disparate nature of local zoning ordinances, according to Ross. At the heart of the issue, though, is a lack of understanding of what BTR is and who it serves. Ross and Sullivan note that municipalities and regulatory ordinances hold negative views of renters and oppose developments based on these preconceived biases.
“Once you sit down and you explain [BTR] and have them talk to our residents or watch video testimonials, that helps,” Ross says. “It’s literally a grassroots endeavor. It takes time.”
Education matters because of the underlying challenges in the housing market. There is a housing shortage measured by a factor of millions at the same time rising prices have increased the share of significantly cost-burdened households. Against this backdrop, BTR offers a compelling value proposition.
“Housing is one of the least affordable things,” Ross says. “[BTR] can offer a quality brand new home, stainless steel appliances, a high technology package, solid surface flooring, and a good community for substantially less than owning the same home.”
To take the steps needed to provide the missing middle and improve housing options, the sector hopes to see a reduction in red tape. Zoning is also a structural challenge, particularly because BTR does not fit neatly into any traditional category. Finlay of Middleburg Communities says municipalities are unsure where BTR fits into zoning codes. However, as the sector continues to mature and be recognized with codes and ordinances, there is optimism for improvement.
While vertical construction costs have stabilized, land entitlement and regulatory burdens continue to drive costs higher for BTR developers.
“We need some relief from all the red tape,” Ross says. “We need to streamline these regulations because they just add to the cost of a home and ultimately that is what makes a home unaffordable.”
Despite short-term challenges related to capital markets, rents, and regulations, demographics and affordability support the BTR sector’s long-term strength. With affordability challenges continuing to plague the housing market, operators in the BTR sector are delivering needed density and units that provide renters with the lifestyle of homeownership without the financial requirements.
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