A Closer Look At The Build-To-Rent Housing Market – The Mortgage Note

Between down payments, current mortgage rates, and the commitment to homeownership, build-to-rent is in demand.

Advocates say BTR communities give renters the option to live in a luxury home community without the stress of homeownership. They are ideal for young professionals, empty nesters, families new to a market, and people experiencing a life change like a divorce.

But the Trump administration’s approach to tariffs and its rollout has spooked some investors and consumers.

“In the real estate sector broadly, anecdotal evidence suggests an immediate-term pull-back, not a retreat, by both debt and equity providers,” Rick Pollack, Managing Director of RCLCO Fund Advisors, said recently. “We have seen this in the BTR sector as well, impacting transaction volume and financing — particularly equity — for new development.”

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Pollack said that with consumer sentiment low when it comes to homebuying, the BTR sector can benefit as these people delay purchasing a home and seek out rental options.

“We have seen evidence of this in growing new home inventories, decreasing home prices, and the increasing age of first-time homebuyers,” said Pollack.

Pollack projects substantial growth among people ages 30 to 50 — 7.1% (6.5 million people) over the next 10 years. In the over-65 group, he sees a 24.1% (14.4 million people) growth.

He said these two cohorts are most likely to rent single-family homes.

“Increasing household debt, especially student debt and auto loan debt, will likely continue to impact the ability of households to afford purchasing a home, leading many to continue to rent. Elevated homeownership costs — initially driven by higher prices, then compounded by higher mortgage rates — are putting financial pressure on young households, forcing them to rent for longer. These factors, combined with changing work patterns post-COVID, accelerate trends that are positive for BTR in the long-term,” said Pollack.

The continuing changes in government policy have made the BTR market sector less predictable for some people.

Kelvin Elliott, founder of Property Sales Watchdog, said there are developers who have paused or rethought projects entirely.

“However, institutional investors don’t appear to be following suit. In the UK, BTR investment is set to reach a record £6 billion in 2025. In the U.S., the BTR sector is also breaking records with Texas, Florida, and Arizona showing particularly strong growth levels,” said Elliott.

Negative consumer sentiment is fueled by concerns about affordability and a lack of confidence in the housing market. This may lessen growth, said Elliott, but it is unlikely to reduce the demand for quality homes to rent.

Demand for BTR is strongest among young professionals, families looking for flexibility, and those for whom the cost of homeownership is prohibitive. In the U.S., Elliott said Phoenix, Dallas, Atlanta, and Charlotte are currently the top BTR markets, led by both population growth and affordability considerations.

“BTR is led by the need for quality rental stock and the evolving needs of tenants,” said Elliott. “With continuing strong institutional investment, the sector appears well positioned for continued, if uneven, growth.”

Inflation remains a factor.

“Construction and operational costs have continued to rise, although more slowly than recently,” said Elliott. “U.S. construction cost inflation is expected to increase by up to 7% due to materials costs and the continued shortages in labor.”

Rising borrowing costs have also made it more expensive to finance new developments, causing some projects to stall or be reevaluated, said Carla Gervais, Principal Broker at The Mortgage Advisors in Canada.

“On the flip side, if rates stabilize or begin to fall, we could see renewed momentum in BTR construction as developers regain confidence and access to more affordable capital,” said Gervais. “Long-term policy clarity around housing, zoning, and taxation would also support stronger BTR growth.”

Gervais explained how rising costs of living will affect the BTR market moving forward, saying that when consumers feel financially uncertain, they tend to delay major life transitions — like moving out on their own or upgrading to a larger space.

“This caution can dampen rental demand in the short term, which in turn may delay or downsize BTR projects,” said Gervais. “For renters, higher living costs can make even purpose-built rentals feel out of reach, which puts pressure on developers to offer value and affordability without compromising on quality or amenities.”

“However, for many, BTR still represents a practical and desirable middle ground between renting an apartment and owning a home, especially in urban centers where affordability is out of reach.”

In Canada, demand for BTR is growing.

This is driven by a combination of high immigration, urban population growth, and Canada’s ongoing housing supply crisis.

“Many Canadians — particularly young professionals, newcomers, and downsizers — are seeking modern rental housing that offers the space and feel of a home, without the responsibilities of ownership,” said Gervais. “Build-to-Rent communities with amenities, maintenance support, and flexible leasing terms are becoming especially attractive in cities like Toronto, Montreal, and Vancouver.”

Canada’s BTR market is still in its early stages compared to the U.S. or U.K. Still, it’s growing quickly as developers and institutional investors recognize the long-term value of purpose-built rental housing.

“As affordability challenges persist and homeownership becomes increasingly out of reach for many, BTR offers a scalable, community-oriented solution to meet diverse housing needs across the country,” said Gervais.