Weekly Update: Renters rule - Midwest rent rises

In the first quarter of 2025, the build-to-rent sector experienced modest rent growth amid rising operational costs, with notable regional variations. As renters become more influential and single-family rentals gain popularity, developers are adapting to shifting demands and economic pressures. Meanwhile, the short-term rental market faces increased regulatory challenges, though resilience is noted with continued revenue growth, and Washington, D.C. emerges as a leader in downtown apartment construction.

Build-to-rent (BTR) communities saw modest rental growth of 1.3% year-over-year in Q1 2025, though operating expenses grew faster at 3.2%, while regional differences emerged with the Midwest leading rent growth and the Southwest seeing declines amid increased housing supply across different rental options.

Build-to-rent townhomes are emerging as an efficient housing solution in 2025, offering developers faster construction timelines and strong returns through efficient floor plans, flexible configurations, and premium rental potential across urban, suburban, and infill locations.

A new report from Zonda indicates that renters are becoming increasingly influential in the building community, with Millennials representing the largest generation likely to rent for longer periods due to high mortgage rates and housing costs. The analysis shows it is currently 82% more expensive to own a home than rent nationally, leading to evolving renter expectations and builders adapting their strategies to cater to this growing "homeproud" renter demographic.

The single-family rental (SFR) market is experiencing significant growth as more apartment dwellers are choosing to rent houses instead of apartments, with six out of ten new home renters coming from apartments in 2024. This trend is driven by renters' increasing desire for more space, the persistence of remote work, and the fact that renting remains more affordable than buying in most markets, with average monthly rent ($1,776) being notably lower than average mortgage payments ($2,504).

Urban Moment Development has completed YardHomes Cottonwood Creek, a 293-unit build-to-rent residential community in Hutto, a northern Austin suburb, featuring one- to three-bedroom units with private backyards and amenities like a fitness center and pickleball court, with rents starting around $1,500 monthly.

The short-term rental market in 2025 is experiencing slower growth with supply increasing by only 4.7%, while facing increased regulatory pressures and competition across major cities. Despite these challenges, the market shows resilience with projected revenue growth to $21.08 billion, though success now requires operators to focus on tech adoption, guest experience enhancement, and strategic pricing to remain competitive.

According to RentCafe.com data, apartment sizes in the United States are trending upward with a current average of 908 square feet, with the article highlighting various cities that lead the way in offering the largest living spaces.

According to the article, Washington, D.C. has emerged as the leading city for new downtown apartment construction, marking a shift as developers have recently been moving their focus away from city centers to other areas. The trend indicates ongoing record-breaking apartment construction activity while highlighting changing development patterns in urban areas.