‘I don’t need to own’: This California couple surrendered their low mortgage rate to rent and build their savings instead — why homeownership is no longer part of the American dream

Why renting is becoming part of the new American Dream

Built-for-rent homes can offer private backyards and garages, just like your typical single-family start — but they come at cheaper price points for many Americans who can no longer afford to buy in the current market.

“There’s still an inadequate supply of housing, the cost of housing has continued to rise, renters are renting longer,” Doug Ressler, manager of business intelligence at commercial real estate firm Yardi Matrix, told the Los Angeles Times.

“The large providers are looking at build for rent as a legitimate strategy to be able to fulfill demand for those people that are on a budget and looking to have a larger square footage than an apartment.”

Construction commenced on about 18,000 single-family, built-for-rent homes in the first quarter of 2024 — surging 20% compared to the first quarter of 2023, according to the National Association of Home Builders (NAHB), which analyzed data from the U.S. Census Bureau’s Quarterly Starts and Completions by Purpose and Design.

And around 90,000 single-family homes that started construction last year (10% of the total) are rentals — almost doubling in two years — according to research from the National Association of Realtors.

Ressler notes that demand for more spacious housing strengthened as millennials began having children and growing families, and firms began buying up subdivisions and converting them into rental properties or building homes for the purposes of renting them out.

Recent data from Entrata, a property management software company, reveals 41% of renters say their “American Dream” has nothing to do with homeownership — and 1-in-5 expect to be lifelong renters by choice.

About two-thirds of these respondents report renting fits their current lifestyle better than owning a home and nearly a quarter say they appreciate the location and flexibility that renting affords them.

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Some lawmakers have concerns this could drive homeownership further out of reach

Federal and state lawmakers fear that investment firms buying up the supply of single-family homes could push rental and homeownership prices up even further.

Real estate investors purchased about 44,000 U.S. homes in the first quarter of 2024 — representing 19% of total home purchases — according to Redfin.

Many wealthy investors have the ability to purchase properties in cash, forgoing expensive mortgage rates, and often snag discounts for buying in bulk.

Corporate investors “have a significant advantage over a typical California family,” said Assemblymember Christopher M. Ward (D-San Diego), according to the Los Angeles Times. Ward has proposed legislation to prohibit institutional investors from purchasing single-family homes in bulk.

“You are allowing a new phenomenon in transactions that is inherently uncompetitive.”