Atlanta’s build-to-rent industry is steadily expanding, and doesn’t show signs of stopping anytime soon, says experts.
According to data from Yardi Matrix, the metro area ranks third overall in the nation for the highest number of build-to-rent single-family units completed in 2022, falling behind only Dallas and Phoenix. A total 808 single-family rentals were constructed in greater Atlanta last year, a 10-year high for the metro area.
Atlanta is one of six metro areas in the Southeast to make Yardi Matrix’s list of single-family rental units completed last year, besting the next-ranking metro, Greenville, South Carolina, by approximately 200 units.
The build-to-rent housing strategy traces its origins back to the 1980s, but the industry found footing in the aftermath of the 2008 financial crisis, as developers began purchasing foreclosed homes in bulk and transforming them into rental properties.
With build-to-rent single-family homes, residents enter long-term leases as opposed to obtaining and paying a monthly mortgage and other fees related to homeownership. In exchange, community facilities and other amenities are usually tended to by an on-site or off-site property manager or team, eliminating the need for residents to handle landscaping work or home repairs; such actions are generally covered in a monthly rent.
Developers and investors profited even more from the business model following the introduction of the pandemic, when the imposition of hybrid and work-from-home business models motivated workers to search for larger homes in rural and suburban areas.
The build-to-rent formula has fared well over the past decade in the Southwest and in states like Texas and Florida, with companies relocating their headquarters and offices and housing prices reaching seemingly unattainable heights for residents considering buying a home.
Doug Ressler, manager of business intelligence at Yardi Matrix, said the BTR model is now seeing success in the Southeast due to changes in employment-driven migration patterns, with technology companies, electric vehicle manufacturers and other major employers establishing offices and facilities in cities like Charlotte, North Carolina and Nashville, Tennessee.
Ressler said that Atlanta specifically is experiencing growth in the build-to-rent single-family home sector because developers view unused land north of Atlanta’s city limits as profitable.
“The permitting and zoning – you will find that true in most markets – is very, very attractive in the Atlanta market,” Ressler said. “There’s been a saying that if you want to track single-family rentals, ‘So goes Atlanta, so goes the single-family rental.”
Developers then proceed to buy up unused land north of the city to construct new communities consisting solely of single-family rental units. Ressler also said that the qualities that make Atlanta a rewarding work destination also make the city an appealing destination for BTR developers looking to expand their property portfolios.
“[Atlanta] has a strong academic base, it has a strong tech hub, it has migratory patterns that increase household formation,” Ressler said. “And, it has larger millennial populations.”
Developers of single-family rentals tend to market their products to specific audiences: particularly those unable to afford lofty housing prices caused by low supply and rising interest rates, as well as those wanting to continue renting for the sake of avoiding many of the responsibilities that come with owning a home.
Though, these characteristics aren’t necessarily mutually exclusive. While those relocating for work may earn enough annually to purchase a home, Ressler said the opportunity to live in a single-family home while not having to face the drawbacks of homeownership, like home repairs, routine lawn maintenance and homeowners’ association fees, is proving to be enough to sway certain movers to pursue renting long-term.
“Do they have a median income they can afford, if the supply were there to buy? Probably, but in all cases, that may not be the lifestyle that they want,” Ressler said. “[Tech workers and developers] are looking for a social community. In other words, it’s not just about plunking down a house or plunking down someplace to live. They want to be able to have retail, grocery and social amenities in a fairly close-proximity area.”
Atlanta’s build-to-rent presence has also witnessed a majority of its growth fairly recently. The city ranks fifth out of metro areas nationwide in terms of build-to-rent completions over the past five years. Greater Atlanta’s BTR inventory has increased nearly 1,500 rental units since 2017, measuring up to a 380% increase, the second-largest five-year rate increase out of the 20 metro areas listed, falling behind only Charlotte, North Carolina.
In the long term, Atlanta’s build-to-rent market is expected to expand even further. Atlanta ranks fourth for the number of single-family rental units currently under construction, topped by Phoenix and Texas metro areas, Houston and Dallas. Also, according to the related study from RentCafe, single-family rental units have an occupancy rate of 97% nationwide, besting even that of traditional apartment units, which currently holds an occupancy rate of 95%.
Although much of greater Atlanta’s BTR presence is situated in suburban cities north of the city limits, like Lawrenceville, Dacula and Cumming, Ressler said developers will likely set their sights on other suburban areas surrounding the city in the coming months or years, as long as the social infrastructure in those areas keeps up with Atlanta’s radically-shifting population.
“Housing supply or purchase is still down, [and it] doesn’t look like it’s coming back in the near term,” Ressler said. “So, as long as that exists and households are being formed, [residents] are going to look to this product [as an alternative].”