A lower cost of capital, more starts and developments, the rise of attached product, and technology are among the factors shaping how the BTR market will be defined in 2025.
While the build-to-rent (BTR) market has experienced a softening recently as the higher cost of capital has discouraged deals, the general state of the market is “good and getting better,” according to Callum Parrott, president and head of single-family rental (SFR) and BTR for Mill Creek Residential.
On the supply side, rate cuts from the Fed should lower the cost of capital, enable more deals, and encourage more investor activity. Such tailwinds should boost development and starts, which have been softer in 2023 and 2024. On the demand side, consumer affordability concerns and a product that caters to the lifestyle preferences of the demographic targets should allow the BTR sector to continue to capture demand for renters, both by choice and by financial necessity. Emerging trends, such as the rise of density-focused townhomes and attached product as well as technology in property management, will differentiate the BTR market and create a pathway for innovation in the sector.
Here are seven trends and market factors shaping the BTR sector moving into 2025.
1. Capital Markets, Starts, and Deliveries
Like the multifamily and SFR markets, there has been a slowdown in starts for BTR across all product types, in large part due to the frozen capital markets.
“The deals still don’t pencil, so we are not seeing a lot of development,” says Kimberly Byrum, managing principal for multifamily for Zonda, BUILDER’s parent company. “There was a lot of money raised to deploy to the asset class, but everybody is sort of sitting on the sidelines now because the returns are just not there for new development.”
Fewer starts will translate into fewer new deliveries in the near-term future, but demand for the BTR product type from young families to empty nesters remains strong. Additionally, recent rate cuts from the Federal Reserve should help bring the cost of capital down and allow more opportunities for those that may have been on the sideline.
Josh Hartmann, CEO of NexMetro Communities, says occupancy rates and rent growth are both trending upward as well, which, when combined with lower rates, is a positive sign for the BTR market.
“It is going to allow more debt to be placed by lenders, which will allow more projects to go forward,” Hartmann says. “It will also strive to drive down cap rates, which were historically high in the last 24 months. If [the Fed] drops [rates] another 100 basis points in the next six to nine months, that could be a meaningful change that will incentivize groups to proceed to start construction projects.”
Parrott says he expects investors to have “renewed interest” in BTR development and ownership in 2025.
“Capital markets are reopening as light has been shed on market cap rates,” Parrott says. “Institutional capital is interested in the asset class given the strong long-term fundamentals with BTR filling a need in the market and supply dropping in the near term.”
2. BTR as a Solution to Density, Affordability
Tim Sullivan, chief advisory officer for Zonda, says townhomes are “the new black” in the BTR space due to a number of factors, including affordability, density, and cost control.
“When we started in this space, it was almost all single-family detached homes,” says Bill Ramsey, principal at architecture firm KTGY, which has designed more than 140 BTR communities. “But now we are seeing a densification of products in BTR communities. Increasingly, you see more townhouses than single-family homes.”
Parrott says townhomes offer residents larger floor plans with the possibility for attached garages and private yards, which creates an attractive style of living more comparable with homeownership than traditional multifamily apartments.
Richard Ross, CEO of Atlanta-based, institutionally backed BTR operator Quinn Residences, says the company has developed its niche in the BTR space, bringing exclusively three- and four-bedroom townhomes to market.
“I think [townhomes are growing] because it is an easier product to get through zoning and entitlements. It is a standard product, so the jurisdictions that people are building in understand it. [Townhomes] still give a little higher density than a traditional single-family product that allows the economics to work a little better for those investors,” says Hartmann. Hartmann’s NexMetro Communities develops Avila Homes neighborhoods, which offer single-level, detached homes across its eight markets of operation.
While AMH offers single-family detached homes in the BTR market, Zach Johnson, the firm’s president of real estate investments, says nearly 80% of the market is either an attached product, townhome, or horizontal apartment.
“As it has become more and more expensive to build homes and builders need to get a margin on these deals, you’ve seen a trend toward more attached product increasing the density,” Johnson says.
With affordability top of mind, Byrum says more townhome designs with one-car garages and a driveway or tandem garages are in the development and planning phases. Developers are also having conversations about the necessity of two-car garages for townhome products, given the likely upward impact on rents.
“There are trade-offs in the townhome world. If you [include] a garage, you are most likely not going to have a yard—unless you have the fenced-in front porch area where you can have a yard. Where is the threshold of car value versus dog value?” says John Christian, managing director for Zonda. “You may see an offering of some units with garages, but not others. But it’s more of an 85-15 [split with] garages versus a 50-50 [split].”
3. Design, Amenities, and the Value of the Home
Ramsey of KTGY says the design solution increasingly deployed in the BTR space is standardization. This can include designing the same kitchens for similar product types or standardizing bathrooms and fixtures. Front-end efficiency in design can result in streamlined property maintenance and management in a finished community, he says.
“The key design attributes [for the BTR sector] are attractive, efficient, and robust,” says Matt Johnston, co-head of real estate for Pretium Partners, a specialized investment firm focused on residential real estate, residential credit, and corporate credit. “People want to live in an attractive house and be house proud. With respect to efficiency, a 2,000-square-foot house can feel big or small depending on the floor plan.”
For AMH, Johnson says the basic understanding of what features inside a home residents are willing to pay more for translates into more attractive homes and more efficient allocation of back-end costs.
“Porches are really attractive in sunny markets, [while] others may opt to not build a covered porch and save money,” notes Johnson. “We see a great return on investment on that: Where do we think if we spent a bit more we could recoup that investment versus other areas where the tenant may not pay an extra $25 in rent for?”
The target demographic is also informing design choices in the BTR sector.
Robert Holder, CEO and managing partner of Holder Properties, says product targeting empty nesters likely will feature primary bedrooms on the main floor, while product targeting families likely will include flexible layouts with possibilities for additional bedrooms and play areas for children.
Across all possible renters, Kory Geans, chief investment officer of Middleburg Communities, ARK Homes for Rent founder Jordan Kavana, and Hartmann say outdoor space—both in private and public areas—has emerged as one of the most sought-after features. Fenced-in backyards are considered highly desirable due to the large percentage of residents who have at least one pet.
When considering amenities, Johnston of Pretium Partners says the home itself “is the most important amenity,” offering residents space, an attached garage, and fenced-in backyards.
“Developers are moving away from the ‘amenities arms race’ we have seen in other sectors like student housing, where more extravagant facilities were added to outdo competitors,” adds Holder, whose real estate investment and development company entered the BTR sector in 2024. “Instead, renters are increasingly prioritizing quality over quantity. Practical amenities such as on-site maintenance and private outdoor spaces are preferred over lavish but underutilized features.”
Copper Valley Town Center in Calaveras County, California, is envisioned as a mixed-use community with two townhome sites, a retail district, and office space. | KTGY
4. Appealing to Multiple Target Demographics
The BTR sector is growing in its appeal to a diverse pool of renters, not just exclusively renters by choice or pre-buyers. In general, three cohorts have emerged as the primary residents in BTR communities: growing families or young couples, renters by choice who desire a luxury product, and empty nesters.
“[Families and young couples] typically desire more space and privacy than what is available in traditional multifamily housing but is not yet ready to purchase a home. This can be driven by financing constraints, particularly in areas with rapidly growing populations and rising housing costs, but can also be due to a desire for flexibility or hesitancy to commit to living in one place long term,” says Will Menkes, president and managing partner of Holder Properties.
According to Parrott, there has been a 9% increase in renters moving from apartments to BTR communities since the third quarter of 2022. The majority of renters moving are families relocating from other single-family homes or young couples coming from traditional apartments.
Byrum says BTR is an attractive product for millennials in their 30s making lifestyle choices, such as getting married, having children, or getting a pet. The additional space and yard offered in many BTR products is seen as an upgrade over traditional multifamily product. She says millennials in their early 30s and Gen Xers in their late 50s represent two of the greatest opportunity groups for the BTR product to capture moving forward.
Empty nesters and baby boomers are an emerging resident pool that are electing to live in BTR communities. Byrum says there are more BTR communities targeting active-adult renters, capitalizing on the desire for a maintenance-free lifestyle with the benefit of private parking, walkable communities, and ample private space.
Hartmann adds, “[55-and-older renters] like the idea of having maintenance-free lifestyles. They want to live in single-family homes [but also] want on-site property management and on-site maintenance that takes care of the house.”
5. Land and Regulations
Despite the resilience and viability of BTR as a product type, Ross says the space is still fighting the perception that Wall Street is buying BTR homes and preventing first-time home buyers from accessing the market. BTR can be a part of the housing supply solution, Ross says, if regulations ease.
“What is needed is a streamlining [of the] entitlement process and making more land available,” Ross says.
Holder says it has become increasingly difficult to gain the support necessary to “take underutilized land and develop it into rental product” due to preexisting stigmas about rental product.
“The areas in which populations have grown the strongest have typically seen the most significant price appreciation and thus reduced attainability; these are the places that need additional housing supply, which should include rental product,” Holder says. “Our view is that adding housing of all types to these areas will make them more vibrant, diverse, and livable for all facets of the community.”
Despite the headwinds surrounding land and regulation, Parrott says the BTR sector stands to benefit from increasing home prices. As prices rise and sales plateau, he notes for-sale builders may become less aggressive pursuing land opportunities.
“The decrease in competition for land, combined with a favorable readjustment in BTR return expectations, should create a more productive land-buying environment for BTR developers,” Parrott says.
6. Technology and AI in BTR
According to Kavana, the BTR market has shifted in the past year from a focus on growth to a focus on innovation and operational efficiency. ARK Homes for Rent is leaning into this by incorporating artificial intelligence (AI) technology to enhance its property management and resident experience, representing a larger trend toward technological innovation in the BTR space.
“While last year’s emphasis was on expansion, today’s market prioritizes delivering convenience, community, and personalization,” says Kavana. “ARK has embraced this shift by leveraging AI to streamline leasing, renewals, and day-to-day management through our resident app, improving both operational efficiency and resident satisfaction.”
Ross and Hartmann say technology in the home is growing increasingly essential in the BTR space. From keyless entries and Wi-Fi-enabled thermostats to smart doorbells, alarm systems, and leak detectors, technology is becoming a required element rather than a bonus add-on across the sector.
“Technology is becoming more and more important for both the resident and us as the operator,” says Ross.
Moving forward, technological innovations will likely continue to transform the resident experience and home performance, from AI-driven predictive maintenance tools to more robust resident apps. However, Kavana says it is important for operators to not innovate for the sake of innovation, but rather with intentionality top of mind.
“Innovation is not just about adopting new technology—it’s about making it work effectively for both our team and our residents,” Kavana says. “By 2025, technology will be deeply integrated into all aspects of BTR homes. We ensure our technology delivers measurable value by tracking how it saves time and enhances the resident experience. The fusion of AI and technology will allow us to offer more tailored, efficient, and valuable living environments, creating opportunities for both residents and investors.”
7. Complex Operators and Institutional Owners
A result of the capital-constrained market in BTR is the prevalence of more complex operators. As Sullivan says, “the tourists are gone, and the professionals remain.”
“As the BTR space evolves, there are two standouts emerging: those who are experts in the space and have learned lessons over the last few years, and those who are trying to capitalize on a trend,” says Geans of Middleburg Communities. “There is now an opportunity to work with groups who actually have a track record and experience in both purpose-built BTR and SFR.”
Hartmann says the consolidation in the sector is expected because as the market has gotten more difficult, interested groups that either are not as financially sound or did not have the requisite experience to operate in the space have been “flushed out.”
“You are seeing more sophisticated BTR developers taking on more market share. That is a positive for the market overall,” Hartmann says.
“It will make it a little bit more of a reliable product type. Now the professionalization or sophistication of the operators is increasing through this more difficult market. That makes for a stronger market.”
