Wall Street Pours Billions Into Build-To-Rent Communities, Betting Big Against Home Ownership Amid High Prices and Interest Rates

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High home prices and stubbornly steep mortgage interest rates have put homeownership out of reach for many Americans. Wall Street has seized upon this, funding large swathes of luxury single-family suburban homes with everything an owner could want except a large down payment, mortgage and a deed in their name.

For generations, the norm in American towns and cities was that the best suburban communities, with the best schools, where affluent homeowners dominated, did not have many – if any – rental properties. That is now changing as millennials with decent jobs have found themselves priced out of homeownership in the neighborhoods where they want to live. Real estate investment trusts

such as AvalonBay Communities have taken up the slack, building large master-planned rental communities that replicate towny suburban neighborhoods.

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According to the Wall Street Journal, AvalonBay purchased 126 build-to-rent townhomes in Bee Cave, Texas, for $49 million. The firm plans to invest over $1 billion in the build-to-rent sector.

“We think we’re really in the early stages of what could be a pretty significant, almost new asset class,” AvalonBay Chief Investment Officer Matt Birenbaum told the Wall Street Journal.

AvalonBay is part of a growing group of investors that includes Blackstone, Invitation Homes and Pretium Partners, who have realized that amid a housing crisis, renting is a far more affordable option for many would-be younger homeowners. The data backs them up:

See Also: During market downturns, investors are learning that unlike equities, these high-yield real estate notes that pay 7.5% – 9% are protected by resilient assets, buffering against losses.

For the first time in over twenty years, the growth of the U.S. renter pool has outpaced that of homeowner households for the past four quarters, according to a Redfin analysis of U.S. census data. Additionally, the National Association of Realtors’ analysis of U.S. Census Bureau data shows that from 2021 to 2023, the share of build-to-rent housing starts doubled to 10% of overall single-family housing. In the third quarter of 2024, new renter households increased at three times the rate of homeowner households.

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