BTR Is Losing Its Pricing Edge

A new research report by Parcl Labs challenges the popular belief that build-to-rent single-family homes command higher rent prices than scattered site properties.

The notion among multifamily institutional investors that new construction intended to be rented instead of sold can be leased at rates greater than those charged for scattered site houses has persisted for several reasons.

For one thing, the cost to maintain entire communities of rental houses is believed to be less expensive. For another, newer constructions typically offer more features and better amenities.

While those premises may be true, increased interest among BTR institutional investors has forged greater competition, which has kept a lid on pricing, according to the report from the real estate analytics company.

“With many investors simultaneously adopting the BTR strategy, the early-mover advantage can quickly erode as similar products enter the market, potentially exerting downward pressure on prices,” according to the report.

Different markets, similar trends

In the report, Parcl Labs studied seven core markets, finding that BTR outperformed scattered site rentals in just one. Rental pricing performances were relatively equal in three places. But in the remaining three, scattered site rentals faired better.

Overall, scattered site properties commanded a 7.3 percent rental premium, the study found. That advantage marked a major shift from just four years ago when the segments were all but equal.

Of the seven markets studied, Houston was the only one where BTR maintained its pricing edge. As of July, new construction in the market had a 4.3 percent price-per-square-foot premium. But in July 2020 that spread was much more significant with BTR landlords charging 18.5 percent higher rents than those who managed scattered site properties.

Per-square-foot pricing was found to be relatively even in Dallas, Charlotte and Atlanta with gaps mostly narrowing.

In Atlanta, which was an early hub of institutional single-family rentals, the spread most drastically favored scattered rentals when it peaked in 2021-2022. Since then, it has narrowed to a less drastic scattered site premium of 3.6 percent.

In Charlotte in 2020, the two segments were closely aligned. But by 2024, scattered rentals enjoyed a 5.3 percent edge. In Dallas, though, there has been a more consistent competitiveness in price per square foot between scattered units and BTRs.

The spread was noticeably wider in Tampa, Austin and Phoenix, according to the study.

Scatted site rentals in Tampa “consistently” outperformed BTR units. In July, the gap there was 16.3 percent—$1.50 per square foot for scattered properties vs. $1.29 cents per foot for BTR units.

The spread in Austin, 13.2 percent, has remained relatively consistent over the four-year study period. In the more volatile Phoenix market, on the other hand, BTR units have held competitive periods. But now, scattered site rentals command a 11.6 percent premium over BTR homes.

The Parcl Labs study noted that there are many other ways to track pricing data. For now, however, and until more information is available, “we let our data speak,” it said. “Based on this analysis, the common perception that BTR units will command better prices requires a deeper look.”