Why Don’t Real Estate Developers Build More Purpose-Built Rentals? Interest Rates

Academics theorize why developers won’t create more purpose-built rental housing. They cite everything from user behavior to policy restrictions. For some reason, they never think to just ask a real estate developer candidly.

A few weeks ago I shared a popular Twitter thread on real estate rental development. Not a lot of people realize real estate development isn’t just about housing — it’s a business. That means it’s subject to the business cycle, and affected by things like interest rates. Here’s a quick rundown on how historically low interest rates destroyed incentive to build rentals.

Developers Build Whatever Is More Profitable
When do developers build purpose-built rentals? When it’s most profitable. When do real estate developers build homes for sale? When it’s most profitable. It’s not about helping to solve the balance of supply and demand. Private development isn’t a social service. It’s a profit-seeking endeavor. Glad that’s out of the way… [Read More]