While the typical midwestern city doesn’t offer the glamor and sunshine of South Florida, the growth profile of the Carolinas, the tech pedigree of Austin or the music scene of Nashville, the Midwest can provide build-to-rent (BTR) developers strong rental growth and lower costs.
Sun Belt markets have long dominated the BTR conversation, but a growing body of research suggests the Midwest may present the sector’s most compelling growth story in the years ahead.
After navigating legislative uncertainty for much of 2026, the BTR industry may be set for renewed growth, thanks in part to the version of the 21st Century ROAD to Housing Act passed by Congress last week. While the bill still needs President Trump’s signature, it would strip out onerous provisions and bans that industry participants say have largely stalled BTR construction since the beginning of the year.
With greater policy certainty potentially on the horizon, stakeholders may want to consider taking a close look at the Midwest, according to a new report from BTR developer Cavan Companies.
The report argues that while the Sun Belt overpowered the most recent BTR growth era, the Midwest is ripe to offer investors and developers arguably the most reliable returns in the coming years. Specifically, the research claims that the strongest opportunity in the Midwest lies in low-density, professionally managed BTR communities.
However, BTR is only part of the story. Multifamily investors and developers can also find attractive opportunities in the Midwest, supported by consistent returns, healthy rent growth and relative affordability.
The Midwest advantage
While the Sun Belt continues to benefit from strong population and job growth, a wave of new build-to-rent supply has weighed on rents. The Midwest, by contrast, remains more balanced and is generating much stronger rental growth.
A Yardi Matrix May 2026 report, which found that national BTR rents fell a slight 0.1% year over year, underscored this trendline. Sun Belt and Mountain West markets like Austin, Phoenix, Denver, Greenville, DFW and San Antonio posted the biggest rental declines. However, markets with the highest rental growth were overwhelmingly located in the Midwest, with Chicago, South Dakota, Columbus, Kansas City, Minneapolis, Cleveland and Indianapolis leading the way.
Cavan Companies’ report argues that the Midwest’s rent-growth advantage over the Sun Belt should persist for some time because Midwest construction pipelines remain relatively minimal, while high-growth Sun Belt markets continue working through excess supply.
To exemplify this, the report noted that the Midwest accounted for only about 13% of national BTR units under construction as of early 2026. Meanwhile, the Phoenix market alone had a pipeline roughly equivalent to the entire Midwest region combined.
Beyond rental growth and supply constraints, the report highlighted several advantages that the Midwest offers BTR developers and investors:
- Lower land costs, which reduce overall project costs and lower breakeven rents.
- More measured supply pipelines, meaning fewer risks of oversupply and rent concessions.
- Diversified local economies, supported by industries such as healthcare, logistics, manufacturing and finance.
- Lower operating cost volatility, especially for taxes, insurance and labor.
Why low-density may reign supreme
The research also concluded that, in the Midwest, low-density communities with detached homes and cottage-style product types may offer the best returns. These communities typically have 8-10 units per acre with sub-1,400-square-foot homes that offer private yards, garages and shared amenities.
Cavan Companies argued that this type of community is best positioned to serve the growing “renter-by-choice” demographic. Detached homes and cottages of this size generally appeal to renters who want a bit more space than an apartment but are not in the market for a for-sale home.
This type of community also provides strong operational performance for a few main reasons:
- Turnover is low, at roughly 14–18% annually versus 20–30% for conventional multifamily communities.
- Rent premiums of 10–20% are possible because residents value private yards, larger floor plans, and community amenities.
- Operating efficiencies improve through standardized floor plans, centralized maintenance and bulk purchasing.
As the report noted, these cottage-style, low-density communities are already quite common. The challenge is not in simply constructing these communities but in executing them at scale.
“The product is not complicated. What is complicated is executing it at scale with the site discipline, cost control, and leasing consistency that converts the format’s structural advantages into realized returns,” the report read.
The report argued that differences in BTR performance increasingly come down to three main factors:
- Site selection: choosing markets with employment diversity, population growth, schools, and limited new supply.
- Cost control: accurate budgeting and construction management.
- Lease-up strategy: effective marketing, renewal management, and disciplined use of concessions.
The multifamily opportunity
The Midwest’s appeal extends beyond build-to-rent. According to Yardi Matrix, six of the ten U.S. markets with the strongest multifamily rent growth between May 2025 and May 2026 were located in the region.
Similar supply dynamics are at play in the multifamily market.
“We haven’t gotten out over our skis as far as deliveries of new units. Sure, we’re a little bit oversupplied, but if you juxtapose that to, say, Austin or Nashville, we’re way less oversupplied and more balanced,” Ivan Barratt, founder and CEO at BAM Capital Founder and CEO told HousingWire TBD.
And Midwest markets, unlike the Sun Belt, offer more moderate yet consistent growth patterns.
“The Midwest doesn’t boom, but it doesn’t bust either,” Barratt said.
Yet another advantage that the Midwest offers is its relative affordability.
“We’ve now got more mobility with the labor force. What we predict is that we’ll see more in-migration into the middle of the country,” Barratt said. “That affordability might not last forever as demand increases, but for the foreseeable future, you’ve got quite a bit of stronghold in the Midwest.”
