The US Sun Belt is witnessing above-average rental yields driven by a surge in housing demand coupled with insufficient supply, according to a new study by the Empira Group. The report, which examines property prices, rental yields, and investment opportunities, highlights the region’s strong appeal for investors as rising home prices push more Americans toward renting.
The Sun Belt, a rapidly growing area that stretches across the southern United States, has become a hotspot for population growth, attracting both domestic migrants and international newcomers. However, construction of multifamily rental units has lagged behind demand. In the ten largest metropolitan areas in the Sun Belt between 2013 and 2023, the number of new households outpaced the number of new apartments, further straining supply.
As a result, rental prices in the region have skyrocketed, with some Sun Belt cities seeing rent increases far beyond the national average. Tampa and Phoenix, for example, recorded rental growth of 64.7% and 62.8%, respectively, compared to the overall US increase of 39% over the past decade.
“The rental market in the Sun Belt offers investors not only attractive yield potential but also a chance to capitalize on the structural advantages of this dynamic region,” said Prof. Dr. Steffen Metzner, Head of Research at the Empira Group.
Despite these increases, rents in most Sun Belt cities remain below the national average of $1,690, with exceptions in Florida cities like Miami, Orlando, and Tampa. This affordability, combined with low or no income taxes and moderate property charges, makes the region particularly appealing for both residents and investors.
Limited Construction Activity
The demand for rental housing in the Sun Belt is not being met by current construction rates. In many cities, the number of new apartments is far lower than the number of new households. Miami, for example, saw the addition of 155,000 new households but only 59,000 new apartments, emphasizing the high demand for rental units, especially in urban centers.
Cities like Dallas, Atlanta, and Houston are experiencing significant household growth, but new construction has struggled to keep pace. This trend highlights an opportunity for investors to focus on developing rental properties in these high-demand markets.
Rising Home Prices Push More to Rent
As home prices rise, homeownership is becoming increasingly unattainable for many Americans. Between 2013 and 2023, the ratio of home prices to household income increased across the Sun Belt. In Dallas-Fort Worth, the ratio jumped from 1.7 to 2.1, while in Miami, it surged from 3.7 to 4.3. This growing affordability gap is further boosting demand for rental housing.
“These developments indicate a steady, long-term rise in property values, offering investors a stable risk-reward profile,” said Metzner. “Unlike more volatile markets, the Sun Belt provides consistent value growth and dependable returns.”
Develop-and-Hold Strategy for Long-Term Gains
Empira’s research suggests that a develop-and-hold strategy—where investors build properties and retain them for long-term rental income—is particularly effective in the Sun Belt. With high demand and limited supply, rental yields are rising alongside property values. This approach also allows investors to diversify risk by holding properties in multiple regions, while still reaping significant profits.
As demand for housing in the Sun Belt continues to outstrip supply, investors stand to benefit from this dynamic market’s long-term growth and stability.
Source: Empira Group
