Rental Real Estate as a Solution to the U.S. Housing Affordability Crisis: Alternative Investment Opportunities for Retail Investors

The U.S. housing affordability crisis has reached a critical junction, with structural supply constraints and persistently high mortgage rates creating a frozen market that disproportionately impacts younger generations and first-time buyers. According to the Atlanta Fed's Housing Ownership Affordability Monitor (HOAM), owning a median-priced home in 2025 required 47.7% of the median household's income, far exceeding the 30% threshold deemed affordable. This affordability gap is compounded by a 4.7 million housing unit deficit and a "mortgage rate lock-in" effect, where homeowners with low-rate mortgages (many below 4%) are reluctant to sell, suppressing liquidity. Against this backdrop, rental real estate is emerging not only as a lifeline for tenants but also as a compelling alternative investment opportunity for retail investors, particularly through platforms like Arrived, which are democratizing access to real estate returns.

The Structural Case for Rental Real Estate

The U.S. housing market's imbalance-driven by restrictive land use policies, rising non-mortgage costs, and demographic shifts-has created a fertile ground for rental real estate. Goldman Sachs Research underscores that height restrictions and minimum lot sizes in urban areas have stifled supply growth, a barrier that could be mitigated through zoning reforms. However, such reforms remain politically contentious and slow to implement. In the interim, the rental market offers a pragmatic solution. Realtor.com data reveals that renting remains significantly cheaper than buying in 49 out of 50 major U.S. metropolitan areas, with median asking rents declining 2.1% year-over-year in 2025. For retail investors, this dynamic presents a dual opportunity: capitalizing on stable rental demand while avoiding the illiquidity and high entry barriers of traditional home ownership.

Democratizing Real Estate: The Role of Platforms Like Arrived

Platforms such as Arrived are redefining access to real estate investment by enabling retail investors to participate in rental property ownership with minimal capital. Arrived's model allows investors to purchase fractional shares in single-family and vacation rental properties for as little as $100, effectively creating a "stock market for real estate". The platform manages property operations, including tenant relations and maintenance, while offering liquidity through its Secondary Market, where shares can be traded peer-to-peer. With over $300 million invested in 550 properties across 65 U.S. cities, Arrived has demonstrated strong performance, including an 8.39% annualized return for its Private Credit Fund in November 2025. Such platforms are particularly appealing in a frozen traditional market, where high mortgage rates and supply constraints deter conventional home purchases.

Bank of America's Outlook: Structural Opportunities in Alternative Real Estate

Bank of America's 2025 Specialty Asset Management Outlook highlights rental real estate as a strategic alternative investment, particularly in multifamily, senior residential, and workforce housing sectors. Ken Shepard of Bank of America Private Bank notes that real assets like commercial real estate, farmland, and timberland are gaining traction as hedges against inflation and uncorrelated diversifiers in a high-interest-rate environment. The bank also anticipates a rebound in private equity and alternative asset management by 2026, driven by falling valuations and a stronger economic outlook. For retail investors, these insights underscore the long-term viability of rental real estate as a portfolio diversifier, especially as traditional markets remain constrained.

Navigating Risks and Opportunities

While rental real estate offers promise, investors must navigate risks such as declining rent growth and regulatory shifts. Realtor.com data shows that investor selling activity slowed in 2025, with sales falling 4.1% year-over-year. However, the net inflow of investor purchases-41,000 more homes bought than sold in the first half of 2025- suggests sustained demand. Bank of America's Matt Vernon also emphasizes the role of alternative mortgage products, such as adjustable-rate mortgages, in providing flexibility for investors in a high-rate environment. For platforms like Arrived, the key lies in balancing occupancy rates (currently 95% for its Single Family Residential Fund) with cost management to sustain returns.

Conclusion: A Path Forward

The U.S. housing affordability crisis is a multifaceted challenge, but rental real estate-supported by innovative platforms and alternative investment strategies-offers a viable path forward. By leveraging technology to lower entry barriers and enhance liquidity, platforms like Arrived are enabling retail investors to participate in a market segment that is both resilient and aligned with broader demographic and economic trends. As Bank of America and Realtor.com data suggest, the structural imbalances in the housing market will persist for years, creating enduring opportunities for those willing to rethink traditional real estate paradigms. For investors, the message is clear: rental real estate is not just a stopgap solution but a cornerstone of a diversified, forward-looking portfolio.