Public and Private Sectors Converge to Close Rental Housing’s ‘Missing Middle’ Gap

Key Points 

• The "missing middle" a type of housing that falls between single-family homes and large apartment buildings is in short supply in many states. 
• Michigan and other localities are finding new ways to solve a persistent problem for American renters.
• Build-to-rent (BTR) is in the right spot to plug this gap in the U.S. housing market.

The “missing middle” is an overlooked part of the American housing market that’s grabbing the attention of policymakers and multifamily developers. Located between single-family houses and large apartment buildings, middle housing is hard to find in many communities. Old zoning rules have historically made it difficult to develop things like duplexes, triplexes, townhomes, and small apartments geared toward middle-income families.

With renters feeling stuck, developers are turning to build-to-rent (BTR) to deliver quality housing to a market starved for options. In Michigan and elsewhere, local governments are testing new ways to encourage the expansion of middle housing. Here’s how these ideas work and why they matter. 

Michigan Acts to Shrink the ‘Missing Middle’

Michigan is trying to help developers build more housing for families making 60–120% of the local median income. The state will cover part of the construction cost—up to $80,000 per home for small projects or $70,000 for bigger ones, with a $5 million maximum. 

Some of the money must go to rural areas, and developers need to show they have financial backing and local support, like land donations or tax breaks. The program also encourages designs that work for seniors and requires fair wages for construction crews. 

In total, Michigan has set aside $110 million for this effort. In one recent example, a $31 million grant will help build 204 units in Midland, with nearly all of them priced affordably. 

While Michigan legislators work to boost development locally, private sector investors are innovating at a national level.

Build-to-Rent Step in to Fill a Void 

While governments work on policy changes, private developers are stepping in with another solution—single-family build-to-rent neighborhoods. These are new homes built specifically for renting, often grouped in master-planned communities with shared amenities like clubhouses and pools.

BTR is thriving as starts have surged nationwide. The sector is expanding at a rapid clip with little signs of slowing down. Even when the housing market wavered, BTR held its own and showed investors its upside. Now, with the economy on firmer ground, the BTR sector is primed to put its stamp on renting in America, maybe even plugging the missing middle gap in the process. 

Initiatives Add Quality Affordable Housing

Public sector initiatives, and the rapid growth of build-to-rent neighborhoods all aim to solve the same problem: there’s not enough quality, affordable housing for middle-income renters. As policymakers and private developers converge on affordability, renting in America is verging on a tipping point, where new supply is what’s likely to move the needle.

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