Insights on Small Single-Family Residential Rental Communities

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Insights on Small Single-Family Residential Rental Communities

According to residential rental analysts, REITs CEOs, and industry insiders, single-family residential rentals have been soaring in popularity over the past few years, they are more resilient than multi-family rentals during a crisis, and will continue being an attractive option for different demographics in the future.

Single-Family Rentals Are More Resilient During a Pandemic/Crisis

  • In the United States, the demand for single-family residential rental homes is soaring amidst the economic downturn occasioned by the COVID-19 pandemic.
  • According to executives from two REITs, stay-at-home restrictions have not reduced the demand for single-family residential homes. On the contrary, the companies are experiencing increased occupancy, with Invitation Homes' occupancy rising to 97.2% in April.
  • As per Dallas Turner, president and CEO of Invitation Homes, shelter-in-place restrictions have not impacted their ability to lease homes, but "residents have been moving into the company’s properties at the same rate as last year and at a faster clip than they have been moving out."
  • David Singelyn, American Homes 4 Rent chief executive officer, also noted that the demand for single-family homes had increased significantly, and the company generated a record number of showings in April.
  • The demand for single-family rental homes in the United States is surging because "would-be buyers are postponing or canceling purchases during the economic downturn."
  • According to Singelyn, single-family homes are also attracting people living in multi-family homes "looking for lower-density options in light of the pandemic and recommendations to maintain physical distancing."
  • Rent collections in single-family rental units have remained relatively the same as the pre-COVID times, and Charles Young of Invitation Homes believes that the economic ripple effects of the pandemic could make single-family rental units even more attractive.

Single-Family Rentals Will Outpace Multifamily Rentals

  • According to John Pawlowski, senior analyst of residential at Green Street Advisors, single-family rentals are projected to "outpace multifamily rentals in the next few years in terms of rent, revenue and even NOI growth."
  • As per Green Street Advisors, multifamily NOI will decline by 6% in 2021.
  • The attractiveness of this rental market sector has led to recent investments in the sector. One such investment is the $625 million partnership between JP Morgan Asset Management and American Homes 4 Rent to develop approximately 2,500 single-family rental homes in multiple markets in the West and Southeast.
  • The demand for multifamily homes is slowing down significantly since "its fundamentals are too strongly correlated to job losses" and the shifting demographics during this pandemic.
  • The growth of the single-family rental segment of the industry has been going on for a while now, outpacing both single-family for-sale homes and multifamily rentals.
  • According to analysts, some of the factors driving this growth include:
  • According to the National Rental Home Council, since 2006, the single-family residential rental segment has been the fastest-growing segment of the overall residential market in the US, registering a 30% growth since 2007 compared to multi-family's 15% growth for the same period.

Other Insights

Increased Investments in Single-Family Rentals in Southeast US


Demographic Profile of the Typical Customer

  • We have provided the following data points that provide insights into the demographic profile of a typical renter of a small single-family house.

Age

  • According to many sources, renters of single-family homes are mostly millennials who are starting families, albeit late, but cannot afford or just don't want to buy houses.
  • Baby boomers are also getting attracted to such homes where they can have a lock and leave mentality since they are tired of home ownership.
  • According to Matt Blank, a principal at BB Living, a build-to-rent company, their typical customers is, "a couple in their late 30s with two children and an annual income from $80,000 to $110,000."
  • As per Robert Dietz, NAHB’s chief economist, the surge in demand for single-family rentals in the US is driven by millennials moving from their 20s to 30s.
  • Most single-family home renters in the US are aged between 35 and 44.
  • Jordan Kavana, the founder of Clean Living Communities (TM), a significant player in the segment, says, "that 60% of their renters are young families."

Income

Gender

Marital Status

  • According to John Burns Real Estate, 52% of SFR renters are families.
Sources
Sources