Real Estate

Single-Family Rental Boom: 93K Homes Built, 99K Underway

Surge in single-family rental construction hits record 93,000 homes, driven by housing affordability crisis.

By Doug Elli

5/15, 11:24 EDT

Key Takeaway

  • Single-family rental construction hit a record with 93,000 homes completed last year, a 39% increase from the previous year.
  • Despite tighter lending conditions, about 99,000 rental homes are under construction this year, indicating sustained growth in the sector.
  • The surge in single-family rentals is driven by unaffordability in homebuying and appeals to a broad demographic including older millennials and retirees.

The Unaffordability Crisis and the Rise of Single-Family Rentals

The landscape of American housing is undergoing a significant transformation, driven by an unaffordability crisis not seen in decades. This shift is compelling more families to opt for renting over buying, fueling an unprecedented boom in the single-family rental business. According to the Wall Street Journal, citing data from John Burns Research and Consulting, some 93,000 homes built as single-family rentals were completed last year, marking a 39 percent increase from the previous year and setting a new record for the sector. This trend is not expected to slow down soon, with predictions of approximately 99,000 rental homes under construction this year, despite tighter lending conditions.

The Appeal of Single-Family Rentals

Single-family rentals are becoming increasingly attractive for a wide demographic, from older millennials to retirees, driven by the escalating cost of homeownership. In March, the average monthly mortgage payment was reported to be 38 percent more than the average monthly apartment rent, according to CBRE. This affordability gap is making single-family rentals a viable alternative for those seeking the benefits of a single-family neighborhood without the financial burden of owning a home. The sector's resilience is further underscored by its sustained occupancy rates, which have held up better than those in multifamily buildings, even as rent growth has moderated from the pandemic highs.

Market Dynamics and Legislative Scrutiny

The single-family rental market is not without its challenges, particularly from legislative scrutiny. Congress has expressed concerns, albeit with limited evidence, that Wall Street's involvement in the housing market may be exacerbating affordability issues. However, companies focused on building single-family rentals can argue they are contributing solutions to the housing shortage, a narrative that distinguishes them from private equity firms converting houses into rentals. This scrutiny comes at a time when major players in the single-family rental space, such as Roofstock and Mynd, are considering mergers to consolidate their positions in the market, as reported by Bloomberg. These developments reflect the sector's growing importance and the complex interplay between market forces and regulatory oversight.

A Sector in Transition

The single-family rental sector represents a significant shift in the American dream, from owning a home to finding flexibility and affordability in renting. This transition is supported by technological advancements and strategic mergers, aiming to streamline the process for investors and renters alike. As the sector navigates legislative scrutiny and market dynamics, its evolution will likely continue to reflect broader trends in housing affordability and consumer preferences.

Management Quotes

  • Richard Ross, Developer:

    "This isn’t going away."

  • Executive of Heitman:

    "We expect a growing number of older millennials and retirees to rent."