The number of single-family homes built-for-rent posted a year-over-year decline for the fourth quarter of 2019, according to the National Association of Homebuilders (NAHB). [1] The market has received attention as a means to add single-family inventory amid concerns over housing affordability and down payment requirements in the for-sale market. Single-family built-for-rent (SFBFR) construction does differ in structure characteristics compared other newly-built single-family homes.
According to NAHB’s analysis of data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, there were approximately 7,000 single-family built-for-rent starts for the final quarter of 2019. This is lower than the 10,000 estimated for the fourth quarter of 2018. Over the last four quarters, 38,000 such homes began construction, which is lower than the 43,000 estimated SFBFR starts for the four quarter prior to that period.
Moreover, the built-for-rent pipeline of single-family homes is considerably smaller than the single-family home portion of the rental housing stock, which is 35% according to the 2017 American Community Survey. Approximately five million single-family homes were added to the rental stock since the Great Recession due to tenure switching. As homes age, they are more likely to be rented and the vast majority of these rental homes are owned by individual households. Thus, the primary source of single-family rental homes is not construction but the existing housing stock. In fact, from 2005 to 2015, 56% of the gains in the rental housing stock were due to increases of for-rent single-family homes.
Nationwide, single-family rents [2] grew by an average of 3% in 2019, driven in part by the lowest unemployment rate in over 50 years, according to the CoreLogic Single-Family Rent Index (SFRI), a measure of rent changes among single-family rental homes, including condominiums.
“Strong economic growth and the lowest unemployment rate in over 50 years helped push single-family rents up by an average of 3% in 2019, which was the fastest rent appreciation since 2016,” CoreLogic said.