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Q3 Built-for-Rent Volumes Slip

The number of single-family homes built-for-rent posted a small decline during third quarter of 2019, according to the National Association of Homebuilders (NAHB). This market has received recent attention as a means to add single-family inventory amid concerns over housing affordability and downpayment requirements in the for-sale market.

According to NAHB’s analysis of data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, there were 11,000 single-family built-for-rent starts for the third quarter of 2019. This is lower than the 14,000 estimated for the third quarter of 2018 however. Over the last four quarters, 41,000 such homes began construction, which is lower than the 45,000 estimated SFBFR starts for the four quarters prior to that period.

Given the small size of this market segment, the NAHB notes that the quarter-to-quarter movements typically are not statistically significant. The current four-quarter moving average of market share (4.5%) remains higher than the recent historical average of 2.7% (1992-2012) but is down from the 5.8% reading registered at the start of 2013. As measured for this analysis, this class of single-family construction excludes homes that are sold to another party for rental purposes, which NAHB estimates may represent another two percent of single-family starts. The estimates in this post only include homes built and held for rental purposes.

With the onset of the Great Recession and declines in the homeownership rate, the share of built-for-rent homes increased. Despite the current elevated market concentration, the total number of single-family starts built-for-rent remains small in terms of the total size of the building market. Howeer, a new study from Cornell authored by Suzanne Lanyi Charles, assistant professor of city and regional planning, identified how these rental trends impact housing, from more unaffordable housing and household instability to increased rents and evictions, depressed house prices and deferred maintenance.

“Single-family rental housing is an increasingly prevalent form of housing tenure in U.S. suburban neighborhoods, representing a paradigm shift in how households gain access to a suburban single-family home,” Charles wrote.

Charles notes that in an attempt to stabilize neighborhoods hit hard in 2008, foreclosed single-family houses were sold off in bulk to large corporations. Increases in suburban single-family rental housing may provide households access to neighborhoods that are otherwise off-limits to renters, Charles said, but the reverse is also true.

Charles notes that while policymakers including Democratic presidential candidate Elizabeth Warren have proposed legislation limiting large-scale institutional investment in single-family rental housing.

About Author: Seth Welborn

Seth Welborn is a Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer.
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