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Single-Family Built-for-Rent Market is on the Rise

for-rent-threeThe increased popularity of the single-family rental (SFR) market in the last two years has led to an increased number of SFR homes built for the expressed purpose of renting. The market for detached SFR homes built-for-rent is on the rise despite a falling market share in the last three years, according to Robert Dietz, Vice President for Tax and Market Analysis for NAHB.

For the fourth quarter of 2015, built-for-rent SFR homes accounted for about 3.5 percent of all SFR starts, according to data from the Census Bureau (Quarterly Starts and Completions by Purpose and Design) and analysis from the National Association of Home Builders. While that market share is higher than the historical average of 2.8 percent, it is more than 2 percentage points lower than the market share at the start of 2013, just three years ago (5.8 percent).

Meanwhile, the number of SFR homes built for the purpose of renting ticked up from 25,000 in 2014 to 26,000 in 2015, according to NAHB.

“The market for single-family for-sale homes is growing faster,” Dietz said, noting that this was also the custom home market was also experiencing similar movements. “The 2014-2015 volume is higher than, for example, prior years, but market share is falling as the for-sale segment expands.”

Dietz continued, “With the onset of the Great Recession, the share of built-for-rent homes rose. Despite the current elevated market concentration, the total number of single-family starts built-for-rent remains fairly low in terms of the total building market.”

2-22 NAHB graphThe share of built-for-rent SFR homes comprises a considerably smaller share of the total SFR portion of the nation’s stock of rental housing. According to a report from John Burns Real Estate Consulting in August 2015, about 12.7 million households rented a single-family detached home, which made up about 29 percent of the 44.3 million total renters nationwide.

Burns noted in his report that the SFR market has traditionally been a “mom and pop” business (with about 54 percent of SFR landlords renting out only one house, according to data from RentRange), institutional investors were beginning to take note of the more than 12 million SFR detached home renters. He said he believes the competition of single-family rental homes with the detached resale and new home market has created a need for new homes to be built for single-family rentals.

“Clearly, there is a subset of renters who will pay a premium to rent new, as evidenced by the 200K+ apartment units that are built and leased every year,” Burns said. “If it works for apartment developers, why has there not been much attempt to build single-family homes for rent? Those days are now ending.”

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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