Housing sector

The rapidly changing rental housing sector

An in-depth report explores the rapid evolution of the single-family rental market, the institutionalization within the market for new build homes, and the emergence of new sub-classifications of these assets.

Entitled, Low Density Rental Housing in America the study is a collaboration between RCLCO Real Estate Consulting and the ULI Terwilliger Center for Housing. A summary of the report by Todd LaRue and Cameron Pawelek of RCLCO uses information from their 20-page report to describe, among other things, the demographic trends and affordability issues that have led to the growth of purpose-built single-family rentals, measures operating and financial conditions within the sector, as well as the implications and forecasts related to SFR’s activity.

“Demographic shifts, including the millennial cohort moving into the age of family formation, are the primary driver of growth in low-density housing types,” write LaRue and Pawelek. “Given housing market constraints and rising construction costs, declining homeownership affordability is one of the most pressing challenges facing many Americans, driving additional demand for homes low-density rentals.

“Single Family Rentals benefit mature millennials looking for a new type of rental product that fits their changing lifestyles, from empty nesters looking to downsize to a maintenance-free living option and range of households at transitional life stages.”

As part of this study, RCLCO and ULI analyzed press articles and conducted interviews with various market experts in their effort to codify the language around product type, mapping the different subsets of SFR, according to the authors.

Single-family built-to-rent communities are most similar to individual SFR units, according to the report. The authors claim that these benefit from economies of scale with high concentrations of units in a single location and consistent branding. with or are sold from a larger planned community and have an average density of three to seven housing units per acre.

Small investors represent more than 97% of SFR’s existing real estate market, according to the report. These landlords usually own a few properties and rent them out through online marketplaces.

LaRue and Pawelek explain the emergence of a larger-scale interest in the market, something Bloomberg also reported earlier this year.

“After the Great Financial Crisis, SFR’s institutional aggregators emerged and aggregated thousands of homes across different markets, using robust platforms and economies of scale. This group also began working directly with builders to buy housing blocks to add to their portfolio as Resale home inventory has tightened. than rental, and therefore has a consistent brand image, housing quality and often offers on-site resources such as rental services, property management and amenities.”

The primary audience for BFR SFD homes are family households, typically in a transition period after moving to a new market or during the construction of a home, with mature professionals and empty nesters representing secondary market audiences, reported the authors.

Like DS News frequently reported in 2021, buildable homes, whose industry has remained stable in recent years with a small market share, has imminent growth potential due to several factors at play in the current market. The RCLCO/Terwilliger Center study also showed an influx of investments and transactions at SFR over the past 18 months. On the downside for mom-and-pop investors, the researchers say continued demand for the SFR product among institutional investors could drive cap rates below some garden-style flats in the near term, as more and more more investors are looking to add SFR to their portfolios.

Another potential downside of inbound SFR assets such as build-to-let is the potential impact on equity, the report suggests.

“With respect to affordability considerations, the higher price of some low-density rental communities could contribute to income segregation. Additionally, in some markets, investor buyers may create barriers to home ownership. ownership (with impacts on equity and economic mobility) consistently outperform individual first-time buyers for resale of existing homes, they report.”

They suggest zoning and land use policies that support mixed income and mixed tenure opportunities for residents, among other ideas.

The report’s authors conclude that, “while low-density rental housing is unlikely to solve the nation’s significant affordability crises, providing more housing alternatives to meet the needs of a diverse range of households Americans is a positive step forward”.

the Report of more than 20 pages is available via RCLCO.com. In addition to the aforementioned LaRue and Pawelek, Adam Ducker, Ryan Guerdan, Liam Mercer and Patricia Bacalao are the authors of the study.


Investors in communities and construction homes for rent, as well as all single-family rental investors, are encouraged to attend this fall Single-Family Rental and Investment Round Tablepart of 2021 Five Star Conference and ExhibitionSeptember 19-21 at the Hyatt Regency Hotel in Dallas, Texas.