In 2020, 49,000 houses in the US were built as Single-Family Rentals, which is a 66% increase in the average homes build to rent annually for single family rentals over the last decade! What has contributed to this boom in homes being built for Single Family Rentals?
Since 2008, and The Great Recession, the Single-Family Rental market has evolved and changed. More and more SFR are owned and built by large investors. (Although, it’s important to note that 85% of SFR are still owned by small investors with fewer than 10 homes in their portfolios.) These large investors have large portfolios and have sometimes created entire SFR communities. These communities of build-to-rent homes are often made up of many different types of homes: suburban style single family homes, as well as, duplexes, row homes, horizontal apartments, and small lot single-family homes. SFRs managed by large investors often come with many amenities such as front year maintenance. On average, SFRs managed by large scale investors are often 5-20% more expensive per square foot than those managed by small scale investors.
Who are buying these SFRs? Many of them are Millennials and Gen Zer’s. Millennials households, on average, a lot less resources to purchase a home than Gen Xer’s and Baby Boomers had at the same point in life. They also tend to want more private space and the option to have more outdoor living space. The average square footage of built-to-rent homes is between 1,400 and 2,200, perfect for young families or young professionals who can afford and value the space but cannot afford a down payment.
The pandemic and work-from-home options helped many young people to seek out SFRs in the past year. In the country, Charlotte has the 4th highest amount of 50-plus SFRs units currently being built with 719 units as of June 2021.
As more younger people reach the point of wanted to have their homes, we are likely to see an even greater increase in the built-to-own market. Many more large-scale investors will probably join the community of SFR owners, decreasing the percentage owned by mom-and-pop, small scale investors.
How do you think the SFR build-to-own market will change in the next few years?