The mom-and-pop business of detached single-family rental housing has gone Wall Street and corporate.
The first wave of investors swept up distressed homes during the foreclosure crisis nearly a decade ago and transformed the single-family rental market into a large-scale formally managed asset class. Today foreclosures are far and few, so investors are turning to a new strategy for tapping into an exploding rental market: buy and build new.
The players are many, per CNBC. Tampa, Fla.-based builder ERC is launching a soft IPO to raise $100 million to build 1,000 rental homes in Florida. Toll Brothers announced a $60-million joint venture with BB Living, a build-to-rent company based in Phoenix, and Lennar announced that it is moving further into this market after experimenting with a build-to-rent community in Sparks, Nev.
Changing attitudes about owning a house are contributing to growing demand for single-family rentals. Not only do Millennials and even a growing number of Baby Boomers looking to downsize perceive more risk than long-term benefits with home ownership, rental products have become more appealing than the typical multifamily building with shared walls.
In 2017, 37,000 homes were built as rentals, according to the National Association of Home Builders. That grew to 43,000 last year, or just under 5% of total single-family housing starts. But that is just homes built and held by builders for rent and doesn’t include those sold directly to investors, so the numbers are likely larger and growing more quickly.