Demand for Single-Family Rentals Presents Opportunities for Builders

Single-family rentals are poised to become severely undersupplied over the next decade, presenting a great opportunity for builders. RCLCO Real Estate Advisors says the current supply and future supply of single-family rentals is not fit to meet the increasing demand. Over the next 10 years, single-family rentals are predicted to grow by 700,000 units. Large investors, such as Tricon Residential, are seizing the opportunity by expanding their single-family rental ownership. Brookfield Asset Management recently acquired a controlling stake in a single-family landlord company, and leading single-family landlord Invitation Homes came out of its booming second quarter with a thirst for 80,000 more homes.

Since the recovery from the Great Recession the single-family rental market has evolved from individual units owned and rented out by small investors, to large investors acquiring significant portfolios of scattered units, to building new units specifically for rent, creating entire communities of single-family rentals with professional management. Build-to-rent homes are not a single product, for while they include suburban style single-family homes, they also include single story detached apartment style units, or horizontal apartments, small lot single-family homes, and even duplexes and row homes.

Following the Great Recession, the share of single-family rental homes expanded substantially as a result of excesses in the for-sale market, and several million additional households became single-family renters, moving into the large vacant stock of newly foreclosed single-family homes. Many of those vacant units were purchased by private-equity groups and other investors, helping to stabilize the housing market. Institutional investors had entered a market previously dominated by small mom and pop investors and found it to be an attractive and growing market.

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