Single Family Rentals Present A Big Opportunity For Builders

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June 16, 2016

Homeownership has fallen to its lowest level since 1967, and it will likely continue to drop toward 60 percent. This is due to limited inventory, high prices, debt, wage stagnation, and strict lending practices. Rental households have increased by 9 million in the last 10 years. 

Approximately 12.7 million of today’s 120 million households rent a detached home, with builders until recently allowing existing resale homes to meet the demand, says real estate consultant John Burns. Between traditional for-lease and for-sale options, single-family rentals (SFRs) are the missing layer of housing, experiencing a marked upswing during the recession with growth continuing in today’s recovery cycle. This will likely grab the attention of developers across the country.

Rental demand is driven by a number of factors. These include people waiting longer to get married, high home prices, the inability to qualify for a mortgage, and a general lack of desire to be tied down to a home. However, many still want the lifestyle of a single-family home.  As interest rates increase, SFR communities will become even more attractive.

The decline in homeownership spans all age groups. Young professionals and families, move-down couples, and active adults lease single-family homes by choice.  A recent article in Forbes online noted that ownership by those aged 35 to 44 decreased almost 10 percent from 2007 to 2015, the biggest decline of any age group. Wage stagnation and foreclosures have been cited as primary causes by Susan Wachter, Professor of Real Estate and Finance at The Wharton School of the University of Pennsylvania.

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