$30B Is Flooding the SFR Market With More To Come
Investors view SFRs as an inflation hedge, and record-high rent growth is also supported by high occupancy.
More than $30 billion in capital is chasing the surging US rental housing market as bond yields remain at historic lows and inflation rises.
John Burns Real Estate Consulting identified 43 announcements targeting US rental housing, but notes that the real number is likely “much higher” since those figures are only the equity investment and excludes the debt, and does not include announcements that are not yet public.
Single-family rents have increased 6% over the last year, according to the Burns Single-Family Rent Index, the highest growth in the 35 years that John Burns Real Estate Consulting has collected and analyzed such data. The index is a weighted average of rents across 63 major single-family rental markets.
JBREC’s Danielle Nguyen notes that multiple factors can account for the surge in investment activity. Investors typically view SFRs as an inflation hedge, and the aforementioned record-high rent growth is also supported by high occupancy.
In addition, “renters have demonstrated that they are willing to pay a premium to rent in a new home neighborhood managed by a professional landlord,” she says. “While the news headlines and NIMBYs are busy bashing institutional owners, many renters are clearly enjoying a better rental experience living with renter (instead of homeowner) neighbors and having no fear that their landlord might decide to sell the home sometime soon.”
SFRs tend to be less common in the Northeast and large coastal metros, and are more popular in the Southwest, Midwest and Southeast. The Southwest (4,896) and Southeast (3,978) have the most SFR units under construction, according to Yardi Matrix data.
Investment in the sector has also been pushed along by the COVID-19 pandemic.
“The single-family rental concept is not new, but it has been blossoming over the last several years and most notable since the onset of COVID-19. That is when we really saw things picking up,” Dori Nolan, SVP of national client services at Berkadia, told GlobeSt.com in an earlier interview. “With affordability continuing to rise and household incomes not rising in lockstep with the cost of a home, this is becoming a more permanent, natural place in solving the housing crisis…I think that single-family rentals will become as prevalent as multifamily housing in the next 10 to 20 years. It really reminds me of when the multifamily sector took off in the 90s.”