The Market for Single-Family Rentals Grows as Homeownership Wanes


The supply of owner-occupied housing in the United States has grown by 10 percent over the past five years, while rental housing has increased just 1 percent. Freddie Mac estimates the housing undersupply in the United States to be more than 275,000 homes.

“There is as much a shortage of homes in the rental market as there is in the home purchase market,” said David Howard, the executive director of the National Rental Home Council. “Demand for single-family rental housing has been on the rise, partly in response to the Covid pandemic, but also because of strong underlying demographic factors.”

The shift appeals to landlords, as well, as renters in single-family homes tend to stay longer and have lower delinquency rates. NexMetro Communities, whose 23 neighborhoods carry the shingle Avilla Homes, has seen renter retention rates increase 20 percent since early 2020. For investors and landlords, built-to-rent properties increasingly offer a higher return, one that continues to pay dividends year over year. “With so many landlords stuck with nonperforming tenants, built-to-rent offers a higher capitalization rate than property development and sales,” said Justin Abdilla, a real estate lawyer. “Why slaughter the sheep when you can shear it?”

Nicolette Boxe, an investor and real estate agent in Leesburg, Va., agrees. After years of buying and renting properties one by one, she is now building a community of two-story, three-bedroom townhouses in her hometown, DeRidder, La. The homes, which each come with an electric car port and a small backyard, will rent for around $2,000 a month. They’ll stand out in DeRidder, she said, and that’s the point.

“We’re trying to give people an urban-city feel, even in Louisiana, where people aren’t accustomed to it,” she said.

In NexMetro’s communities, surrounding Phoenix, Dallas, Denver and Tampa, “residents are primarily renters by choice,” said Mr. Hartmann, the chief executive. “They have the wherewithal to buy, but are choosing to rent because of their life stage and preference. For them, it’s a lifestyle play.”

Micaela Cullender, 22, a fraud specialist for Goldman Sachs, chose the Avilla Heritage community in Grand Prairie, Texas, near Dallas, after noise from neighbors in her apartment building became intolerable while she was working from home. She and her fiancé, Tate Stavenhagen, were going to buy a home after getting married. After living at Avilla, where they have 10-foot ceilings and quartz countertops, they are planning to build a home with amenities on par with those of their rental.



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