Built to rent housing is nothing new. We’ve seen single-family rental companies, usually small “mom and pop” single-family rental investors, buy homes directly from builders with the intention of renting, not selling, those homes for a long time.
During the 1980’s, this built to rent niche hit +30,000 units during any 12-month period. In the run-up to the housing collapse in 2008, we saw +40,000 single-family housing units in this niche. Today, we’re back to the figure of +30,000 units. Most of this rental stock is built in suburban southeastern and southwestern markets where single-family housing is predominant and where single-family rental companies are most active.
Even though we have these above numbers, it’s hard to know exactly how many housing units single-family rental companies buy directly from builders. Neither has to disclose those numbers. That said, the National Low Income Housing Coalition believes that cumulatively, from 2005-2016, the number is up to 43.3M units. If that’s so, these single-family rental companies are the nation’s largest landlords.
Rather than small “mom and pop” single-family rental companies, today’s Invitation Homes and American Homes 4 Rent, the nation’s largest such companies, are buying whole subdivisions of new homes directly from builders with the purpose of renting out those homes.
Invitation Homes is implementing plans right now to own a 79-unit single-family rental subdivision, Evan Woods, in Charlotte. American Homes 4 Rent is actually building its own supply of housing to rent.
Two new upstarts, NexMetro and AHXCommunities, are leading the wave of new single-family rental companies into this niche. These companies build entire subdivisions and then assume property management functions as well as rent out the units. Some of these built to rent subdivisions have amenities such as pools, spas, gated entrances and landscaping services. Some do not.
Inherent problems with such multi-faceted companies include biased rental practices, tenant mistreatment, automatic rent increases, and hasty and/or unclear cause-and-effect eviction practices.
Whatever the problems and whatever the current numbers, many housing experts see built to rent partnerships and mergers coming in the very near future. Rick Palacios, junior director of research with John Burns Real Estate Consulting said, “I think you can just read the tea leaves and see that there are definitely relationships emerging in this niche industry.”