Part I of this two-part series focuses on the new reality of the single-family rental market.
Alternate Path to American Dream Is Becoming a Single-Family Renter
Single-family built-to-rent homes now make up approximately 6% of all new homes in the US. This percentage is projected to double in the next 10 years.
Paraag Sarva, chief executive of Rhino, a company that sells insurance renters can buy in lieu of a security deposit, said, “The majority of opportunities in this country have traditionally been rooted in the Old-World American dream, with a white picket fence, two and a half kids and a dog. But that is fundamentally changing.”
The reality today is “…40% of Americans can’t afford a $400 emergency, let alone relocating to a new home…” and a down payment, added Sarva.
“The single-family home market has become an inevitable asset class for institutional money,” said Aaron Graf, chief executive of Lg Fairmont, a New York-based real estate brokerage. “A normal buyer can’t compete with an all-cash offer from an institution, especially if (the all-cash offer) comes in high. Young people are thus being priced out of the starter single-family home.”
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Built-to-Rent Movement Began in 2010
Investors began snapping up foreclosed single-family homes during the financial crisis of 2010. Investors then turned to developers who were building large single-family properties and offered to buy 10-15% of those developments in order to lease their properties to individual households. When developers said yes, “People saw that these rental homes could coexist just fine with owner-occupied homes,” said Gary Beasley, chief executive with Roofstock, an online marketplace for and investment in owner-occupied homes.”
By the pandemic onslaught, institutional landlords had shifted towards full-on subdivisions of rental properties. In May 2020, Redfin indicated that investors had put down $77B on single-family rental homes within the last six months. The cherry on the chocolate fudge sundae also happened in May 2020 when Rockport and an investment firm announced a joint venture of $1B in single-family homes to be renovated and leased throughout the country.
Thanks to The New York Times
