Last year roughly 25,000 single-family detached homes were built and operated as rentals, and spanning the next several years a significantly larger volume of single-family rentals will be built, according to a report from John Burns Real Estate Consulting.

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Takeaways:

  • Last year, roughly 25,000 single-family detached homes were built and operated as rentals.
  • Spanning the next several years, a significantly larger volume of single-family rentals will be built.
  • The competition between single-family rental homes and the detached resale/new-home market has created the need for new single-family rental homes.

Last year, roughly 25,000 single-family detached homes were built and operated as rentals — and spanning the next several years, a significantly larger volume of single-family rentals will be built, according to a report from John Burns Real Estate Consulting.

“We expect detached homes for rent to become an important segmentation opportunity for the top master plans in the country, who will no longer ignore 10 percent of housing demand,” said John Burns, CEO of John Burns Real Estate Consulting, noting that resale homes have historically filled the demand for single-family rental housing.

The competition between single-family rental homes and the detached resale/new-home market has created the need for new single-family rental homes to be built.

Burns cited several builders, including American Rental Properties, Starwood Waypoint, Lennar and Rancho Sahuarita, who have expressed plans to build more single-family rentals to sell to investors or manage themselves.

“Clearly, there is a subset of renters who will pay a premium to rent new, as evidenced by the 200,000-plus apartment units that are built and leased every year,” Burns said. “If it works for apartment developers, why has there not been much attempt to build single-family homes for rent? Those days are now ending.”

Major markets where single-family rental construction may pick up in the coming years include:

  • Houston
  • San Francisco
  • San Antonio
  • Dallas
  • Portland
  • Denver
  • Honolulu
  • Seattle

Spanning the last 12 months, rents for this product have risen by 13 percent to 15 percent in all of these markets, according to RentRange.

A group of secondary and tertiary markets where demand for single-family rental appears high includes Sarasota, Florida, where rents rose by 17 percent on a year-over-year basis.

Des Moines and Ames, Iowa, have seen rents rise by 21 percent and 22 percent, respectively.

Email Erik Pisor.

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