Future Trends in the Single-Family Rental Market

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When you think of rental housing, what do you envision? For many people, apartments are the first thing to come to mind. But nowadays, that image is becoming less and less accurate.

More tenants are moving away from apartments – whether it’s downtown high-rise buildings, luxury apartment complexes in the suburbs, or federally-subsidized housing communities – instead of looking to reap the benefits of renting a single-family home. And as the single-family rental market emerges as one to watch, a growing number of investors and developers are asking: what is the future of rental housing?

Single-Family Rentals Are Having a Moment

A 3D rendered animated image of a home with a for rent sign out front

Of the close to 43 million renter households in the U.S., more than half (about 25 million) live in single-family rental homes (Freddie Mac). That includes detached homes, townhomes, and multifamily properties with up to four units, all offering tenants advantages that aren’t typically found in apartment-style living. The single-family rental market has a commanding valuation of over $4 trillion, so it’s not surprising that it’s drawing the attention of investors, developers, and tenants alike.

Despite (and perhaps because of) its rapid growth, the single-family rental (SFR) market is one that tends to raise more than its fair share of questions. Investors wonder if single-family properties are a profitable investment, while many developers ask what it takes to succeed in the SFR market. But in the minds of both renters and experienced SFR developers, the answer is clear: now is the time to stake your claim in the single-family rental property market.

Now, SFRs are the belle of the housing market.

The U.S. Census Bureau measured the occupancy rate for single-family homes at a generational high, reaching 95% in early 2021. People realize that even if they can’t commit to the responsibilities or the expenses of homeownership – even if they simply don’t want to – they can still enjoy all the luxuries of living in a single-family home.

And as renting becomes an increasingly attractive option, more people are discovering that renting vs. buying a home comes with some major advantages:

  • Typically, the monthly costs associated with renting a home are far lower than those involved in owning one. For example, a renter doesn’t have to budget for repairs and maintenance, property taxes, or homeowners’ insurance.
  • For individuals that prioritize convenience, being able to relinquish the chores of owning a home is a big win. Tasks such as landscaping, exterior updates, and even small jobs like changing the air filters are all the responsibility of the landlord or property management company.
  • Renters aren’t burdened with concerns about changing property values, taxes, and other variable costs.
  • Many newer rental homes are part of build-to-rent master-planned communities, which are specifically designed to provide the very best in amenities while flawlessly fitting the needs of tenants.

With all of this in mind, it seems safe to say that single-family rentals aren’t just a passing trend. Rather, they’re a staple of the rental market, and they’re absolutely here to stay.

A Promising Future: How the Single-Family Rental Market Has Changed & Where It’s Going

Data compiled by Amherst Capital Management shows us that the popularity of single-family rentals isn’t exactly a new phenomenon. In fact, SFRs have had a steady presence in U.S. housing marketing since the 1980s. What is new is the way that the SFR sector has overtaken virtually every other part of the rental market.

Changes in the market for single-family rentals

Here are just a few of the single-family rental statistics that highlight just how rapidly the sector is growing:

  • Data from before the recession (1985-2005) puts single-family rentals at a steady 30-35 percent of the total rental market.
  • Since the Great Recession, the SFR sector has been the rental market’s fastest-growing segment. About 4 million single-unit dwellings (a 35% increase) have been added to the market in the past decade, with another 8 million two- to four-unit dwellings joining as well.
  • Single-family rentals now makeup 53% of the total rental market nationwide and up to 66% of the market in rural areas.

Reasons behind the market shift to SFRs

Housing experts point to the post-housing boom crisis of the late 2000s as a major catalyst for the changes that have created the market as it is today. The massive rise in foreclosures opened the door for large-scale investors and developers to join the rental market, as they purchased foreclosed properties and then made them available for rent.

Whereas individuals or small entities primarily owned the single-family rentals of the 1980s and 1990s, there has been a shift to properties – and even entire communities – owned and managed by large companies.

But that doesn’t necessarily mean that major corporations are dominating the SFR rental market. In fact, they still own only a small percentage of homes for rent – just 1%, to be exact. What does that mean for the future of rental housing? In short, there’s still plenty of potential for investors and developers that are well-prepared to enter the market.

Why Americans are choosing single-family homes for rent

Let’s take a moment to zoom out and look at the big picture: how has the American housing marketing changed? And perhaps more importantly, what does that mean for the many Americans who are considering moving to a new home in the near future?

It comes as no surprise to hear that the pandemic has played a major part in the market shift, but it might not have caused the changes you would expect. Together with factors like the popularity of remote employment, it spurred a major increase in the cost of buying a home.

According to the National Association of Realtors, the median price of existing single-family homes for sale has skyrocketed to an all-time high. In March of 2021, the median home price in the U.S. was a record-breaking $335,000, selling in just over two weeks. While this is a plus for sellers, it’s become a major obstacle for buyers – a considerable number of Americans are being priced out of homeownership altogether. Add that to the intense demand for homes, which far surpasses supply, and it makes sense that more people are making the switch to renting.

What This All Means for the Future of Housing

As the SFR market thrives, American housing as we know it is changing, likely forever. In many ways, the growth of SFRs has put a higher quality of life within easier reach while simultaneously raising the bar for renting in general.

Moving forward, the housing market will look considerably different than it once did, in more ways than one.

Tenants’ expectations are higher than ever – and leading developers are rising to the occasion.

So, what does it take to achieve sustainable profits and success in single-family rentals? For one, it’s vital to understand what the tenants of today want and expect from a rental home.

As the SFR market expands, so do the expectations of potential tenants. Many current tenants are transitioning from homeownership to renting, and they aren’t willing to settle for a property that feels like a major downgrade. Instead, they’re looking for options that provide the best of both worlds: the convenience and cost-effectiveness of renting with the high-end comforts and perks of owning a home.

At Wan Bridge, we’ve spent years learning exactly what a single-family home needs in order to attract tenants and secure long-term occupancy. It’s this detailed understanding that has allowed us to become one of the nation’s top build-to-rent home developers and the name behind more than a dozen upscale rental communities across the state of Texas. Our formula for success is centered around designing expressly for tenants, crafting homes and communities that go far and above the usual options.

Wan Bridge BTR homes and communities include features such as:

  • High-end finishes and upgraded, energy-efficient appliances
  • Open-concept floor plans
  • Spacious lots
  • Neutral color palettes
  • Vaulted ceilings
  • Plenty of natural light
  • Expansive community green space
  • Community maintenance teams that manage all home repair/maintenance needs
  • Professional landscaping for all front and back yards
  • Community pools, gathering spaces, walking paths, playgrounds, and more
  • Convenient locations and close proximity to regional amenities

This expertise, combined with our extensive analysis pinpointing the best-possible BTR market locations, has led Wan Bridge to a leading position in the industry.

Single-family rentals are expected to remain in high demand, making them a solid investment option.

The obvious benefits of renting a single-family home are driving a considerable amount of the present demand already. But as homeownership becomes less viable (and less attractive) for many Americans, you can expect to see demand continue to grow.

When you compare SFRs to multi-family apartments, there’s a clear winner: single-family homes average a 70% retention rate, whereas apartments come in at about 50%. This can be largely attributed to the fact that tenants in single-family homes tend to build stronger connections to their neighborhoods and schools, so they are less likely to want to move. Plus, because single-family properties are typically more adaptable to changing needs (growing families, the desire for more space, etc.), they can provide a suitable place to live for several years.

But beyond that, America’s younger generations have different perceptions of homeownership than their parents and grandparents did. Whereas owning a home used to be considered a marker of success, millennials don’t necessarily see it as such. When you combine this with factors like increased student loan debt and variances in lifestyles and personal preferences, it makes sense that single-family rental homes have become a mainstay of the market.

Master-planned, professional-managed SFR communities are likely to become the new industry standard.

Tenants in a single-family home from a landlord can’t always count on all of the benefits of renting. For example, some landlords require their tenants to maintain the home’s landscaping, while others fail to provide proper maintenance. It’s not unusual for a landlord to decide to sell the property, requiring tenants to relocate on short notice.

In contrast, build-to-rent developments (like the ones we’ve created in several Texas cities) check all the boxes that are most important to tenants: convenience, comfort, and stability. These master-planned communities have plentiful amenities, and the homes are constructed to a higher standard of quality than older properties may have been.

A select few developers, including Wan Bridge, are going one step further and serving as the property management firms for these communities. So, everything from the landscaping to last-minute home repairs is taken care of by an expertly-run team. From the perspective of a potential tenant, the choice is simple – why wouldn’t you pick the property that’s been built to suit your needs as a tenant, then professionally managed by a team you can trust?

Make Your Move and Partner with Wan Bridge, the Industry’s Leading SFR Developer

As we look towards the next decade and beyond, it’s an exciting time to be a rental community developer or investor. The future is bright, and the potential for growth, profit, and success is virtually limitless. And as a developer that prioritizes the needs of both our tenants and investors, Wan Bridge is honored to have the opportunity to lead by example.

One part builder/developer, one part asset manager, and one part property manager, Wan Bridge takes a uniquely integrated approach to position ourselves as an industry leader. We’re modernizing the rental market, elevating the tenant experience and the potential for sustainable success at the same time. We’ve established a $600 million portfolio in assets and development in five years, debuted more than a dozen communities, and grown more than 100% every year. Wan Bridge has about 1,500 homes currently under our belt, and we’re adding 1,300 more this year – we won’t be slowing down anytime soon.

If you’re interested in joining the future of the U.S. housing market, whether you’re a potential tenant, investor, or even a landowner ready to sell, Wan Bridge would love to chat with you. For more information about how to partner with our team, contact Wan Bridge today.

Image Source: ahmetemre / Shutterstock