Single Family Rentals: Demographic, Structural and Financial Forces Driving the New Business Model
National Association of Real Estate Investment Trusts®
March 31, 2014
The transition to a lower rate of home ownership resulted in large flows of households into rental properties. Many of these households chose to rent single family properties, both because of the different characteristics of a single family versus a multifamily property, but also because the vacant stock of multifamily units was not sufficient to accommodate these flows in many metro areas.
The translation of housing stock from ownership to rental is not frictionless, however, and requires both capital to purchase homes for rental, and management expertise to operate the rentals. Institutional investors bought homes for rental in many MSAs where the magnitudes of the household flows were large relative to the local pool of potential individual investors. Indicators of housing stress, including the level of shared households, households with additional adults age 35, and higher average household size, rose more sharply during the crisis in these MSAs than the country as a whole, suggesting there was a need for even greater amounts of rental and affordable housing in these MSAs. By providing capital and management teams in these markets, these investors may have helped prevent an even greater degree of housing stress in these cities.
Number of Pages in PDF File: 34
Keywords: Housing markets, Single Family Rental
JEL Classification: R3
Date posted: April 2, 2014