America’s biggest private landlords are becoming home builders as demand for single-family home rentals surges ahead of supply.
With more Americans having the flexibility to work from anywhere, there is a growing demand for rentals with more room and spacious outdoor areas. So much demand, in fact, that there simply aren’t enough such homes to go around anymore.
“This market is very undersupplied,” American Homes 4 Rent Chief Executive David Singelyn told CNBC’s Squawk Box.
American Homes 4 Rent has built over 100 rental-only communities in the U.S. in the last five years and it is not alone. One of those communities, in Mooresville, North Carolina, about 30 miles north of Charlotte, includes 220 rental homes with access to amenities such as a pool and a fitness center. Services such as maintenance, landscaping, and gardening are provided for in the rent.
American Homes 4 Rent is one of several major private landlords that’s racing to build more homes, along with firms such as Lennar, DR Horton, Taylore Morrison, and Toll Brothers. Data from the National Association of Home Builders shows that 13,000 new homes were added to the rental market in the first quarter of the year, up 63% from a year ago. Rentals now represent 5% of the new home market, up from 2.7% historically.
With demand for homes to buy also sky-high, some landlords have chosen to sell some of their rental home stock to cash in on today’s elevated home prices. But Singelyn told CNBC his company will continue building homes for rent to cater to the demand it is seeing.
“How many inquiries are we getting? How many showings?” he asked. “It’s two to three times greater today than it was two years ago before the pandemic.”
CNBC said the total investment in single-family rental homes surged to $30 billion in 2021, up from just $3 billion the year prior. It’s expected to top $50 billion by the end of the year as institutional investors, home builders, and landlords all rush to meet demand.
It’s a profitable business for all of those stakeholders, with the tight supply pushing up median rents across the U.S. Nationwide, single-family rents have increased 13% from a year ago, according to CoreLogic data.
A shortage of single-family properties available for rent has plagued the market, pushing rents up at record-level rates,” said CoreLogic Principal Economist Molly Boesel.