SFR Investors Continue their Development Push with New Build-to-Rent Projects
June 7, 2022 | Bendix Anderson | WealthManagement.com
Close to 5 percent of all the single-family houses that developers started to build in 2022 are planned to be operated as rental houses.
Developers will start construction on tens of thousands of new rental houses in 2022.
The biggest companies that own and operate single-family rental (SFR) housing—like the REITs Invitation Homes, Tricon and American Homes 4 Rent—are all creating thousands of new, build-to-rent houses. These homes are rising in subdivisions planned from the start to operate as rentals, with shared amenities for the renters like swimming pools and pet parks.
These same companies often still buy individual, existing houses to renovate and operate as rental homes—even though home prices are rising as fast or faster than development costs like prices of construction materials and wages of construction workers. Strong demand is filling rental houses of all types—both build-to-rent and existing houses—and the rising rents are attracting investors to all types of single-family rental houses.
“Right now, everything is working,” says Eddy O’Brien, co-founder and managing partner at Blaze Capital Partners.
Developers build more and more BTR
Close to 5 percent of all the single-family houses that developers started to build in 2022 are planned to be operated as rental houses, according to data from the U.S. Census. That’s up close to 2 percentage points from 10 years ago.
“The activity in build-to-rent has definitely increased over the past three years,” says Don Walker, managing principal and chief financial officer for John Burns Real Estate Consulting. “There has been a lot of interest in single-family rentals and build-to-rent in particular.”
Developers are becoming more and more active. About 6 percent of the lots and land purchased by homebuilders in the fourth quarter of 2021 were bought by build-to-rent companies, according to John Burns.
However, build-to-rent is still a relatively small part of the housing market. Developers are likely to start construction on 1.8 million housing units in 2022 in the U.S., according to a forecast by John Burns. Just 4 percent of those—or 50,000 to 72,000 units—are likely to be single-family houses built to be rented. “In comparison, we are looking at 500,000 multifamily starts,” says Walker.
