Demand for single-family rental homes remains robust according to the Burns Single-Family Rent Index™. US single-family rents accelerated 3.8% YOY in September, roughly unchanged from August’s 3.9% YOY growth. The index tracks new leases across the 63 largest single-family rental markets in the US.
Despite ongoing economic uncertainty, US single-family rents continue rising, with September’s growth of 3.8% YOY exceeding the 3.4% YOY historical average dating back to 1985. As seen in the chart above, US single-family rent growth historically moderates during recessions but does not turn negative (even during the Great Financial Crisis).
“Today, single-family rents are not hitting the normal recession rough patch for several reasons,” said Rick Palacios Jr., the firm’s Director of Research. Those reasons include:
- Less tenant exposure than apartments to lower-income bands hit hardest by job losses to date, since single-family rental tenants tend to be higher income
- Consumers placing a premium on their living space during COVID, causing an increasing amount of apartment renters to shift to single-family rentals
- Highest single-family rental occupancy rates since 1997 pre-COVID, reflecting strong demand heading into the recession
- Accelerating population shift to affordable, less dense markets with diverse economies (namely Sunbelt markets where single-family rental operators are concentrated)
- Homeowner forbearance relief preventing distressed supply from hitting the market as potential single-family rental units, which is what happened during the last recession
- Unprecedented government assistance for consumers (i.e., extra $2,400 unemployment per month cushioning renters through July, stimulus checks, student loan payment deferrals, and temporary eviction moratoriums)
- Extremely tight for-sale housing supply at entry-level price points, which is where single-family renters who want to buy a home typically search
Among the 63 markets tracked by our Burns Single-Family Rent Index™, Kansas City had the strongest rent growth in September (+7.7% YOY), followed closely by Memphis (+7.5% YOY) and Tucson (+7.4% YOY). Phoenix and Sacramento round out our top five list for September, with single-family rents rising +7.3% YOY in both markets. Aside from Sacramento, job losses in our top five markets have been less severe than the US economy’s -6.4% YOY drop in employment, helping support rents. Despite employment falling -8.6% YOY in Sacramento, single-family rents are likely benefiting from Bay Area transplants seeking extra space while working from home.
None of the 63 markets we track saw single-family rents decline in September YOY, with Houston (+0.9% YOY), Newark (+1.1% YOY), and San Jose (+1.2% YOY) experiencing the weakest growth. New York (+1.4% YOY) and San Francisco (+1.5% YOY) complete our bottom five for September single-family rent growth. The Newark and New York economies have been hit particularly hard by COVID, with unemployment rates of 11% and 14%, respectively. Aside from Houston, all of our bottom five markets are also seeing an acceleration in outmigration fueled by COVID, suppressing the ability to raise rents. Houston single-family rents have historically grown 2.9% annually going back to 1985, turning negative only once following the 1986 oil collapse. While the Houston economy is much more diversified today, a struggling energy sector is likely weighing on rent growth.
For more information on our Burns Single-Family Rent Index™, including analysis by rental price tiers and our full suite of single-family rental and build-for-rent research/consulting offerings, please contact us.