The single-family rental (SFR) sector continues to impress in 2021, with new lease effective single-family rents exceeding double digits in many of the largest single-family rental markets.
Major differences by market
In the last year, rents have fallen -1% in San Francisco, which is quite a contrast to the growth seen in the majority of the 63 SFR markets (see map below), according to our Burns Single-Family Rent Index™.
Among the 63 markets tracked by our Burns Single-Family Rent Index™, resident demand remains insatiable, especially in Phoenix (+13%), Riverside-San Bernardino (+12%), and Atlanta (+11%)—all of which posted double-digit new lease single-family rent growth YOY.
Nationally, our Burns Single-Family Rent Index™ shows new lease effective rents up 6% YOY in July, exceeding the 3% YOY historical average dating back to 1985.
Note: The US Burns Single-Family Rent Index™ is the US roll-up based on a weighted average of the 63 single-family rental markets we track across the country.
To complement our index, we also compile results and findings from the publicly traded single-family rental (SFR) REITs—which reported even higher increases. For context, publicly traded single-family rental REITs reported 14% same-home new lease rent growth in 2Q21. We attribute this primarily to:
- Our Burns Single-Family Rent Index™ includes mom-and-pop landlords, who provide less services and tend to raise rents more cautiously
- The SFR REITs combined portfolio is concentrated in four markets (Atlanta, Phoenix, Tampa, and Las Vegas) where leasing demand has been very high
- REIT rents that were somewhat under market (in order to keep occupancy high during the initial growth period) are now being adjusted to market
The overall single-family rental industry benefits from a plethora of strong fundamentals:
- Higher asking rents thanks to record-high occupancy and low new home construction in many markets
- Extremely tight for-sale housing supply at entry-level price points, which is where many single-family renters who want to buy a home typically search
- Strong price appreciation: Rising home prices result in rising property taxes, which helps the local city and also incents landlords to raise rent. Fortunately, our consultants have noted that many renters are relocating from more expensive markets where they were paying even higher rent, and are easily able to qualify.
- Consumers place a premium on living space: COVID-19 had fueled the need for extra space and privacy, particularly for those working from home, drawing some renters from apartments
We believe the single-family rental market will be more cyclical going forward, primarily because the rise of newly built rental subdivisions will create supply of vacant homes. High supply has always contributed to apartment cyclicality, and we believe it will contribute to single-family rental cyclicality too.
These strong fundamentals have drawn the keen eye of investors. In April, we released a timeline of publicly announced investor and capital transactions in the single-family rental and build-to-rent space—and we continue to update it as billions of dollars flow into the sector. Check out our article on Single-Family Rental and Build-to-Rent—So Hot Right Now to understand the major institutional investments that have happened in the last year and half.
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