Single-family renters have experienced an unprecedented surge in demand over the last two years. Their appeal comes from their ability to provide the space that families need to live comfortably. The benefits of living in a house without the financial obligations of homeownership and the access to lower-density neighborhoods that many of today’s residents crave. With the shortage of starter homes showing no signs of easing, renters are on the hunt for properties that allow them to work and relax in their own space and accommodate their needs. Single-family rentals are the property type that’s best able to satisfy their evolving requirements over time. However, a Single-Family Renters Survey found that even though residents are sold on single-family rentals, they’re not necessarily sold on their current properties. Just 32% of single-family renters feel certain that they’ll renew their lease this year—and an additional 36% are on the fence.
Single-family rentals aren’t new
What’s new is the level of interest they’re getting from today’s renters—and institutional investors. Single-family properties already represent the largest segment of the rental market. This is in terms of the number of households who live in them and the amount of value they hold for their owners.
Today, they represent 34% of the U.S. rental housing stock, and they house 42% of renters—nearly 45 million people in all. Today, single-family rentals represent 34% of the U.S. rental housing stock, and they house 42% of renters—nearly 45 million people in all.
So, what do single-family properties offer to renters?
In contrast with other property types, they provide the space that larger households need to live comfortably. In our survey, 3 people live in a typical single-family renter household, often including couples, kids, relatives, and pets. Single-family properties grant these residents access to additional bedrooms, a backyard, and greater privacy than they can find in multifamily rentals; as well as access to lower-density, quiet neighborhoods. They give renters access to suburban and rural employment opportunities and schools. Because they’re located in areas where multifamily developments aren’t as common, single-family rentals provide opportunities for renters to live, work, and attend school in a city’s outlying neighborhoods and suburbs. They also provide housing for the 7.5 million renter households who live in rural areas. They free renters from the financial obligations of down payment, a mortgage, and property upkeep. Single-family rentals make it possible for renters without savings or credit to purchase a house of their own to still enjoy the benefits of living in one. They’re also a good fit for renters who don’t want the burden or expense of owning and maintaining a property on their own.
The Rise of Single-Family Rentals
The current surge in demand for single-family rentals has its roots in the subprime mortgage crisis of 2007–2010. After the housing market crashed, some families lost their homes to foreclosure. This caused them to rent as they repaired their finances and credit history. Their former homes were packaged together, purchased, and rented out by institutional single-family rental aggregators. Other homeowners found themselves underwater on their mortgages. Rather than selling their houses at a loss, those who needed to move elsewhere rented out their former homes. They were hoping to regain enough value to be put on the market. All in all, between 2006 and 2016, 3.5 million single-family homes were transitioned.
Where Single-Family Rentals Tend to Be Located
There are two different ways to look at which parts of the country have the most single-family rentals. The first is to examine which states have the greatest number of single-family rental properties within their borders. From this perspective, states like California, Texas, and Florida are at the top of the list due to the sheer size of their housing markets. California has more than 2 million single-family rental properties. Texas has nearly 1.3 million rental properties. Florida has just under 1 million rental properties. In addition, Ohio, Pennsylvania, Georgia, and North Carolina all have more than half a million single-family properties.
Alternatively, we can look at the states that have the greatest share of single-family rentals about multifamily rentals. In the majority of U.S. states, single-family homes make up between a third and half of available rental properties. In states where much of the population lives in rural areas, they comprise closer to three-quarters of the rental market. The states with the greatest share of single-family rentals include Oklahoma, Kansas, Arkansas, Idaho, and West Virginia. (1)
Amid a nationwide shortage of starter homes, single-family rentals allow renters to enjoy many of the benefits of living in a home without a mortgage: the indoor and outdoor space that couples and families need to live comfortably, as well as amenities like air conditioning, a washer and dryer, and the option to have a pet.
Single-family rentals give residents access to safe, quiet neighborhoods within suburban and rural areas. These areas might otherwise be inaccessible—as well as the employment and educational opportunities that come with them.
Though single-family rentals have attracted significant interest from institutional investors in recent years, individual investors still own the vast majority of single-family rental properties in the U.S., and will continue to seek out property managers’ expertise in running their properties efficiently, legally, and profitably.
While their incomes might look slightly higher on paper, single-family renters have more debt. They also have fewer savings than renters in other property types, and also have larger households to support. With single-family rents rising by an average of 13% in the last year alone, renters’ financial health is of concern.
Single-family renters are considering moving at higher rates than we’ve seen for the last two years. They are displaying less loyalty to their current property than residents of other property types. Affordability concerns and the desire to buy a home are the two main factors motivating them to move.
4 in 5 single-family renters are interested in completing at least some rental processes online. Renters of all ages would like to be able to make payments communicate with you, file maintenance requests, sign their lease, and find rental listings online; and interest in other capabilities is growing in spades.
Our Corken + Company team is here to help you find a rental property that fits your needs and budget. Call us today!