A lot of people have been surprised by the alarming rate of apartment construction, but what is further surprising us, is the rate that single-family rental homes are being built. Here’s a quote from RentCafe, “For the better part of the decade ending in 2016, single-family homes for rent were the fastest growing type of rental in the U.S., outpacing the formidable apartment boom seen throughout the country.” And it shows no signs of slowing!
The U.S. housing market has gone through nothing short of a transformation in the last decade. The number of people renting their abode has increased significantly, in some cities surpassing the number of homeowners. The housing market quickly responded to this shift by adding millions of rental units in just a few years, with many U.S. cities witnessing a frenzy of apartment construction.
The most interesting part of this transformation, however, was the fact that the rental market expanded even faster horizontally than it did vertically. For the better part of the decade ending in 2016, single-family homes for rent were the fastest growing type of rental in the U.S., outpacing the formidable apartment boom seen throughout the country.
According to U.S. Census estimates, the number of single-family rentals (SFR) in the U.S. grew by 31% in the ten year period immediately following the housing crisis (2007 to 2016), while multifamily rentals (MFR) grew by 14%. In net numbers, single-family rentals in the U.S. increased by 3.6 million units in ten years, more than rental apartments, which increased by 3.2 million units. As of 2016, the U.S. Census counted a total of over 15 million single-family homes for rent in the United States and a total of over 26 million apartments for rent.
The main trigger for this wave of single-family homes turning into rental homes was the housing crash of the late 2000’s. Many single-family homes with “underwater” mortgages were swept up by a few institutional investors during the crisis and turned into rentals. However, a much larger number of small investors became landlords during that period of time. According to a recent Urban Institute study, most single-family rentals in the U.S. are owned by individual investors. Of the 15+ million single-family rentals currently on the market, only 2% are owned by large investment firms, and about 45% belong to landlords who own just one unit.
Phoenix leads with the fastest growth and the largest gain in single-family rentals
Although they’re more common in suburban settings, single-family rentals have been incredibly prolific in most of the nation’s biggest urban centers. When we looked at increases in the number of renter-occupied households by type, we found that in 22 of the 30 largest U.S. cities single-family rentals expanded faster than apartments between 2007 and 2016.
With some of the largest numbers of foreclosures and sharpest drops in home values during the housing bust, the city of Phoenix tops the list of cities with the biggest percentage increase in single-family rentals. According to U.S. Census estimates, the number of houses for rent in Phoenix increased by a whopping 77% (from 56,900 in 2007 to 100,800 in 2016). Phoenix saw about 44,000 single-family homes turn into rentals during this 10-year period, the largest gain among the 30 cities analyzed.