Just under 1 in 10 homes that broke ground in the United States in 2024 was being built for a tenant, not an owner, according to John Burns Research and Consulting data. 

Single-family rentals accounted for more than 1 in 4 rental unit construction starts in 2024.

Investors poured a combined $57B into single-family rentals in 2021 and 2022. Capital flows slowed in 2023 as rising interest rates squeezed deals, but the sector bounced back, with investment nearly doubling year-over-year to $6.3B in 2024. Analysts expect more growth ahead. 

“This niche is only 6, 7 or 8 years old, but it gained a ton of traction, not only on the demand side from tenants moving into a purpose-built rental community but also on the development side,” said Chris Nebenzahl, vice president of rental research at John Burns. “Developers have seen that demand and have really met the demand.”

Single-family rentals have exploded into the housing market, with 124,825 new rental homes built since 2017. Unit completions have grown in each of the last six years, and 2024 set the new high-water mark for deliveries with more than 34,000 units, according to Point2Homes data, an SFR leasing platform and subsidiary of Yardi Matrix. 

Private equity continues to pour money into the sector to take advantage of macroeconomic and cultural shifts that have made renting more attractive. Persistently high home prices, exacerbated in the last two years by elevated interest rates, have contributed to the sector’s success.

Single-family build-to-rent homes accounted for 27% of all rental housing starts last year, and SFRs accounted for 9% of all single-family housing starts, according to John Burns. 

“Institutional investors are increasingly favoring purpose-built developments over acquisitions, further boosting the growth of SFR/BTR properties,” Doug Ressler, manager of business intelligence at Yardi Matrix, wrote in an email. 

New SFR construction was up 41% year-over-year in 2024 even as traditional housing starts fell by 2%, according to John Burns. A quarter of the SFR developers, operators and investors surveyed by the research firm expect to break ground on more units this year compared to last. 

Today, it is cheaper to rent than to buy in all of the country’s 50 top metros, with the median mortgage priced around $2,703 per month, while rent in a comparable city is around $1,979 per month, according to Bankrate. Homeowners, unlike renters, also have to contend with property taxes, insurance and repair bills. 

Renting becomes even more attractive when factoring in that 30-year mortgage rates are floating between 6% and 7%, up from the sub-3% rates that were common before the Federal Reserve tightening policy in 2022. 

“It’s still expensive, and we’re waiting for our incomes to come up, but you don’t hear that many complaints about rents anymore. But you’re hearing more about home prices, and that’s because home prices have continued to go up,” said Ken Johnson, a housing economist and the real estate chair at the University of Mississippi.

Homebuyers look at today’s prices and sense that the market is near a peak, giving them more reason to hold off on closing a sale, he said. There are signs that Wall Street investors agree.

The stocks of Invitation Homes and American Homes 4 Rent, the two largest public SFR firms, are trading somewhere between a 20% and 35% discount on their net asset values, The Wall Street Journal reported. 

Invitation Homes has been trading at a discount since early 2022, but the gap has widened by 10 percentage points over the last 12 months. With home prices elevated, large institutional investors that own more than 1,000 homes accounted for just 0.3% of U.S. home purchases in the third quarter, according to Point2Homes. 

Sun Belt markets have drawn the bulk of investment in the last five years, after the pandemic provided a burst of energy to existing migration trends driving Americans south. 

Nearly 4,300 new build-to-rent homes broke ground in Phoenix in 2024, the most of any major city. It was followed by Atlanta, which saw 3,236 units break ground, Dallas, Houston and Charlotte. Since 2017, developers have broken ground on 42,000 single-family rentals across those five cities alone. 

“The concept is going to be most effective in large metropolitan areas that are growing,” Johnson said, highlighting cities with large populations of young professionals.

But SFR owners and developers have found themselves in regulatory crosshairs in recent years as the nation’s housing affordability crisis deepens.

Lina Khan, the head of the Federal Trade Commission under former President Joe Biden, took a parting shot at SFR providers in the waning days before President Donald Trump took over the White House. 

The FTC issued a mid-January request for public comment seeking input about how the federal watchdog could probe SFR operators and their impact on the housing market. The investigation would target at least 30 firms, each of which owned at least 1,000 rental units, the FTC said. 

“This proposed study would shed much-needed light on the mega-investors that have amassed huge portfolios of single-family rental units and potentially contributed to the housing challenges that Americans face,” Khan said in a statement at the time. 

FTC commissioners unanimously approved the notice, but it is unclear whether Trump’s nominee to replace Khan, Andrew Ferguson, will follow through with a probe. 

Private equity’s interest in housing has drawn scrutiny for years, including a 2022 ProPublica investigation that found the investment firms were behind 85% of Freddie Mac’s largest apartment deals since 2013.

Earlier this year, New York Gov. Kathy Hochul proposed blocking hedge funds and private equity firms from buying up large numbers of homes in the state. Similar proposals have been floated in Nevada and Minnesota. 

Analysts who spoke to Bisnow said private equity’s interest in single-family housing was a positive development for housing affordability. The build-to-rent communities popping up across the country are a supplement to housing options rather than a replacement, they said. 

It takes tens of millions of dollars in upfront investment to build homes for rent, and the cash has to come from somewhere, Johnson said. 

“We see politicians saying that we don’t need Wall Street or private equity in the rental market or building homes for ownership. That’s a prescription for disaster,” he said. “I don’t hear people saying we don’t need professional investors in the stock market. People that know what they’re doing create price efficiency and liquidity in the housing market.”

Bisnow/Shai Dolev

Chapman Taylor’s Michael Swiszczowski, Moda Family Homes’ Chris Procter, IMMO Capital’s Samantha Kempe, UKAA’s Lesley Roberts and Chapman Taylor’s Catalina Ionita

The UK single-family rental sector is fast convincing real estate investors of its benefits. If it can prove it helps housing affordability and creates much-needed new homes, it just might convince society at large as well. 

“While we’re not necessarily doing God’s work in investing in single-family housing, by investing in that sector we’re creating additionality and net new housing,” Packaged Living Managing Director of Single Family Housing Jonathon Ivory told an audience of 200 at Bisnow’s Single-Family Rental event late last month. “Covid-19 has changed how and where people want to live, and single-family rental provides new homes in green and open places that improves wellness and quality of life.”

Packaged Living is backed by Canadian investment giant Fiera Capital, Ares is backing developer Moda for a £1B single-family rental drive, and Swedish investor EQT is backing Sigma Capital, among many large investors looking to buy into the sector in the UK.

In the UK, single-family rental has emerged in the wake of its rise in the U.S., where it has faced criticism for putting homes into the ownership of large institutional investors, rather than individuals. 

Conductor founder Charlotte Constance quoted a statistic from a survey undertaken by the data firm, highlighting that 86% of those polled wanted to own their own home rather than rent.

“How can you sleep at night?” she asked the panellists.

Ivory said that in building new homes, institutional investors and the developers they backed were helping to meet the housing targets set by government, and that structural factors had led to the consistent shortfall of housing built in the UK.

Bisnow/Shai Dolev

Packaged Living’s Jonathon Ivory, Sigma Capital’s Rob Sumner, Godwin Developments’ James Mulcare, Apache Capital’s Richard Jackson, L&G’s David Reid, Bond Bryan’s Tomasz Romaniewicz and Conductor’s Charlotte Constance

He made an often overlooked point that this structural shortfall had pushed house prices up. Combined with low interest rates and a decline in pension contributions, that meant that for many people, owning a home was a savings and pensions scheme as well as a place to live.

“It is not this sector’s job to fix those structural inadequacies,” he said. 

Other speakers argued when it comes to affordability, purpose-built single-family came out ahead of other forms of open-market rental housing.

“It’s a value proposition that’s attainable to the mass market,” Moda Family Homes Director Chris Procter said. 

“It will be at a significantly lower price point than city-centre apartment schemes,” he said, adding that although it may be slightly more expensive than a single-family home owned by a buy-to-let investor, the quality of the home and the service offered by a large scale, professional landlord would be significantly higher. 

Sigma Capital Investment Director Rob Sumner offered data to back this up. Sigma manages listed company PRS REIT, which owns 4,000 suburban single-family rental homes. He said the average household income of its tenants was £42K a year, and that those households spent about 25%-30% of their net income on rent, compared to 35%-40% in the urban BTR market. That makes its homes far from a premium product, he said. 

UKAA President and Allsop partner Lesley Roberts said it was easier to incorporate social housing into single-family rental schemes than traditional big-block urban multifamily schemes. The income differential between the open-market units and the socially rented units is smaller, and there is also a more practical reason. 

“The land is cheaper, and you can build to the pace of absorption in your market, which makes assimilating the two and creating a community easier,” she said. “Towers are expensive, you can’t occupy them until they are built, and the specification can be a bit higher.”  

IMMO Capital is a platform buying existing homes on behalf of institutional investors. In a podcast interview with Bisnow, Chief Investment Officer Samantha Kempe said the company was not necessarily taking homes out of the hands of individuals because it was often paying less than individuals were bidding.

“Quite often, we have [sellers] come back to us because the other bidders fell through,” she said. “They weren’t able to get their mortgages in place, or they changed their mind last minute, and they ended up finding another property. And the seller will come back to us and say, ‘You know, are you still willing to buy that price? I’m in a chain, I need to move.’ So, the convenience factor and the certainty that we can provide sellers — that often means that we are able to buy properties at a bit of a discount.”

Zillow’s exit from the house-flipping business created an opening for investors bullish on the single-family rental market, with an inventory of 9,800 houses nationwide up for sale. 

Single-family rentals are still a relatively small part of the U.S. residential market, but investors are now betting on surging demand for such properties in the wake of rising house prices exacerbated by the coronavirus pandemic. 

Investors are also betting on something else: a long-term shift in demand away from apartments and toward single-family houses, especially among the generation rising after millennials. They might not be able to quickly afford to buy a house like their parents or grandparents, but data shows they want to live in one.

Among members of Generation Z between 18 and 23 years old surveyed by the National Apartment Association, 43% of respondents say they want to rent a single-family detached property after entering the workforce, while 44% would prefer to live in a “vibrant suburb,” compared to the 23% who would prefer the city. 

Investors want to make that happen, with a growing number of companies throwing their hats into the single-family rental ring. 

These players could win big under such a shift in demand from the multifamily sector, though the SFR product has headwinds similar to that of the typical residential market: a lack of inventory. 

“There’s a lot of capital looking to invest in this space but few executable projects,” IHP Capital Partners Senior Vice President Jeff Enes said. “Resale inventory remains low in many markets, and for developers, there tends to be a protracted entitlement process, which makes it difficult to bring new product to market.”

Interest in the sector is encouraged by renter demand from new demographics and incentives for build-to-rent product, which has an 8% annual return on average, The Wall Street Journal reports, citing Green Street data. That is the highest of any property sector tracked by the firm. 

“Building upon our experience, IHP is looking to expand that business in multiple markets,” Enes said. 

IHP Capital provides equity for homebuilders in the West, where it is currently involved in 37 residential projects. IHP is also pursuing single-family rental projects. Through an affiliate, IHP is developing five single-family rental communities in Phoenix, one of the hotter single-family rental markets.

Most single-family investors are still small operators, many with just one investment property. Larger investors owned about 300,000 single-family rental houses as of 2019, according to Laurie Goodman, vice president for housing finance policy at the Urban Institute, while small-scale investors own 15 million units. But larger investors are seeking to expand their presence in what they see as a growth market.

JLL Income Property Trust recently jumped into the game by purchasing a 47% interest in a portfolio of over 4,000 homes assembled by Amherst Residential, which manages the properties. The company paid about $560M for its share of the houses, which are in such markets as Atlanta, Dallas, Phoenix, Nashville, Tennessee, Charlotte, North Carolina, and Tampa, Florida. 

The company flagged single-family rentals as a “near-core property sector poised for accelerating institutional capital inflows,” JLL Income Property Trust President and CEO Allan Swaringen said in a statement.

“Given the superior long-term tenant demand growth outlook, our research projects long-term expected rent and NOI growth above all other institutional property type averages,” he said.  

Zillow could serve as a source for expansion for single-family rental investors. A company spokesperson told Bisnow the firm will sell the remaining inventory “the same way we always have, by selling to buyers of all kinds, including individuals, families, individual investors, institutional investors and nonprofits.”

Bisnow Archive/Ian Johnston

Regardless of the ultimate disposition of those particular properties, the demand for those homes is clear. 

During the third quarter of 2021, real estate investors bought 18.2% of all U.S. homes purchased, up from 11.2% the year prior, according to Redfin, and representing the highest percentage on record since Redfin began tracking the market in 2000.

The Q3 percentage represents 90,215 residential units, with investors paying nearly $64B for the properties, up from $59B in the second quarter and $36B a year earlier. 

Some markets are attracting more investor interest than others, according to Redfin. In Atlanta, about one-third of homes sold in the third quarter were snapped up by investors, the highest rate among the 40 metros the company analyzed. Next were Phoenix, Charlotte, Jacksonville, Florida, and Miami. 

Those markets have seen steady year-over-year increases in multifamily rents, and the addition of SFR inventory could potentially level out those gains. 

Spurred by a 5.7% rent increase in Q2 2021 alone, the average effective apartment rent has risen in Metro Atlanta by 11% year-over-year, Marcus & Millichap reports. Phoenix, meanwhile, has seen apartment rents spike 20% since August 2020, according to ApartmentList.com.

The larger backdrop of demand for single-family rental housing is the frenetic overall U.S. housing market. 

In 2020, existing-home sales rose 6% year-over-year while new single-family home sales spiked by 20%, putting total home sales at their highest level since 2006, according to the Joint Center for Housing Studies at Harvard University.

Meanwhile, rents in institutionally owned SFR portfolios grew more than 3% annualized in 2020, according to data from DBRS Morningstar. The pandemic was at work: Reduced mobility pushed more individuals and families to rental homes with more space.

The activities of single-family investors will drive home prices up further, critics say, especially in growing metro areas where investors are snapping up relatively inexpensive single-family homes. 

As investors buy sites to develop single-family rentals, homebuilders would be forced to compete, potentially paying more for entitled land. That cost most likely would be passed along to buyers.

What’s more, investors are already competing directly with traditional homebuyers, which may worsen the prospect of homeownership for those entering the job market or millennials unable to exit the rental market. 

“Large investors buying single-family homes is a significant threat to the average homebuyer since the average homebuyer cannot compete,” said Carmen Hill, a Los Angeles-area residential real estate broker and professor of real estate investments at Cerritos College.

Other investors pursuing land acquisitions in anticipation of continued demand for single-family properties, for sale or otherwise, include alternative investment firm Värde Partners, which has entered into a land banking facility agreement with Taylor Morrison Home Corp., the nation’s fifth-largest homebuilder.

“The significant growth in demand for suburban housing has exposed a persistent shortfall in supply, creating substantial opportunities to invest,” Värde Partners Managing Director Brendan Bosman said. 

Though Taylor Morrison mostly develops properties for sale to individual buyers, it has been exploring single-family rentals since before the pandemic. In 2019, the Scottsdale, Arizona-based homebuilder formed a partnership with Christopher Todd Communities to build single-family rental communities.

Other major players in the single-family rental space, such as Pretium Partners, are also expanding their reach. 

Pretium’s rental property management operation, Progress Residential, owned about 66,000 single-family homes in 29 markets as of the end of Q2 2021, with an occupancy rate of nearly 97%, according to the company.

In January, Pretium formed a $700M joint venture with Canada’s Public Sector Pension Investment Board to develop SFR housing in the U.S. In September, Pretium formed another joint venture with Crescent Communities to develop $1B in new single-family build-to-rent communities. The first community will be in the Charleston, South Carolina, market, and others will follow in the Southeast and Southwest.

The partnership plans to develop more than 3,000 new rental homes altogether, according to Crescent Communities Managing Director, Single-Family Build-to-Rent Tony Chen.

“There is significant opportunity in the SFR market and a clear sense of urgency among institutional investors to deploy capital to this asset class,” Pretium Chairman and CEO Don Mullen said in a statement early this year.