By Anca Gagiuc
The COVID-19 pandemic is one of the decade’s—if not the century’s—main turning points in the real estate industry. It changed every property type. Retail was nearly swallowed whole by industrial by means of e-commerce, powered by warehouses and logistical centers. Offices were almost empty during lockdowns and will likely never again house as many workers because work-from-home proved so effective that it seamlessly evolved into remote working. But housing is the property type that changed the most. For two scary years, homes would become all the places people used to visit each day—living and sleeping quarters, food courts, working and learning spaces, shopping and entertainment venues, fitness centers—all under the same roof.
It’s no wonder that the health crisis triggered the “Great American Move” because households and businesses alike started relocating to less dense and more affordable places. Residents were looking for bigger homes, with extra space, preferably with yards, although farther from employment centers. Unsurprisingly, single-family rentals became a popular lifestyle choice for families looking for the comforts and amenities associated with homeownership, but with the flexibility and ease of use offered by renting.
These new migration patterns, doubled by demographic shifts in demand, keep challenging the housing industry, which was already facing long-time difficulties caused by significant undersupply. The housing market struggles to change rapidly, and single-family rentals are an important component of this change.
When it all really began for SFRs vs. today
Single-family rental ownership gained traction after the Great Recession when companies like Blackstone and Colony started buying distressed single-family homes and renting them out, explained Doug Ressler, manager of the business intelligence department at Yardi Matrix. Soon after, it became apparent that this was a viable business alternative in bridging the existing housing shortage gap between supply and demand.
Mark Wolf, founder & CEO of AHV Communities, witnessed this firsthand, having founded his company in 2013. He said that, as with everything new, at first there was some resistance to it, as he fought to pioneer the built-for-rent, single-family rental community concept.
“Many of the larger institutional groups passed on working with us at the time, thinking there was no market for what we were doing,” he said. Today, we’re looking at an overheated market. “$80 billion is chasing very little product, and numerous inexperienced developers have entered the sector and have essentially regurgitated AHV’s business plan and talking points,” Wolf told Multi-Housing News.
Sudha Reddy, founding & managing principal at Haven Realty Capital, a 2010-founded company, recalled that the opportunity back then was in aggregating distressed homes at attractive prices and converting them into newly rehabbed, professionally managed rental homes, thereby providing displaced homeowners and renters with a high-quality rental housing option. Unlike 2010—when the opportunity was clearly defined—today the cycle is in the early stages of the transition as the Fed tries to combat inflation, so it will take time for the opportunity to present itself in the current environment, Reddy believes.
The SFR/BTR market has grown and changed substantially from a development perspective, too. The early leaders in this space included big, national homebuilders like Toll Brothers, D.R. Horton and Lennar, or as Alex Pollack, director of partnerships at Mosaic puts it, “companies which already had multifamily subsidiaries and could pull these two operations together and be successful in the arena.”
These days, the market expanded to include players with experience that combine sophistication with know-how, as developers are well versed in student housing, multifamily and senior living.
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