Single-family rental investment is gaining in popularity, but with the surge comes some risks, according to a report from the Urban Institute. The New York Times reports that investors purchased one-fifth of all single-family starter homes on the market, double the number they bought 20 years ago. Additionally, according to the 2017 American Community Survey, investors own and rent out about 18.2 million one-unit homes, including detached homes, townhomes, and duplexes, providing housing for about 42% of the nation’s 43 million renter households.
In response to this large increase, Urban Institute has three points to consider:
Are investors taking homeownership opportunities away from individuals and families?
Are investors creating and maintaining quality affordable rental units?
Are investors increasing home prices?
Investors are more likely than individual buyers to buy in cash, giving them leverage in a home purchase over a traditional buyer. Additionally, bigger investors also have technological and managerial advantages that allow them to determine a house’s value so they can act quickly.
According to GlobeSt.com, the demand for SFR is projected to outpace multifamily, office, retail, self-storage and hospitality growth in the next three years.
“The stark difference in growth in the past decade between the number of renters and that of homeowners is quite astonishing, with the overall renter population increasing by more than 23 million versus less than 700,000 for owners,” said Kevin Maggiacomo, CEO and president of SVN International Corp on GlobeSt. “When the National Apartment Association reports that well over 4.5 million units are needed across all price points by 2030 just to satisfy current rental demand, you get a real sense of both the challenge and chance in the residential market right now.”
There are some policies the Urban Institute notes to keep SFR investors and homebuyers on a level playing field and improve the market overall. This includes nonprofit to provide assistance to traditional buyers or pushing investors to broaden access to single-family homes near good schools and safe neighborhoods.