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Single-Family Rental Market To Be Undersupplied Over The Next Decade


There is an expected 700,000 single-family units designed for the rental market expected to be built nationwide over the next 10 years. Yet, according to a recent study conducted by RCLCO Real Estate Advisors, that may not be enough to support growing demand.

This growing segment of single-family rental units are designed as a hybrid between traditional apartment units and single-family homes, built as single-story, detached homes complete with their own small backyards. These rental communities typically have amenities, such as a pool, dog park, and clubhouse.

Tricon Residential (formerly Tricon Capital Group) was an early investor in single-family rental homes and recently moved into the build-to-rent space by purchasing moderately-sized single-family lots, often located within master-planned communities, and partnering with area builders to deliver rental homes, typically custom designed as a rental product.

It looks like the demand will potentially create a greater need for more production of similar homes. “Given demographic trends, RCLCO forecasts much greater demand than the current pace of production, which could result in a significant supply shortfall, suggesting the sector presents a strong market opportunity in the coming decade,” according to the report.

Phoenix is ground zero for this unique product which is catching on not only among renters, but with other builders who want to grab a piece of this action along with interested investors.

Phoenix-based NexMetro Communities has nearly 5,000 homes in 32 projects either completed, under construction or in preconstruction in Phoenix, Dallas, Denver, Tampa, and Florida, with more units in the predevelopment stage in those same markets.

With home ownership declining to 62.1% (mostly among millennials), some expect demand for rental housing to continue to increase. Some believe this is simply the result of consumer demand and the idea that people are looking for a new kind of lifestyle outside of standard big box options. As shown on the chart below, single-family renters overall tend to be older and are more likely to include households with children.

Another key player in this market is Mesa-based Christopher Todd Communities, which has nearly 2,500 homes completed, under construction or in the pipeline. More than 1,000 homes are in the pipeline. CEO Todd Wood states they “have a winning combination of single-family smart homes and a resort lifestyle developed in gated communities, which sets us apart from others in the industry.”

Even traditional homebuilders are taking notice of the success of these rental communities.
Last year, Scottsdale-based Taylor Morrison Home Corp. (NYSE: TMHC) teamed up with Christopher Todd Communities to build several of these communities nationwide.

Given the anticipated undersupply of single-family rentals for the foreseeable future, this segment represents a strong opportunity for investors, builders and developers to create new rental home communities in a variety of formats, serving a growing market.

If you have questions about the real estate market, reach out to Arizona Home Group. We are here to help.

Arizona Home Group is Greater Phoenix’s most innovative real estate team.

Keller Williams Sonoran Living
5301 N. Pima Rd., Scottsdale, AZ 85250
(602) 571-3730

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