The single-family rental-home sector has been expanding fast in recent decades. Currently, there are about 22 million single-family rentals (SFRs) across the country, which accounts for more than one third of rental-housing supply, according to RCLCO Real Estate Consulting.
The prevalence of these homes also has led to controversy, with some objections to corporate investors buying up a number of homes and turning them into rental units. Homeowners say that the practice artificially increases housing costs, hurts minority neighborhoods and may lead to property neglect by absentee landlords. This past April, David Howard of the National Rental Home Council (NRHC), an organization that represents the interests of the SFR industry, spoke to Scotsman Guide about why the industry is not a danger to private homeownership and how it may even be part of solving the nation’s housing-shortage problem.
How large is the SFR sector?
There are about 140 million housing units in the United States, and there are about 22 million (single-family) rental units. So, the rental sector makes up about 16% of the housing stock in the country. The business of renting single-family homes has been around as long as anyone can remember, but it’s only been during the past 15 to 20 years that the industry has coalesced. During the financial crisis of 2007 to 2009, there was a great deal of investor purchasing of homes by both large companies and individuals. By doing so, they essentially created a floor for the rest of these falling property values. A lot of home-rental companies got their start during that period and provided growth for the industry.
There is as much of a crisis in rental properties as there is in owner-occupied properties.
How can this industry help ease the country’s housing shortage?
Housing works best when there are more options for buying, selling, owning and renting. This industry presents itself as another option for housing consumers. Rental homes offer the consumer an option that fits their space needs and their budgetary needs. But there is as much of a crisis in rental properties as there is in owner-occupied properties. In the last five years, the amount of owner-occupied housing in this country has increased by about 10%. The amount of rental housing has only increased by about 2%. One of the ways the industry is addressing this is to build homes to rent. Today, 26% of our members are building their own homes to add to the portfolio. Two years ago, it was just 3%.
What is your response to the criticism that the industry is causing rapid price appreciation by buying many homes and taking them off the market?
First of all, I think the most important point to make here is that companies are creating single-family rental units because there is a demand for those units. If there wasn’t the demand, you wouldn’t see them buying the homes for rent. Also, I would like to see any kind of research that shows a definitive connection between large companies buying homes and home-price appreciation. Our member companies control 300,000 homes. That is 0.2% of the overall housing stock in the country. When you own such a small amount of anything, you really have no ability to impact pricing.
What would you say to those who worry that absentee landlords will cause properties to be neglected?
In terms of issues such as property upkeep, member companies of the NRHC in 2021 invested more than $2 billion in property upgrades, renovations and improvements of their properties. So, it’s clearly the case that companies are making significant efforts to preserve the quality of their properties. And I would argue that in many cases, the properties owned by our member companies are even of a higher quality because of those investments and because of their professional management services.
How do you respond to criticism that corporate landlords target minority neighborhoods and potentially destabilize these poorer communities?
I would say that as a practical matter, there are fair-housing restrictions that prevent any homeowner or any investor in housing from targeting communities based on race or ethnicity. The U.S. Department of Housing and Urban Development also has rules preventing single-family rental-home companies, in this case, from even knowing the [prevalent] race or ethnicity of the communities in which they are investing. Secondly, I would say rental companies are making purchases and making rentals available in communities where there is the highest and greatest demand. And that’s really what this is all about. Companies are investing in communities where people want to live, whether they want to own or rent. ●