With the tight for-sale market, the demand for rental housing will increase dramatically in 2021—specifically, singly-family rentals. COVID-19 has changed the way we work and live, which has fueled the desire for larger living areas and more outdoor spaces. Apartments may be the first choice for many renters, particularly young renters in urban areas. But there will be a surge in interest from individuals and families for single-family rental homes in the suburbs.

Owning Single-Family Rentals

The vast majority of single-family rentals are owned by individual investors, rather than corporations or real estate partnerships. According to the most recent Rental Housing Finance Survey, more than three quarters of the nation’s single-family rentals are owned by individuals; the other quarter are owned by various types of partnerships or corporations.

However, over the past decade, more large-scale investors have accumulated significant portfolios of single-family houses that they operate as rental housing. In the past, big investors considered it inefficient to own large numbers of single-family rental properties. Maintenance of these scattered units is much more difficult than managing dozens or even hundreds of units in one apartment building. But the calculus has changed, property management technology has improved, and the single-family market has become more profitable, attracting major investors, including JP Morgan Chase and Brookfield Asset Management.

Building Single-Family Rentals

Investors buying up single-family homes is not a new phenomenon; we saw this trend during the last housing boom and bust. A novel advancement during this business cycle has been the surge in home builders who are focused on constructing single-family homes specifically to be rented out.

The demand for new “build-to-rent” homes is being driven primarily by demographics. More and more households are in the stage of life where single-family homes, rather than apartments, better meet their needs. At the same time, the inventory of single-family homes is lower than it has been in recent history and prices are escalating. Some would-be buyers are being kept out of the market and are looking for other options.

Home builders are stepping up. Lennar, DR Horton, and Toll Brothers are among the national home builders that have introduced single-family rental options, primarily in suburban subdivisions. At present, the demand for this type of rental product seems unsatiable and Wall Street investors are flocking to make it big from the shift to renting in the suburbs.

What REALTORS^® Need to Know

As demand for single-family rental housing increases in 2021, property managers in Virginia could see growing opportunities to work with owners who want to list their home for rent. At the same time, however, there could be greater competition from large or national property management companies looking to get into the fastest-growing segment of the residential real estate market.

REALTORS^® should emphasize the value they bring to prospective clients in terms of their commitment to ethics and professional standards and their knowledge of local market conditions. Be sure to take advantage of all the resources Virginia REALTORS^® has available for property managers to be prepared for the changing rental market.