Copyright© 2015 Fannie Mae 1

Multifamily Market Commentary – December 2015

Single-Family Rental Sector Attracting Institutional Investment

Prior to the Great Recession, the cratering of single-family home prices, and declines in the homeownership rate to recent 

lows, much of the single-family rental sector consisted of small “mom and pop” investors. While these smaller investors 

still represent a large segment of the market, institutional investors have entered the fray and changed the single-family 

rental landscape. Why the sudden interest? In short: An imbalance between supply and demand.

More Single-Family Renters than Multifamily Renters

According to the 2014 American Community Survey, there are 

more than 43.2 million rental units in the U.S. The majority of 

these are composed of one- to four-family properties, as seen in 

the table to the right. 

Approximately 53 percent of all renter households – about 23 

million – reside in one- to four-family homes. About 18.3 million 

households live in a multifamily rental property with five or more 

units, which is about 42 percent of all renter households. The 

remaining 5.0 percent of renter households live in either 

manufactured housing rental units (about 2.0 million) or in other 

rental housing, such as a boat, recreational vehicle, or van 

(about 41,000 units).

Growth in Single-Family Rental Sector

It is important to note that much of the growth in rental properties 

since 2005 has been in single-family detached structures, as illustrated below. Interestingly, despite the more than 1.6 

million estimated new multifamily units added to the nation’s rental stock since 2007, its share of rental households has 

not changed much over that timeframe. Instead, the growth in rental housing can be attributed primarily to the large 

number of former homeowners who lost their homes to foreclosure since the beginning of the housing crisis. And that is 

why we have seen the sudden interest in single-family rental properties from institutional investors and the proliferation of 

single-family rental real estate investment trusts (REITs). 25.9 5.7 19.724.2

8.5

11.1

4.9

27.4

6.1

18.7

22.8

8.6

11.6

4.7

28.9

6.2

18.0

22.6

8.3

11.4

4.6

1, DETACHED 1, ATTACHED 2 - 4 5 - 1 9 2 0 - 4 9 50+ OTHER*

DISTRIBUTION OF RENTER 

OCCUPIED STOCK (%)

2007 2010 2014

Structure 

Type

Households 

(Millions) Percent Residents (Millions) Percent

SingleFamily 15.2 35% 47.7 43%

2 to 4 

Units 7.8 18% 19.0 17%

5 or More 

Units 18.3 42% 37.8 34%

Mobile 

Homes 2.0 5% 5.6 5%

Other 0.0 0% 0.1 0%

Total 43.3 100% 110.2 100%

U.S. Renter Occupied Stock by Structure 

Source: 2014 American Community Survey 

Change in U.S. Renter Occupied Stock by Structure 2007 - 2014

Source: 2014 American Community Survey 

Note: “Other” includes manufactured homes and rare structure types such as boats, RVs, vans.
2

Homeownership Rates by Age Cohort 2000 - 2014

Declining Homeownership = Increasing Rentals

The decline in homeownership rates has helped boost 

the demand for single-family rentals, even among the 

younger age cohorts. As seen in the chart at the top

right, although all age cohorts have seen a decline in 

homeownership rates since 2005, younger age groups 

have fallen more steeply compared to the older aged 

cohorts. In addition, new housing supply remains out of 

balance with demand, as evidenced in the second 

chart, below right. The disconnect between household 

demand, lower new single-family construction starts, 

and the ongoing hesitancy of younger buyers to 

purchase a home – due to lingering student debt, 

escalating home prices in many metros, or their

perception of not being able to qualify for a mortgage –

have all converged to pave the way for institutional 

investors to enter the single-family rental sector. 

Bumpy Rent Growth for Single-Family Rentals

Although 52 percent of renter households reside in 

single-family homes compared to just 42 percent in 

multifamily rentals, rent growth in the single-family 

sector has not kept pace with the robust rent growth 

experienced in the multifamily sector. As seen in the 

chart at the bottom right, across the U.S. single-family 

rents for a three-bedroom home have only grown by 

about 5.3 percent since 2010. This has resulted in a 

current average rent level of about $1,525 per month 

compared to $1,495 in early 2010. 

In contrast, rents for institutional investment-quality 

multifamily rental properties have surged by more than 

16 percent over the same period. Ongoing demand for 

multifamily rentals has boosted multifamily rent growth 

on an uninterrupted basis each quarter since the first 

quarter of 2010. As a result, asking rents for 

multifamily properties climbed to an estimated $1,156 

a month as of the second quarter of 2015, compared 

to just $995 as of the first quarter of 2010.

Going forward, single-family rentals are expected to

produce steady rent growth. Moody’s Analytics 

predicts that single-family rents will grow at about 3.0 

percent annually over the next five years, slightly 

outpacing inflation. However, multifamily rent growth 

is expected to continue outpacing single-family rentals 

due primarily to anticipated demand from Millennials 

forming new households and preferring to rent 

multifamily properties.

Household Formations and New Supply

Source: AMH, Federal Reserve Bank of St. Louis, Census Bureau

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600

$1,700

$1,800

Median Rent

S Zill

Median Rents for All 3 Bedroom Detached Single-Family 

Properties in the United States

Source: Zillow
3

Not All Markets Are Equal

Not all metros will experience the same patterns of rent growth in single-family rentals. Indeed, a number of metros most 

likely have already seen their best single-family rent growth days. As seen in the chart below, Moody’s Analytics predicts

that San Jose, Austin, and Denver – three high-tech metros that have seen tremendous job growth over the past five 

years – will see a significant slowdown in rent growth. But other metros are expected to see improved rent growth over the 

next five years, including Atlanta, Las Vegas, and St. Louis.

Location, Location, Location

Although there has been an increase in the percentage of single-family renters, it is not evenly distributed across the 

country. As seen in the chart below, there tend to be concentrations in certain regions. For example, there is a larger 

percentage of single-family renters in states such as California, Nevada, Arizona, and Georgia – all states that saw big 

declines in single-family housing prices and large numbers of foreclosures during the recent housing bust. In comparison, 

there are fewer single-family renter households in the Northeast and even the Midwest. For example, in the New York 

metro area, single-family renters account for just 11 percent of all renters, closely followed by Boston, at about 15 percent. 

-4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%

Kansas City

Atlanta

Buffalo

Las Vegas

New Orleans

Cleveland

Detroit

St. Louis

Birmingham

Milwaukee

Washington

Nashville

San Antonio

Boston

Portland

Austin

San Francisco

Pittsburgh

Denver

San Jose

2014-2019

2009-2014

0%

10%

20%

30%

40%

50%

60%

70%
4

Mom and Pop Rule the Single-Family Roost

Although there are nearly 15 million single-family rental homes in the U.S., only about 1.0 percent are owned by 

institutional investors. That said, there are a number of institutional investors, both public and private, involved in the 

single-family rental sector, as seen in the chart and table below. Privately held Invitation Homes, a unit of The Blackstone

Group LP, is far and away the largest player, having a portfolio of $9.0 billion representing 45,000 single-family rental 

properties. The next largest firm, California-based American Homes 4 Rent, is the largest of the public firms, with a $7.0 

billion portfolio representing about 37,000 properties. And now that Colony American Homes and Starwood Waypoint 

(SWAY) have announced a merger, their combined portfolio will total about $7.7 billion, representing 30,000 properties. 

 

Outlook Stable for Single-Family Rentals 

The single-family rental sector has benefitted from the convergence of solid underlying fundamentals over the past few 

years. On the supply side, due to rising foreclosures, the housing bust produced cheap inventory for institutional investors 

to purchase. On the demand side, slow but steady job growth helped increase household formations in the rental 

segment, including demand for single-family housing from homeowners displaced by foreclosed, who are less likely to 

rent apartments. 

In addition, the rise of institutional investors in this segment of the rental housing market has likely helped produce betterquality and better-managed single-family homes, which in turn has made these properties more attractive for many of 

these displaced homeowners, as well as other renters. As Moody’s Analytics stated, institutional investors helped 

“professionalize the industry.” All these factors are expected to continue contributing to demand for single-family rental 

homes. 

Major Institutional Investors in Single-Family Rentals

Source: American Homes 4 Rent, September 2015
5

Location and Millennials Impact Outlook

The level of demand for single-family rental homes is expected to differ depending upon the region of the country. 

Extrapolating based upon current housing rental trends, there is likely to be more demand in the western and southern 

regions of the country and less in the northeastern and Midwestern regions. 

Longer-term future demand for single-family rental housing hinges upon the Millennials. As seen in the chart below, the 

20- to 34-year-old cohort, which makes up the bulk of today’s Millennials, is expected to continue increasing over the next 

decade or so. Then, even after a slight dip, this age cohort is expected to start picking up steam, reaching nearly 71 

million people by 2040.

Enough Housing Demand to Go Around

The Millennials have become the nation’s largest demographic cohort. Like the Baby Boomer population, the sheer size of 

the Millennials makes them a force to be reckoned with. Whatever they decide to do about their housing needs in the 

future will become a big determinant in the success of the single-family rental sector. However, given the burgeoning 

cohort of younger people over the long term, there should be ongoing, solid housing demand – for all types of rental and 

owned housing. 

Kim Betancourt

Director of Economics

Multifamily Economics and Market Research

December 2015

Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Multifamily Economics and Market Research 

Group (MRG) included in these materials should not be construed as indicating Fannie Mae's business prospects or 

expected results, are based on a number of assumptions, and are subject to change without notice. How this information 

affects Fannie Mae will depend on many factors. Although the MRG bases its opinions, analyses, estimates, forecasts and 

other views on information it considers reliable, it does not guarantee that the information provided in these materials is 

accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these 

views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by 

the MRG represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie 

Mae or its management.

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