Multifamily and Single-Family Rentals to Continue Outpacing the Rest of the U.S. Housing Market

DBRS, Inc. (DBRS Morningstar) published a commentary titled “Multifamily and Single-Family Rentals to Continue Outpacing the Rest of the U.S. Housing Market,” which reviews the key drivers behind multifamily and single-family rental growth. The commentary also provides and our view of why these asset classes will remain the fastest growing segment of the U.S. housing market.

Key Highlights:
• From 2000 through 2020, the inventory of combined single-family and multifamily rental units grew by 26.0%, compared with just 21.2% for owner-occupied units, according to the U.S. Census Bureau.
• Lack of mortgage affordability is the primary driver of growth in both single-family and multifamily rentals. High debt burdens (student loans and credit card debt) and wage levels that lag the cost of living make it difficult for many potential homebuyers to afford a house, making single-family and multifamily rentals an attractive alternative.
• The total single-family and multifamily rental inventory has risen faster than the overall U.S. housing inventory, up 23.5% to approximately 44.9 million units in 2020 from about 36.3 million units in 2000. Another sign of the strong demand for rental units, nationwide vacancy for all rental units has dropped to a 20-year low of 6.4% in 2020, down from a high of 10.8% in 2009.

“Single-family rental may be the new first home because of lack of affordability that is attributable to low supply of single-family homes, particularly in the lower-tier price points,” says Adler Salomon, Senior Vice President, U.S. RMBS. Similarly, “Multifamily housing has risen in importance during the great financial crisis and continues to grow as a result of the influx of millennials into the marketplace,” according to Steve Jellinek, Head of North American CMBS Research.