The Unexpected Fastest Growing Segment of the Housing Market

February 9, 2018

Categories: Rental Housing
Tags: urban institute, single family rental, freddie mac, berkadia

A recent Urban Institute article covered five surprising things about the fastest growing segment of the housing market. But the biggest surprise may be the segment itself—single-family rental (SFR) housing. 

Since 2006, the SFR segment has grown from 31 percent to 35 percent of the country's rental market and outpaced growth in both single-family homeownership and multifamily rental housing during that time.   

So what's causing the demand for SFR housing? The Urban Institute posed that question to three experts, and they attributed the surge to both changing demographics and housing market conditions.

Most notably, many millennials are now at the age where they are forming households and prefer single-family homes. But tighter mortgage requirements, student debt and other home buying obstacles mean that while many millennials would prefer to buy a house, their only available option is renting one.

Another surprising aspect of the SFR market is that institutional investors (entities that pool money to purchase real estate) are largely absent. As Urban Institute notes, institutional investors only own 2 percent of SFR units. By comparison, those investors own more than 55 percent of multifamily units.

But that may change as Freddie Mac recently launched a single-family rental financing pilot program and inked a deal with Berkadia, a large institutional investor, to finance 197 single-family rental homes across six states. The good news is that more than 90 percent of the homes financed in the deal will be available to households earning at or below 80 percent of the area median income.  

TSAHC's Single Family Rental Program

In May 2013, TSAHC created the Single Family Rental Program to provide eligible low-income families with affordable, below-market rental homes in high opportunity neighborhoods in the greater Austin area. There are 20 homes available through the program, and they are located in areas with higher than average median incomes, access to good schools and services nearby. More information can be found here.

On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.

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