Dive Brief:

• Companies that scooped up foreclosures and rented them out during and after the recession are staying in the rental game by building new, Bloomberg reported. The build-to-rent setup targets those who want to live in a single-family home but aren’t ready or able to buy. 

• Buying new costs more up front than does rehabbing an existing home, but landlord companies save on maintenance and can set rental prices 5% to 8% higher. The REITs may also get discounts as builders try to offload the last few homes in a large community or seek to jumpstart sales in a new one. 

• Along with traditional landlord REITs like American Homes 4 Rent and Colony Starwood Homes, homebuilder Lennar also is engaged in the practice via a rental-only community outside Reno, NV, that currently has 225 homes.

Dive Insight:

Though rental investors allow those unable to afford a down payment the opportunity to rent single-family detached houses, a recent report by Attom Data Solutions suggested that such outfits are removing entry-level homes from the market during a time when inventory in that category is already tight. Last year, non-owner-occupied home purchases reached a 21-year high with a 37% share.

Single-family rents grew 4.5% in 2017, and vacancy rates for rental houses are less than 5%. But that could change if rental stock continues to expand and wages stagnate, potentially shifting the power from the landlord to the renter, National Real Estate Investor reported. 

According to CNBC, citing a recent report by HomeUnion, the hottest market for single-family-rental investors is Atlanta, due to a slow recovery of housing prices and an expected 75,000 new jobs created this year. Orlando ranked second, driven in part by tourism that increases lower-paying leisure and hospitality jobs. Seattle came in third for landlord investors, thanks to strong tech-sector job growth driving demand for rentals.