Dive Brief:
- Housing giants Lennar and Toll Brothers have been expanding their divisions devoted to the roaring multifamily rental sector, The Wall Street Journal reported Tuesday.
- Lennar, the second-largest builder in the U.S., is in the process of establishing a $1.1 billion fund to construct apartments in about 25 of the country's largest housing markets. The builder said it will increase the equity of that multifamily fund to $2 billion in the next year.
- Toll Brothers, the 13th-largest U.S. builder with a focus on the luxury market, also has plans to ramp up its three-year-old multifamily division and enter new markets. The builder said it will double its equity in the segment, increasing the total investment to $300 million.
Dive Insight:
The hot rental sector has been riding high, as potential buyers frustrated with rising home prices and a lack of affordable inventory put off homeownership.
The significant focus on the multifamily market has raised concerns it is becoming overbuilt. But those worries haven't yet been verified, as an MPF Research report last month found that cities with the most aggressive apartment construction haven't had any trouble filling new units and tolerating rent increases.
Builders aren't letting the fear of a multifamily tipping point stop them from increasing construction in the sector. Lennar President Rick Beckwitt said, "I think it’s too soon to tell if there has been a fundamental shift in homeownership rates... What we do know today is there is demand on both sides."
And even if the rental sector does cool off, both Lennar and Toll Brothers make the majority of their revenue from single-family home sales. In the last fiscal year, Lennar sold approximately 21,000 homes, and Toll Brothers sold nearly 5,400.
