Race for Space Pushing Up Suburban Rents | Paper Source Online
Published by Realtor.com | November 10, 2020
Big companies that own single-family homes are raising rents at the fastest rate since they emerged from last decade’s foreclosure crisis.
Though millions of Americans are still struggling to pay rent and at risk of eviction, the bet on six-figure-earning suburbanites by companies such as Invitation Homes, Inc. and American Homes 4 Rent has so far been pandemic-proof.
Occupancy of the hundreds of thousands of houses collectively owned by these companies is at record highs. Timely payments are in line with historical rates. Tenants are accepting rent increases instead of moving out. New renters hunting for home offices and outdoor space are paying up to move in.
A Covid-19 vaccine might make moving to the suburbs less urgent for some, but rental executives and investors expect favorable demographic and housing-market dynamics to outlast the pandemic.
“The demand we see today is totally insatiable, and it’s growing,” said David Singelyn, chief executive of American Homes 4 Rent, which owns more than 53,000 houses in 22 states and collects an average monthly rent of $1,686.
Asking rents for available properties owned by big home-rental firms jumped 7.5% in October, according to real-estate analytics firm Green Street. It was the fifth straight month of year-over-year increases and the biggest since the firm began tracking in 2014, when financiers were still gobbling up foreclosures.
Mom-and-pop operators and individual investors who own most of the country’s 16 million rental houses are also raising rents. But not as aggressively as America’s mega landlords, who use computer programs to match rents with demand and have their own investors to please. September single-family rents climbed an average of 3.8% from a year earlier across 63 markets regardless of the owner, according to John Burns Real Estate Consulting. No market declined.
Increases in excess of 5% came in corporate-landlord strongholds Atlanta and Phoenix, but also in Middle America, around Memphis, Minneapolis and Kansas City, as well as in the West Coast’s less-expensive inland markets, like Sacramento, Calif. and Portland, Ore.
“Landlords are able to raise rents right now at a rate that is high in normal times,” said Rick Palacios Jr., John Burns’s head of research. “It’s ridiculously high when you put it in a backdrop of a recession”
The situation speaks to the uneven economic recovery. Multitudes of Americans remain unemployed and without the means to make up for missed rent payments once eviction moratoriums are lifted. Meanwhile, work-from-home professionals have kept earning and are looking for more living space.
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