Insights on Small Single-Family Residential Rental Communities

Goals

To identify recent (within the last 12-18 Months) residential research in the USA on the trend of small single-family residential rental communities as a product type and its demand in the market to help develop a target market persona for new residential rental home brands offering homes that are between 500 and 1,200 square feet in size, such as detached homes that compete with studios to smaller apartments. Research should focus on identifying the demographic distribution of potential customers.

Early Findings

  • According to research published by Benjamin Coomer of the NAHB Economics and Housing Policy Group in August 2019, Millennials are becoming increasingly interested in accepting a smaller house and a smaller lot.
  • In 2018, 34% of Millennials were ready to accept a smaller house for a more affordable home compared to 21% of Millennials who were ready to do the same in 2007.
  • The percentage share of GenXers and Boomers, ready to accept a smaller house for a more affordable home also increased from 22% to 39% and from 31% to 48% respectively between 2007 and 2018.
  • Recent market studies indicate that the demand for single-family rental homes is on a rise with empty-nesters willing to opt for downsizing to increase portability and Millennials not interested in taking care of a home.
  • According to the latest available data published by the National Association of Home Builders, 43,000 single-family rental homes were built in 2018, the largest number in 40 years.
  • The average annual household income of tenants in many such single-family residential rental communities was as high as US$100,000, implying many of these tenants could afford to buy a home but chose not to.
  • According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released in August 2020, the confidence of US home builders in newly-built single-family homes has increased by 6 points to reach a 35-year high of 78.
  • Interest in single-family units is increasing among both the communities of renters and buyers.
  • Some top factors driving this interest towards single-family units include low-interest rates and the willingness to shift towards more affordable, lower density markets.
  • According to a report published by the National Association of Realtors in June 2020, the demand in the housing market is skewed towards single-family homes with strong demands in the inner and outer suburbs.
  • The median housing price increased by 2.3% from a year ago to $284,600 in May 2020. This increase in overall housing prices was driven by an increase in single-family home prices.

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