By the Numbers

Record single-family rental performance and growth

Mary Beth Fisher, PhD | November 12, 2021

This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors.

Record rent growth and home price appreciation for single-family properties continues to drive strong results for institutional single-family rental operators. Performance improved at the three public SFR operators—Invitation Homes, American Homes 4 Rent and Tricon Residential—and portfolio expansion accelerated during the third quarter of 2021. Build-for-rent ventures continue to gain traction and contribute to robust development pipelines, while new SFR securitizations that help finance stabilized properties have easily exceeded prior records.

Rent growth during the third quarter hit a new high for the public SFR operators of between 9.1% and 10.6% year-over-year (Exhibit 1). However, the rent growth rate for new leases was considerably higher, ranging from 15.9% for American Homes 4 Rent to 20.8% for Tricon Residential. Rents for lease renewals rose by a smaller but still historically robust amounts of 5.0% to 7.8%. Occupancy rates for same home portfolios remain high at 98% and turnover rates have been modestly falling on average during the pandemic, likely in part attributable to the higher cost of rent for new tenants versus those that renew leases with existing operators.

Exhibit 1: Comparison of performance metrics (same home portfolio)

Note: Data from earnings results for third quarter 2021. Same home portfolios are stabilized homes that have been owned and operated for at least one year.
Source: Invitation Homes, American Homes 4 Rent, Tricon Residential earnings reports and supplements, Amherst Pierpont Securities

This rent growth notched by these public institutional operators is in-line with national rent indices, which report that single-family rents have exploded higher during the pandemic, increasing by 7.1% for low price tier homes to 10.5% for high price tier homes (Exhibit 2). The difference is even wider when accounting for property type, with attached single-family rentals such as townhomes experiencing rent growth of 6.4% year-over-year in August 2021 compared to 11.7% rent growth for detached rentals, which comprise the vast majority of homes owned by institutional SFR operators.

Exhibit 2: National single-family rent index by price tier

Note: Indices reflect year-over-year changes in rents for single-family homes. The low-price tier is defined as properties with rent prices less than 75% of the region’s median rent; the high-price tier is defined as properties with rent prices greater than 125% of a region’s median rent.
Source: CoreLogic

The strength of the single-family rental market, partially due to the pandemic, has attracted significant capital and encouraged many SFR operators to pursue aggressive expansion plans. Tricon Residential increased the size of their SFR portfolio by 8.9% during the third quarter, adding a net 2,215 homes to their portfolio (Exhibit 3). Invitation Homes, the largest SFR operator, grew their portfolio of homes by 1.9%, adding 1,523 homes during the quarter, and American Homes 4 Rent added 1,292 homes on a net basis for 2.4% growth. All three SFR operators are selectively disposing of lower-priced properties in their portfolios and investing in higher priced homes with higher average monthly rents.

Exhibit 3: Home portfolio sales and dispositions during third quarter of 2021

Note: Average cost and proceeds from sales for Tricon are estimated from financial statement data on acquisition and disposition proceeds during the period. Data from earnings reports for 3Q 2021.
Source: Invitation Homes, American Homes 4 Rent, Tricon Residential, Amherst Pierpont Securities

Tricon’s development pipeline is targeting another 1,600 homes added its portfolio in the fourth quarter of 2021. American Homes 4 Rent expects to add another 700 home before year-end 2021, and owns another 9,500 lots which are earmarked for development as part of their build-for-rent program.

The boom in capital invested in single-family rentals has helped drive SFR securitizations to record issuance in 2021 (Exhibit 4) as SFR operators tend to leverage equity capital 3 to 1. There have been 22 deals year-to-date in 2021 for $14.7 billion in total issuance. Both Invitation Homes and American Homes 4 Rent have migrated to the senior unsecured debt market as opposed to issuing new SFR-backed deals, as it increases flexibility and is priced competitively to secured debt given their investment grade ratings. Tricon recently came to market with one SFR securitization, a $733 million deal, but has raised enough equity in joint ventures to fund their build-to-rent programs. Financing via SFR securitizations is for stabilized homes, so capital and debt dedicated to build-for-rent is being deployed in the private markets. Hunter Housing Economics estimates that build-for-rent starts will approach 100,000 homes in 2021 and will eventually surpass 200,000 new-construction units per year within 5 to 7 years.

Exhibit 4: Single-family rental securitizations

Note: Amounts in millions. Data through 11/9/2021.
Source: Bloomberg, Amherst Pierpont Securities

There has been about $30 billion in debt and equity put to work in the single-family rental sector in 2021, according to an article in the Wall Street Journal, and billions more is purportedly available in future commitments.

Mary Beth Fisher, PhD
marybeth.fisher@santander.us
1 (646) 776-7872

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