Single-Family Rental REITs: Renting The American Dream
One of the best-performing property sectors this year, Single-Family Rental REITs have rebounded as the previously-sluggish U.S. housing sector has shown signs of life amid a moderation in mortgage rates.
The dire predictions of a "hard landing" in rental markets have been rebuffed in recent months by steadying rental rates and strong occupancy trends seen across the major rent indexes.
While multifamily markets face supply headwinds over the next year, single-family builders have pulled back from an already historically supply-constrained single-family market, fundamentals that support sustained inflation-beating rent growth.
SFR REITs made it look too easy. Recent upstart entrants that pushed the leverage limits are learning the hard way that SFRs are a capital-intensive and logistically-challenging business that requires considerable scale to operate profitably through business cycles.
These REITs are content to play it safe for now - a privilege earned through disciplined balance sheet management - but tighter financing conditions will be a catalyst to drive further market share gains to larger institutions that have access to cheaper and deeper capital.
In the Hoya Capital Single-Family Rental Index, we track the three major SFR REITs: Invitation Homes (INVH), American Homes (AMH), and Tricon Residential (TCN). We also track two recent entrants: NexPoint Diversified (NXDT) - which owns minority interests in Vinebrook and NexPoint Home Trust - along with Bluerock Homes (BHM) - a spin-off resulting from Blackstone's acquisition of former apartment REIT Bluerock Residential in 2021.
Other major institutional investors involved in the SFR sector include private equity firms Pretium Partners, which owns/operates more than 80,000 homes through its Progress Residential platform; Cerberus Capital, which owns more than 34,000 homes through FirstKey Homes; Amherst Group, which owns/operates more than 34,000 homes through Main Street Renewal; and the aforementioned NexPoint Advisors, which manages nearly 25,000 homes through Vinebrook Homes and NexPoint Homes Trust. NexPoint also manages apartment REIT NexPoint Residential (NXRT) and mortgage REIT NexPoint Real Estate Finance (NREF). Several traditional Wall Street "heavyweights" are active in the space as well, including Blackstone (BX), which owns 17,000 homes through Home Partners of America.