According to recent U.S. Census data, in 2014 just under 65 percent of new home starts were for the traditional single-family home, with the balance mostly comprised of multi-family projects with five or more units. And yet as recently as 2009, single-family starts stood at 80 percent versus just under 18 percent for larger multi-family developments, which means that the share of multi-family housing starts nearly doubled in just five years.
In March of this year, Lennar introduced an 80-unit pilot program of single-family homes for rent near the city of Reno, Nevada in the community of Sparks. Located in the 640-acre Pioneer Meadows master-planned community complete with biking and hiking trails, the Frontera community offers six plans ranging in size from 1210 to 2182 square feet of living space, two to four bedrooms and attached two-car garages. Other features include stainless steel appliances and granite countertops in the kitchen, full-size washers and dryers, walk-in closets for the master suite, wood-style window blinds and even regular lawn maintenance.
Still, Lennar is fortunate in that it has a back-up plan for this pilot program: If they can’t rent them out, they can simply sell them the usual way. In addition, given the complexities managing a community of single-family versus multi-family homes, it’s hard to predict how important this business will be to the company’s bottom line, especially when it already has a pipeline of 20,000 apartments worth over $5.5 billion yet to be built.
However, for those builders not yet ready to dip a toe into the rental market, there are other options. Starwood Waypoint, a REIT which as of the second quarter of 2015 owned over 17,500 single-family homes and reported a stabilized occupancy of nearly 97 percent, has reportedly worked with a dozen builders to help them offload their slowest-selling plans or the final few homes in a community.
Finally, other options include the rent-to-own programs offered by companies such as Home Partners of America. Although such homes rent and sell for a premium versus local comps, the plan is to allow tenants to try out a home before locking in a down payment, with the caveat being that the longer they wait to buy, the higher the price will be.
