Thursday, July 25, 2024

Guardian Asset Management

Single Family Rental

Newsletter

Single-family rent growth rate rises in May

CoreLogic reported that their single-family rent index (SFRI) for May rose 3.2 percent from its year-earlier level. This is up 0.2 percentage points from last month’s reported year-over-year rent growth rate but is down from the 3.4 percent annual rent growth rate reported in May 2023.

The history of the overall SFRI growth rate since January 2020 is shown in the first chart, below. The chart shows both the nominal year-over-year rent growth rate and also the wage-adjusted and CPI-adjusted rates. The wage-adjusted rate is the year-over-year nominal rate less the year-over-year rate of wage growth as measured by the seasonally-adjusted average hourly earnings of production and non-supervisory employees. The CPI-adjusted rate is the year-over-year nominal rate less the year-over-year rate of growth in the consumer price index (CPI).

Section 8 single-family rentals:

An overlooked investor asset class

One of the most heart-wrenching problems in America today is the lack of affordable housing. According to an analysis of Redfin data, having a six-figure income is now essential in order to buy a median-priced home in close to half of the United States. That's driving a surge in rental demand among those who are priced out of the housing market, but the median monthly asking rent of $1,964 as of January 2024 is also a stretch for many. According to the National Low Income Housing Coalition, "the lowest-income renters in the U.S. face a shortage of 7.3 million affordable and available rental homes." 

As organizations like the Mortgage Bankers Association work toward solutions for this enormously complicated issue, institutional investors may be overlooking an opportunity to step up. This "counterintuitive" opportunity lies within the Housing Choice Voucher (HCV) market segment, which grew at an inflation-adjusted 13% rate from HUD FY2002-FY2019. Building a portfolio of HCV single-family rental assets would advance a flagship model for public/private partnerships that genuinely "do well by doing good" — expanding housing access in workforce neighborhoods while providing attractive yields for dedicated institutional investors.

Here's Why Some Secondary Markets May Not Support Single-Family Rentals

Build-to-rent single-family houses may be an emerging asset class, but a Georgia firm is moving away from the concept in some smaller markets because of softening rents.

Trilogy Investment Co. had planned build-to-rent houses in Tallahassee, Florida, as well as in Winston-Salem, North Carolina, and Winder, Georgia. Instead, Trilogy ended up selling the sites to builders of for-sale homes, including Miami-based Lennar.

The build-to-rent concept does not work financially in some areas where rent growth is moderating as supply increases, Jason Joseph, CEO of Alpharetta, Georgia-based Trilogy, told CoStar News.

In those smaller markets, "People can only afford so much rent, but as buyers they can afford slightly more expensive houses," Joseph said.

Even so, he stressed that build-to-rent properties remain his company's primary focus because they still work in larger markets.

The emerging limits on build-to-rent demand come as single-family rentals have increased in popularity in recent years in larger cities. That's because higher interest rates are keeping some potential buyers in the rental pool. Elevated insurance costs and maintenance fees also have some people reconsidering homeownership.

Housing Market Best For Renters in These 5 Cities

The South and Southwest of the country have the cities with the best rental markets in the U.S., according to a recent report by nationwide apartment search website RentCafe.

The report considered various factors including affordability, size of apartments, employment and quality of life.

For the second year in a row, Charleston, South Carolina, is the best city in the nation for renters thanks to its strong local economy and affordability, as the cost of housing in the city is lower than the national average.

According to RentCafe, the city also offers plenty of employment opportunities thanks to the presence of companies such as Boeing, Benefitfocus, Blackbaud, and BoomTown and its "thriving" tourism industry.

Charleston also offers spacious apartments, quality schools, plenty of green spaces and lots of opportunities for young people to socialize in fitness centers, cultural events and others.

These are the five best cities for renters this year:

How much Money do you need to make to afford rent in California? What a new study says

California has the highest housing costs in the country, according to the National Low Income Housing Coalition. The nonprofit organization looked at what you need to make in all 50 states and the District of Columbia to comfortably afford a two-bedroom rental home — and the Golden State topped the list.

“Even in states with the least expensive rents, a renter working full time and earning less than $18 per hour is unable to afford a modest two-bedroom apartment,” said the National Low Income Housing Coalition, which is dedicated to creating public policies for affordable housing for low-income individuals. In California, you need to earn nearly $50 per hour in order to afford a two-bedroom rental. That’s pricier than Massachusetts, New York and Hawaii.

For at least one demographic, this presidential campaign is serving as a unifying force: Every credible economist agrees that both parties are proposing terrible economic policies.

The latest is President Joe Biden’s plan for national rent control. He casually dropped the possibility of such a policy during a press conference last week, and on Tuesday the White House released its official plan. Under the proposal, which exempts new construction, landlords with 50 or more units would agree to either cap rent increases at 5% or give up federal tax breaks. The policy joins Republican presidential nominee Donald Trump’s proposals to impose a 10% tariff on all imports and make tipped income tax-free.