Single-Family Renters: Identifying an Evolving Demographic
As the single-family rental (SFR) investment market matures, a clearer picture of its typical renter has begun to come into focus. On December 5 at IMN’s 11th Annual Single Family Rental Forum (West), a group of industry leaders, including Arbor’s Tres Seippel, Director, Construction Management, explored how demographic trends have influenced the rise in popularity of single-family rental homes.
“I think when you are building a property, you need to know your target market,” said Seippel. “You have to research the marketability and feasibility up front to know what will work. Just building housing to build housing isn’t the right approach. Be thoughtful.”
Although wages have risen nationally, the cost of goods and housing has climbed. Buying a home is now less affordable than at any time in recent history. As a result, more households have been choosing apartments over residential homes. Increasingly, SFR communities, which often include amenities like community space, fitness centers, and smart technology, have been attracting the attention of those priced out of homeownership and renters by choice.
The demographic profile of the single-family renter has been consistent in recent years, according to Kaycee Kisling, Managing Director of Multifamily Investments, Mark-Taylor Residential. “In terms of the income qualification factor, in Class A space, you have about $114,000 household income on a Class A space multifamily, and that’s really consistent in their SFR and their BTR portfolio as well,” she said.
SFR Attracts Tenants of All Generations
Today, Baby Boomers are looking for convenience and less responsibility when weighing housing options. Many would rather not have to spend time mowing the lawn but instead be able to enjoy easy access to amenities like golf carts and pools.
“I think renters like the idea in built-for-rent (BFR) that there is a community with a shared space versus single-family scattered site don’t have an onsite point person or an office you can walk into,” said Seippel. “There’s been some research and some surveys out recently about how the BFR actually has attracted more of the older generation who like to have a person they can go to and speak to and a place to walk in to have a conversation with property management, with maintenance, with anything like that.”
Although they clearly have different tastes, younger cohorts, such as Millennials and Generation Z, prefer renting for a similar set of reasons. Younger generations, accustomed to a work-from-home lifestyle, seek access to amenities that add convenience. While many Zoomers, who range from 12 to 26 years of age, are simply not interested in home maintenance right now, they are still looking to move into a starter home with a backyard. “All the research that has come out in the last three or four years about Gen Z is that they are moving towards more space and are more cost-conscious,” said Seippel. “They are more focused on personal fulfillment and the work-life balance.”
SFR Communities Evolve With the Times
Whereas early SFR communities came with just a simple pool, more creative amenities have become the norm. SFR communities now often include outdoor space that is available for tenant use. For instance, a frisbee golf course, which doesn’t require a high capital investment, can enhance renters’ quality of life and, in turn, increase retention.
To attract Gen Z tenants, newer communities have also gone high-tech, including everything from wall-mounted TVs to car charging stations in monthly costs. Future-focused infrastructure can be costly, but it is a long-term investment that could pay serious dividends. “Everything is moving in that direction,” said Seippel. “Maybe today Gen Z might be the first adopter, but Baby Boomers, Millennials, Gen X will all adopt it at some point if they haven’t already.”
However, every community and every location is different. What works in Scottsdale, AZ, might not work as well in Tulsa, OK.
“If your competition out there is all doing it and you’re not, you’ll lose market share,” said Seippel. “Because that’s the biggest part of all of it, knowing what your competition is doing. It might not give you more rental income today, but in the future, it’ll keep occupancy higher, and when everyone else comes around, you won’t have to put your cost in then.”
Interested in the multifamily real estate investment market? Contact Arbor today to learn about our array of multifamily and single-family rental financing options and view our other market research and multifamily posts in our research section.