Residential REIT Performance Remains Positive, Balance Sheets Show Discipline

Residential REITs own and manage various forms of residences and rent space in those properties to tenants. Residential REITs include REITs that specialize in apartment buildings, student housing, manufactured homes, and single-family homes. REITs own more than 1 million residential units, including 8,300 student apartments and 370,000 manufactured homes, as well as more than 200,000 single family homes.

CoStar data reveals that apartment supply has been greater than demand over the last few years, but in the first quarter of 2026, excess net demand (demand less supply) was rising and progressing towards its equilibrium. CoStar data also showed slowing rental growth rates in the apartment sector, but rental growth overall remained positive. If excess net demand continues to rise, apartment rental growth rates should begin to rise as well.

Nareit’s REIT Industry Tracker for the first quarter of 2026 showed that the residential sector’s year-over-year net operating income (NOI) growth was 0.4%. The apartment subsector saw a 1% decline in NOI, but occupancy rates remained healthy at 95.8%. The single-family rental (SFR) and manufactured homes subsectors had NOI growth of 3.2% and 6.2%, respectively. The residential sector’s same-store NOI growth was 1.4%. Residential REIT balance sheets also displayed continued discipline with a leverage ratio of 30.4%.

The SFR business – including REITs and non-REITs – is in a period of regulatory uncertainty as legislation that could impact it is debated in Congress. The potential legislation will not require the sale of currently owned properties and will continue to allow acquisitions through build-to-rent programs, which is the dominant acquisition strategy. Nareit and the SFR industry have emphasized to policymakers that SFR REITs add to overall housing supply and will continue to play an important role in the housing supply solution.

This year, residential REIT performance has not been as strong as other property sectors, but it has remained positive with year-to-date returns of 2.4%, as of May 31. Residential REITs have seen improved performance over last year, as the sector had negative returns in 2025. Current active manager REIT allocations to the residential sector are just under the index weight at 97%.

Adam Kramer, vice president of equity research at Morgan Stanley, noted that the sector is now clearly nearing the end of its historic construction wave, with the national under-construction pipeline at its lowest level since 2013 and housing starts trending toward their weakest levels since 2012.

Kramer added that multifamily REIT balance sheets remain healthy, with manageable leverage and refinancing exposure. Looking ahead, he expects management teams to focus heavily on supply recovery, capital allocation, stock buybacks, and selective development opportunities.

3%

The U.S. Government Accountability Office indicated that institutional investors own about 3% of single-family homes in the U.S.

25% 

According to Green Street, apartment supply growth will be 25% below pre-COVID levels in 2026, resulting in relatively tight supply.

9 

Since 2020, there have been nine mergers and/or acquisitions of residential REITs, five of which were REIT-to-REIT transactions.