Single-Family Rental Housing Sector Maturing, Executives Say

The single-family rental housing sector is showing signs of growth and maturation, according to real estate executives who participated in a panel discussion at REITWeek 2016: NAREIT’s Investor Forum.

Bryce Blair, the executive chairman of Invitation Homes, described the end of 2015 as an inflection point in the sector. Single-family rental companies have passed through the early launch stages of acquiring assets and stabilizing their businesses, according to Blair. They are now entering a phase in which they are focused on “optimization of the business,” said Blair, who previously served as CEO of multifamily REIT AvalonBay Communities, Inc. (NYSE: AVB).

“It’s about getting better at our craft,” he said.

Other panelists expressed similar sentiments.

The sector has started demonstrating “proof of concept,” according to David Singelyn, CEO American Homes 4 Rent (NYSE: AMH), as interest grows in the business.

“We’ve got a lot of opportunity in front of us,” Singelyn said. “This is a very exciting time for where this industry is going.”

Frederick Tuomi, CEO of Colony Starwood Homes (NYSE: SFR), pointed out that the sector went through a period of “massive growth” when it lacked significant infrastructure to support the businesses. Now, the early movers in the sector have the opportunity to create new business processes and technology “without legacy anchors.” For example, Colony Starwood executes 100 percent of its leases online, and 70 percent are done through mobile devices.

“We’re part of a new concept of delivering housing in the way that consumers like to acquire services,” Tuomi said.

Curt Schade, president and chief operating officer of Progress Residential Master Trust, said the company is now engaged in refining its business practices. Those efforts are showing tangible results, according to Schade. “We are really starting to see progress in the operating numbers,” he commented.

The sector is buoyed by the lack of affordable housing in the United States, according to Schade, and renters have embraced the quality of rental homes offered by large-scale operators.

Blair asserted that operating scale is “critical” to competing in the single-family rental housing sector.

Dave Bragg, a managing director with Green Street Advisors who moderated the discussion, noted that despite its maturation, the sector remains “heavily fragmented.”