High Occupancy, Low Turnover Fuel Single-Family Rental Growth in Q1 

May 11, 2022 | Christie Moffat | S&P Global Market Intelligence

Rental rates for new leases and renewals of single-family rental homes owned by real estate investment trusts continued to rise in the first quarter, bolstered by high occupancy and low levels of tenant move-outs. 

Dallas-based Invitation Homes Inc. reported that new lease rate growth was 14.8% in the first quarter, compared with 8% a year ago. Renewal rate growth was 9.7%, up from 4.3% a year ago. 
Executives said on an April 28 earnings call that resident turnover averaged a record low of 4.6%, and overall portfolio occupancy averaged 98.1% during the quarter. 

The pandemic contributed to a national surge in homebuying activity, which caused single-family home prices to soar. Amid inflationary cost pressures and rising interest rates, Invitation Homes CEO Dallas Tanner said leasing a home is now over 12% more affordable on average than owning a home in the markets where the firm has properties. 

“I don’t think [turnover] will stay at this level like we’re seeing right now. However, I don’t think it’s going to go back to where we were previously,” Invitation Homes Executive Vice President and COO Charles Young said. 

Calabasas, Calif.-based American Homes 4 Rent reporte that occupancy across the firm’s portfolio was 96.2% for the first quarter, down from 96.7% in the fourth quarter of 2021. The decrease in occupancy was attributed to recent acquisitions. 

New lease rate growth was 12.3% in the quarter, compared with 10% a year ago. Renewal rate growth was 7.5%, up from 5.1% a year ago. 

American Homes 4 Rent COO Bryan Smith said on a May 6 earnings call that despite rising prices, the firm has not encountered much price sensitivity in the marketplace. 

“We’re not seeing a ton of price sensitivity. And where we are, we’re quickly adjusting our prices on the re-leasing asks. With regards to some of the other components on the fee side, no change in the way that those have been approached by our residents,” Smith said.
 
In a May 10 earnings release, Toronto-based Tricon Residential Inc. also reported strong rental rate growth. The firm’s portfolio consists of homes in both Canada and the U.S. Occupancy across the portfolio was 98% in the first quarter, up from 97.3% a year ago. New lease rate growth was 18.7% in the first quarter, up from 12.3% a year prior, and renewal rate growth was 6.3%, up from 4%. 
Demand for single-family homes is expected to endure long-term, as the U.S. housing market lacks millions of necessary houses compared with the population, American Homes 4 Rent CEO David Singelyn said. 

“We need more product. That product is going to probably get stymied a little bit on the homebuilding side, and that’s just going to further increase the demand for single-family rentals … and multifamily. These people need somewhere to go,” Singelyn said. 

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.