February 2, 2022
Will Single Family Rentals Come to Canada?
These days, a trend that is growing in some markets in the United States is a build-to-rent development model when it comes to single-family homes.
Traditionally, single-family homes in North America were built to be sold to homeowners. Now, we’re seeing that in an expanding number of markets these single-detached homes are being constructed with the purpose of making them available for the growing number of people in today’s world who want to rent rather than buy.
Some subdivisions in the US are popping up with 100 to 200 of these rental single-family homes.
Major pension funds such as Blackstone are backing the trend and supporting the growth in that space which is gathering momentum in places like Texas, Arizona and several southeast states. In fact the sector has grown from $3B in project deal flow in 2020 to $50B projected in 2022.
Land prices are relatively inexpensive in many of those markets and homes can be constructed in a very cost-effective way.
The question is will the concept come to Canada?
In Canada, there’s a different scenario at play with higher land costs and higher construction costs. The rent equilibrium will be needed to make those yields on the investment work.
But as we all know, most trends that start in the US, in particular, eventually make their way north to Canada. That’s also true for the real estate market.
The only way it’s coming to Canada at the current time will be in the townhome sector. Perhaps the single-family sector will follow soon after.
Demographics will drive the demand as the Millennial generation ages and starts to have children. They will want to move out of apartment and condo living into a bigger space that a single-family home and a townhome would provide as well as having an outside area to spend time.
There’s also been a demographic shift taking place in Canada and the United States. More people are renting today as opposed to buying.
There are a number of reasons people look to the rental market.
They may have been burned by the housing market before and they now don’t want to own. They don’t want to put all their capital into a house.
Depending on where they live in the country, real estate prices for homes have skyrocketed in recent years, putting homeownership out of reach for many.
It is cheaper to rent a house. The landlord pays the taxes, the insurance and many of the other costs of a property. All the tenant needs to do is pay for the rent and tenant insurance.
The communities where rental properties are built are also attractive with amenity space and a maintenance free lifestyle.
For people in the US who are renting single-family homes, developers manage the entire community.
Renting a townhome or a single-family home in the future in Canada could become a reality in the near future as many people consider affordability and the ease of life in making their housing decisions.
Chris Chornohos has a passion for real estate and helping his clients reach their business goals by providing Real Estate Investors and Owners with the first class valuation and advisory services to close more deals. Chris is also an investor, builder and developer. Reach out to Chris today to help with your Real Estate needs.
E: Chris.Chornohos@nmrk.com W: www.chrischornohos.com
*Image source: https://wheelercpa.com/renting-out-a-second-home/
