Single-family, built-for-rent housing

By: J. David Chapman/April 6, 2023

Oklahoma has a lot of single-family, for-rent homes. We have significantly less multifamily rental products such as apartments, town homes and condominiums. The reason is twofold. First, there is a strange opposition to apartments in our state, creating challenges to developers and builders constructing any multifamily product. Secondly, the affordability of single-family homes as rentals is the most attractive in the country. Seems as though Oklahoma might have been ahead of the curve on a new trend.

A relatively new category of real estate called single-family, built-for-rent, or SFBFR, construction is posting record numbers around the country. Instead of opting for a standard apartment unit, some renters prefer more of a single-family residential experience with the benefit of a professionally managed and amenity-rich community. The SFBFR market is a way for builders and developers to add single-family inventory amid concerns over housing affordability and down-payment requirements in the for-sale market.

These rental single-family communities typically offer one-, two- and three-bedroom, attached or detached homes with upscale finishes, high ceilings and private yards for each unit. It is not unusual to equip these homes with stainless-steel appliances, quartz countertops, in-unit washers and dryers, and hardwood-style flooring throughout. The community might have dog-parks, community pools, landscaped recreation areas, playgrounds and walking trails.

Managers are reporting that renters of this type of product are “stickier” than typical apartment renters because they see their rental home as more of a long-term decision. Rent increases and renewals are consistently outpacing those in conventional apartments. The premium for these homes over apartments is reported as much as 24%; however, they are 17% more affordable than single-family homes in neighborhoods with owner-occupied homes.

Tenants for these kinds of homes are one-third professional millennials, and close to 60% of the residents are single women. We are also seeing many move-up families, life-transition (divorce) tenants and empty-nesters. On the density front, single-family platted subdivisions will see less than 10 units per acre, town houses and row houses will have around 20 units per acre, and multiple-story apartment buildings can achieve densities from 50 to more than 100 units per acre. These SFBFR neighborhoods typically will see between 10 and 25 units per acre depending on the size of the units. This lack of density when compared to apartments makes their affordability more challenging and they tend to work better in markets with lower land costs such as Oklahoma.

J. David Chapman is a professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).