A new white paper from Freddie Mac says SFRs are the largest source of rental housing in America and they’re playing an important role in rural areas where they account for two-thirds of the rental housing stock. However, Freddie Mac says that the secondary market for SFR home loans is limited. In addition, they point out that of the 43 million renter households ̶ in America today, 35.5 million live in urban and suburban markets and 7.5 million in rural markets. Freddie Mac produced the white paper under their Duty to Serve plan, which aims to expand affordability and address America’s most persistent housing problems.
“Across the United States today there are nearly 43 million renter households ̶ 35.5 million live in urban and suburban markets and 7.5 million in rural markets. Typically, rental housing is thought of as apartments: high-rise and mid-rise buildings downtown, garden apartments out in the suburbs and federally subsidized housing around the country. Indeed, over 18 million renter households live in multifamily buildings like that. But where do the other 25 million renter households live? The answer, for an overwhelming majority, is in single-family rental (SFR) homes.”
Some key findings:
- The SFR market is the single largest segment of the rental market by valuation and households served
- The overwhelming majority of SFRs are owned and operated by individuals or very small investors
- There is a slow-growing middle-tier investor market with further potential for growth
- Large-scale institutional investors are a new entry into the market, but are limited to a select few firms that own approximately 1 percent of SFRs
- Apart from these select few institutional investors with access to the capital markets, there are limited secondary market opportunities for SFR loans with middle-tier investors that would provide liquidity and stability, and there is not a uniform set of terms and credit standards for loans on SFRs
- Freddie Mac’s pilot included both middle-tier investors and affordable homes in select large-investor portfolios and demonstrated how a secondary market infrastructure focused on SFRs affordable at 80 percent of the area median income (AMI) could be created and operated, particularly for middle-tier investors
Click here to read the full report at Freddie Mac.