Lessors of Residential Buildings

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 52,400 lessors of residential buildings and dwellings in the US lease single-family homes, apartment buildings, and town homes. The industry includes owner-lessors and firms that rent real estate and subsequently sublet property to others.

Vulnerability to Trends in the Housing Market and Economy

The housing market is cyclical, and market conditions affect property income and values and the ability to collect rent.

Capital-Intensity of Operations

The residential owner-lessor business is extremely capital intensive.

Industry size & Structure

The average residential lessor operates out of a single location, employs about 6-7 workers, and generates $2.5 million in annual revenue.

    • The residential lessor industry consists of about 52,400 firms that employ 357,900 workers and generate over $129 billion annually.
    • The industry has a low level of concentration; the top 50 companies account for about 30% of industry revenue.
    • Large firms with residential lessor operations include Essex Property Trust, Avalonbay Communities, Equity Residential, and Mid-America Apartment Communities. Some large firms are vertically integrated and operate as residential real estate developers.
    • Despite the size of the industry, many large firms operate regionally.
                              Industry Forecast
                              Lessors of Residential Buildings Industry Growth
                              Source: Vertical IQ and Inforum

                              Coronavirus Update

                              May 19, 2022 - Home Builders Court Wealthy Investors
                              • In 2021, the vast majority of new homes were sold to individual buyers, but as interest rates and home prices push higher, builders are increasingly catering to investors who are buying homes in bulk, according to The Wall Street Journal. More than 25% of the homes purchased by professional rental investors in the fourth quarter of 2021 were newly-built homes, according to a recent report by John Burns Real Estate Consulting LLC and the National Rental Home Council. In the third quarter of 2019, only 3% of homes bought by investors were new construction.
                              • A lack of single-family housing inventory has increased demand for a type of home called single-family built-for-rent (SFBFR). While the overall market for SFBFR is relatively small, it is growing rapidly. In the first quarter of 2022, the number of SFBFR housing starts increased 62.5% over Q1 2021 levels, according to the US Census Bureau. The Census data for SFBFR housing only includes housing built and held for rent by the builder.
                              • After the Supreme Court struck down the moratorium on evictions last summer, many expected a flood of evictions, but that never materialized, according to CBS News. Congress enacted the Emergency Rental Assistance (ERA) program in 2021 to prevent evictions during the coronavirus pandemic. Of the $46 billion allocated, as of the end of February 2022, the ERA program had paid out $30 billion to 4.7 million households. The remainder of the ERA funds is expected to be paid out by mid-2022. Once emergency funds run out, the US Treasury Department urges state and local governments to provide additional funding from the $350 billion they received through the American Rescue Plan Act. In 2020 and 2021, US evictions fell to their lowest levels on record, in part due to federal government interventions, according to an analysis released in March 2022 by Princeton University’s Eviction Lab.
                              • While the Emergency Rental Assistance (ERA) and efforts by state and local officials helped stem the tide of potential evictions, a nationwide lack of affordable housing remains a significant challenge. More than 350 state and local governments have used American Rescue Plan Act monies to invest in housing, and more are expected to do so in 2022, according to the Treasury Department’s chief recovery officer, Jacob Leibenluft.
                              • In May, the Biden administration announced an action plan to help bring more affordable housing online. Supply chain disruptions have slowed the construction of new housing units and the imbalance between supply and demand – combined with inflation – is reducing affordability for some renters. The national median rental price reached a new high of $1,807 in March 2022, up 20% compared to March 2020, according to Realtor.com. The Biden plan aims to use federal transportation funds to promote the relaxing of state and local zoning laws that can inhibit apartment projects. The plan will also streamline federal financing sources to reduce the costs and timeframes of bringing more affordable housing to market.
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