Today’s Challenges to Getting Single-Family Rental Communities Built

As we reach the mid-year point, housing remains both an opportunity and a challenge. With demand running high, construction costs increasing, and the scarcity of developable land, many for-sale home builders are pressured to pass on these costs to home buyers. Compounded by increasing interest rates, student debt, shifting demographic trends, and other economic factors, the market for those seeking alternative housing options is very high.

These factors have driven up rental demand over the past decade and, despite what some now say, that demand is still surging in key regional markets. Where traditional apartment product has typically met a majority of the demand, many renters are now seeking non-traditional for-lease home options, and new single-family rentals (SFR) are now widely sought. In 2017, developers built more than 36,000 rental houses, a six percent increase over the previous year. This represents the largest number of houses built, specifically to rent, for at least 14 years, according to data from John Burns Consulting.

Despite growing demand for SFRs, these new communities are becoming harder to deliver. Three key market factors are the cause of this: land sourcing, financing, and city challenges. These factors are paving the way for only the more seasoned developers and builders to thrive.

Land sourcing

Competition for land has increased. Ten years into the recovery, an increasing number of large builders are looking at smaller sites, thereby balancing down their lot inventory timelines. This competition makes land sourcing tougher, but not insurmountable. While public builders have the capital on hand to close land acquisitions quickly, local relationships, a solid track record, and ratio of deal closings can separate SFR builders.


Debt financing for new rental construction is harder to access from banks these days. The single-family new construction rental model is still in its infancy and many banks have high allocations of apartments on their balance sheets. As more communities are built, the ground-up construction of contiguous, new home communities will be less of a risk to lenders, making more capital accessible. This model is much more akin to apartment investment, with a couple of main differences; specifically, that it is a lower density product with a lower loan-to-cost and value risk profile in comparison. Experienced players who are active in this model are scarce, and those who are succeeding are those who know how to bridge the disconnect with banks by educating them on the value — and ROI — of the investment.

City Challenges

Workforce housing options are indisputably lacking in many of the country’s cities and growing metro regions. Rental housing is an obvious and important part of the solution. Unfortunately, politics in many cities hinder development of new product. Additionally, increased city fees, along with rising construction costs and financing hurdles, are limiting the supply of single-family rentals in a lot of metros. Developers and builders who are serious about the ground-up construction of new SFR communities must now work diligently to develop and foster city relationships and to educate regional officials on the inherent value in delivering these new communities.

While land, finance, and city challenges exist, they haven’t stopped the construction of new SFR communities. AHV Communities has a number of SFR communities currently under development in Texas, including Rivers Edge in Georgetown, and Legacy in Pflugerville. Additionally, we have a growing pipeline of new communities planned in 2018, including 250 homes in San Antonio and 215 in New Braunfels. We will close on 69 lots in Leander and 114 in San Antonio, this summer. Developers and builders with the right team, product, value proposition, and perseverance will be able to work around these obstacles and remain active at this important juncture in the real estate cycle.

Spencer Rinker is President of AHV Communities, a leading developer, builder, and operator of luxury, single-family home rental communities with offices in Irvine, California and Austin, Texas. Spencer may be reached at 

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