U.S.A Housing Crisis: Follow the Money

Sadly, the U.S.A. is lacking housing units. The National Association of Realtors estimates that the deficit is 5.5 million housing units: 2 million single-family homes, 1.1 million units in buildings with two to four units and 2.4 million units in buildings of at least five units. Private equity investors and publicly traded companies are waking up to this reality and are investing billions of dollars to capitalize.

These plays center around two main strategies: (1) build to rent communities and (2) scattered single family rental homes.

(1)   Build to rent is developing brand new communities offering a robust amenity package. They achieve operational economies of scale and are professionally managed. Homes range anywhere from side-by-side single-story units offering 1-3 bedrooms to detached homes offering 2-4 bedrooms. Strategies range from buying finished homes from home builders to partnering with home builders.

(2)   Acquiring scattered single family rental homes throughout a MSA. Managing these homes is a logistics nightmare, which is why we have seen all of these companies roll up into larger public and private companies:

a.      Invitation Homes (NYSE: INVH) over 80,000 homes

b.      Progress Residential (private company) over 66,000 homes

c.      American Homes4 Rent (NYSE: AMH) over 50,000 homes

d.      Tricon Residential (TSX: TCN) over 31,000 homes

My favorite play is developing brand new build to rent communities.

My hope is that more supply of both of these categories will provide more rental options for Americans while reducing the cost. Every American wants a safe and affordable place to call home.