Lower rental-home vacancy rates spur faster rent growth
The single-family rental stock has grown by 35 percent over the past decade, from 11. 3 million homes in 2006 to
15. 3 million in 2016. Nationwide there are now more rental homes in single-family properties than in large rental
The increase in single-family rental homes has been uneven across neighborhoods, however. The single-family
rental stock grew by 23 percent between 2006 and 2016 in the Los Angeles-Long Beach-Anaheim metropolitan
area. In the Phoenix and Atlanta metro areas, single-family rental stock grew by 86 percent and 90 percent,
respectively, over the same period.
Much of the increase in the single-family rental stock is attributable to the
housing-market decline and the Great
Recession. Over the 10 years ending in
2016, more than 10 million homeowners
lost their homes through foreclosure or
Although many were sold to owner occupants, some were purchased by investors, including companies that specialize
in single-family rental management.
As of 2015, partnerships, corporations
and real estate investment trusts (REITs)
owned 17 percent of the single-family
rental homes in the U.S. Although the
number of companies that specialize in
single-family rental ownership is growing, today it’s still the individual investor
— often called “mom and pop” owners
— who own about 80 percent of the single-family rental homes nationwide. In contrast, about four of every five
rental buildings with 50 or more apartments are owned by partnerships, corporations, or REITs.
Because of the rapid rise in single-family rental homes over time and the differential growth across metro areas,
we decided to explore how rent growth in that sector responds to supply and demand conditions. The growth in
the CoreLogic Single-Family Rental Index relative to the Consumer Price Index Less Shelter was used to measure
rent growth in excess of inflation (known as “real” or “inflation-adjusted” rent growth).
The Census Bureau Housing Vacancy Survey (HVS) one-unit vacancy rate was used to gauge market tightness.
Although CoreLogic’s Rental Index and the HVS vacancy rate both include one-family houses, there are important coverage differences. The HVS includes mobile homes, which have higher vacancy rates, and excludes rental
condos in multi-unit buildings. The Rental Index excludes mobile homes and includes rental condos in high-rises.
Over the last 14 years, the analysis shows that the equilibrium vacancy rate for single-family rental homes was
about 9 percent, meaning that when the HVS one-unit vacancy rate was below this level, rents were rising faster
than other consumer prices. And when vacancy rates were above 9 percent, rent growth was slower than inflation
in other consumer goods.
To illustrate, as one-unit vacancy rates have declined since 2014 —to 6.1 percent in 2017, the lowest level in 20 years
— rents have grown by nearly 3 percentage points faster per year than other consumer prices. On average, for each
percentage point that vacancy rates were below equilibrium, rent growth was about one percentage point higher
The relationship between lower vacancy rates and higher rent growth also is evident when looking across metropolitan areas. Rents grew faster in locales that had low vacancy rates — a byproduct of limited rental inventory
relative to families looking for homes. The rental-unit shortage appeared to be particularly acute in high-cost
cities along the Pacific Coast, running from Seattle down to San Diego.
Both the Seattle and San Diego metro areas had rental vacancy rates (for single-family and multifamily combined)
below 4 percent during 2017, more than three percentage points below the national average. In these two metro
areas, real rent rose 3 percent during 2017.
In contrast, the Oklahoma City metro area had a 10 percent rental vacancy rate and real rent declined 1.5 percent
in 2017. Because of the dynamics between vacancy and rent, additional rental supply is necessary to moderate
rent growth in cities with limited vacant inventory. n
Frank E. Nothaft
Frank E. Nothaft is chief economist
for CoreLogic, America’s largest
provider of advanced property and
ownership information, analytics
and data-enabled services. He leads
the economics team responsible for
analysis, commentary and forecasting trends in global real estate,
insurance and mortgage markets.
Before joining CoreLogic, Nothaft
served as chief economist for
Freddie Mac. Prior to Freddie Mac,
he was an economist with the Board
of Governors of the Federal Reserve
System and served as assistant to
Fed Governor Henry C. Wallich. Visit
CoreLogic at www.corelogic.com.
Sources: CoreLogic Inc., U. S. Bureau of Labor Statistics and U. S. Census Bureau
Rent Growth Vs. Vacancy Rates for Single-Family Homes
Real single-family rent growth Single-family rental vacancy rate