The Public Sector Pension Investment Board, or PSP Investments, has partnered with Pretium Partners, an alternative investment management firm, for a nearly $550M bet on the single-family home rental market.

The pair is set to invest about $548M to buy houses to rent in the southeastern and southwestern United States. PSP Investments, a Canadian pension giant, is the latest major investor to jump into the U.S. single-family rental property market, an increasingly crowded field.

Investors in the property type, as well as developers who are building houses expressly for the purpose of renting them, are essentially betting on the renewed interest in suburban housing being sustainable even after the coronavirus pandemic, which has seen people wanting to put space between themselves and their neighbors, but also that a solid portion of the suburbanites won't want to buy a house or can't do so.

The move by investors into rental housing also comes amid a booming housing market in many parts of the country. Americans have robustly sought single-family housing during the pandemic. An estimated 811,000 new homes were sold nationwide in 2020, according to the Census Bureau, an 18.7% increase compared with the 2019 total of 683,000.

Most single-family rentals are still owned by small owners, many of whom rent out a single property, but corporate ownership of single-family has grown since the Great Recession housing crisis. The demand for single-family houses, facilitated by low interest rates but also the pandemic, has meant a shortage of units for sale to companies that want to rent them out, so they are turning to developers like Avanta Residential to find properties, Bloomberg reports.

Avanta, an affiliate of Hunt Cos., formed a joint venture with Iron Point Partners in January to develop $500M of single-family rental housing in Colorado, Georgia, Florida and Texas.

“Three years ago I would have said this was a fad,” Greystar Executive Director Mike Clow told Bloomberg. “But it’s become more prevalent because it’s filling a need for consumers.”

Greystar manages about 1,500 single-family homes for clients, a number that might grow to 25,000 in five years, according to Clow, but it isn't the only company increasing its holdings in the sector. Homebuilding giant Lennar Corp. is preparing to ramp up its development of rental homes, while D.R. Horton Inc. is increasing its single-family rental development.

About 6% of new single-family homes are developed specifically to be rented, RCLCO Real Estate Advisors Managing Director Todd LaRue told Bisnow. At that rate of development, about 700,000 new single-family housing units for rent will be developed over the next 10 years.