Single-Family Rentals At A Crossroads: Policy, Supply And The Future Of Housing

The single-family rental industry started off the year in the political spotlight. On Jan. 7, President Donald Trump posted on social media that he wanted to take steps to “ban large institutional investors from buying more single-family homes.” Two weeks later, the White House issued an executive order offering more context, followed by draft legislation in both the House and Senate. 

Today, Congress is working to reconcile differing views on what the final bill should look like, with several key issues still under debate, including a proposed seven-year forced-sale requirement for new build-to-rent projects. That provision, included in the Senate version, has drawn criticism from industry stakeholders as well as policymakers on both sides of the aisle due to concerns about its potentially stifling impact on housing supply and, ultimately, affordability. 

A bipartisan group of 76 House members has made this opposition public by signing a letter opposing the proposed seven-year forced-sale requirement and urging House leadership to strip or revise the provision.

All of this political commotion has led to predictable confusion and uncertainty, with much of the capital flowing into new build-to-rent developments frozen in place, a foreboding picture for much-needed future supply.

Lafayette Real Estate founder and CEO Thibault Adrien walked Bisnow through what path this regulatory environment may carve out for the single-family rental and build-to-rent industry.

Starting With The Facts

There is a housing affordability crisis in the U.S., driven in large part by a shortage of homes, particularly affordable ones.

“American households need more housing options, both to buy and to rent,” Adrien said. “Recognizing that reality, and attempting to address it, is not controversial; it’s an economic and demographic fact.”

The U.S. is, and always has been, a nation of both owners and renters. Going back to 1965, roughly one-third of households rented their homes. Currently, the homeownership rate stands at 65.7%, broadly in line with long-term averages. The idea that the U.S. is becoming a renter nation is not supported by the facts. 

Adrien said a healthy housing market needs a functioning ecosystem of owner-occupied and rental housing, especially at a time when renting is materially more affordable than owning — by some estimates, nearly 50% cheaper on a monthly basis.

“Supply matters,” he said. “In housing, as in any market, more supply helps affordability.”

Apartments alone do not meet the full range of renter needs. Only 13% of the apartment stock in the U.S. contains three or more bedrooms — the rest being studios and one- and two-bedroom units. Meanwhile, roughly 14 million American households rent single-family homes, drawn by a combination of affordability and lifestyle preferences, including more space, a garage and a backyard. That demand is not going away. The U.S. is not going to displace 14 million households or eliminate the need for rental housing across both apartments and single-family homes. The single-family rental industry is here to stay. 

What, Exactly, Will Change?

First, as long as sensitive legislation comes out with a clear and clean carve-out for build-to-rent, there will be an increased focus on build-to-rent construction, as opposed to the model of acquiring individual existing homes, Adrien said. MLS acquisitions were already falling out of favor prior to the regulatory shift, largely because existing homes had become too expensive for investors, with retail buyers consistently outbidding them in recent years.

While the original executive order carved out build-to-rent entirely, the Senate bill proposed a forced-sale mechanism, which, in practice, is likely to shut down BTR, he said. 

“Investors will not be willing to take on the risk, effort and capital required to build new communities if they are then exposed to the timing and execution risk of selling homes individually under a strict timeline,” Adrien said. “Many policymakers understand this dynamic, and industry participants continue to advocate that the final legislation should account for the importance of new development in expanding rental housing supply.” 

More broadly, a more complex and mature regulatory framework, which is not unusual for a maturing industry, will likely weed out less experienced participants and require operators to have a deep understanding of federal, state and local regulations. This includes what is permitted, how to remain compliant with fair housing laws and rental registries, and how to navigate evolving requirements across jurisdictions. 

Scale and strong relationships with industry groups such as the National Rental Home Council, as well as local stakeholders, will be critical in navigating the future of the SFR and BTR sectors. But increased sophistication is not only about regulation, it also extends to investment discipline and operational execution.

While some eternal optimists tried to flip the script entirely, insisting this could actually be great for experienced investors, Adrien prefers to nuance this: “Regulatory barriers to entry won't magically fix BTR underwriting, and we're not going to ‘win big’ simply by knowing the rules,” he said. “BTR is hard. Finding land and making the numbers work requires hard work and precision.” 

The easy days of SFR and BTR, when cheap debt and double-digit rent growth could cover up sloppy underwriting, are over, he said. 

“The industry has matured. Mistakes are no longer profitable.”

Where The Industry Is Heading

Lafayette views vertical integration as a key competitive advantage, Adrien said. Controlling the value chain, from development through operations, allows for tighter execution and a better resident experience, both of which are critical at an institutional scale.

Over the past 15 years, Lafayette has built internal property management capabilities through Brandywine Homes USA, as well as in-house homebuilding capabilities through Marquis Homes. 

“Fifteen years ago, our best option was to build our property management operations ourselves, but today, as the industry has matured, there are both in-house and third-party property management solutions that meet institutional standards, and both routes can be acceptable," Adrien said. "On the build-to-rent construction side, we concluded that developing in-house capability was essential, leading us to launch our own homebuilding platform. This does not preclude us from partnering with high-quality external builders where appropriate”. 

Institutional landlords have a brand to protect, he added. 

“They’re highly incentivized to take care of their residents,” he said. “Renewal rates are a direct measure of resident satisfaction, so professional service isn’t optional; it’s fundamental.”

Today, the benefit of a more mature market is that it’s more disciplined, less volatile and ultimately healthier, Adrien said. This emerging policy framework is part of that evolution: more guardrails, more transparency and more clarity around what gets built, where and for whom. 

“As long as regulation is reasonable, it might well help professionalize the industry further and reduce misconceptions around this new asset class,” he said.

This article was produced in collaboration between Lafayette Real Estate and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.