The largest single-family home landlords plan to raise their rents as much as 5.7% this year as they shift focus from buying properties to boosting their bottom lines.
"In the 2015 rental season, we're really seeing the ability to move rents," David Singelyn, chief executive officer of American Homes 4 Rent, the largest publicly traded single-family landlord, with about 35,000 homes, said at a conference in Miami Beach, Fla.
Corporate landlords are seeking to profit from increased demand for rental homes after building a new real estate asset class on the rubble of the housing crash. The firms slowed their expansion as housing prices rose and are focusing on operations to show investors they can be profitable managing thousands of scattered properties.
Large buyers — those who purchase at least 10 properties a year — have spent about $68 billion amassing about 528,000 single-family rental homes since 2011, according to a report last month by Haendel St. Juste, a Morgan Stanley analyst.
"The focus is now on optimizing revenue, compared to getting heads in beds," St. Juste said in an interview at the Information Management Network conference.Shares of three public landlords — Silver Bay Realty Trust Corp., Starwood Waypoint Residential Trust and American Residential Properties Inc. — are trading below their initial prices because investors prefer apartment real estate investment trusts, St. Juste wrote in the report.
The CEOs of Silver Bay, Starwood Waypoint and American Residential Properties all said they plan to raise rents this year, beginning in markets such as Phoenix, where they first bought foreclosed homes and rental vacancy rates have dropped.
"We are focusing aggressively on rent bumps," American Residential Properties CEO Stephen Schmitz said during a panel discussion. "There's a supply imbalance in some markets. The same thing that keeps occupancy high also drives rents."
Rental rates will increase 4% on renewals and as much as 5.7% for new tenants, Schmitz said.
"We think this year will be 3% to 4% increases," Silver Bay CEO David Miller said. "We're definitely seeing it. It's happening."
Blackstone Group's Invitation Homes, the largest landlord, with 47,000 homes, also is raising rents in some markets, including Phoenix, Chief Investment Officer Dallas Tanner said.
American Homes 4 Rent will raise rents more in the second and third quarters of this year, when most apartment leases come up for renewal, Singelyn said. High-quality apartments rent for more than comparably sized single-family homes, leaving room for increases on houses, he said.
"That's where the opportunity is," Singelyn said.