Lennar, the nation’s second-largest homebuilder, announced yesterday that it plans to launch a single-family rentals venture called Upward America Venture. The business will be injected with $1.25 billion in equity, backed by private investment management firms Centerbridge and Allianz Real Estate among others.
Upward America Venture is positioned to purchase and manage $4 billion worth of new single-family homes and townhomes from Lennar, and potentially other homebuilders, in high growth markets across the United States.
These new rentals are intended to be “affordable to households earning approximately the median income in each market,” according to a press release. Rick Beckwitt, co-chief executive officer and co-president of Lennar, also noted that a portion of the homes will offer rent-to-own agreements.
“The vehicle’s social focus provides a unique opportunity for families and individuals across the country to live in brand-new homes at an attainable price point, all without putting up a down payment. We have a distinct opportunity to create upward mobility in the housing market through this initiative,” said Beckwitt.
To date, Lennar has developed 300,000 owned and controlled homesites, providing a substantial pool of prospective rental properties. The single-family rental market is booming as a result of the COVID-19 pandemic. Thanks to the proliferation of remote work, renters seeking additional living space and private backyards have flocked to suburban and rural areas.
According to commercial and multifamily lender Arbor’s Q4 2020 single-family rental investment trends report, occupancy rates for such properties stood at 95.1 percent, nearing levels not seen since the early 1990s. Credit rating agency DBRS Morningstar pegged annualized rent growth for single-family homes at 7.5 percent in the fourth quarter, the second-highest reading since it began tracking such data in 2015.
Single-family rentals are appealing to a broad spectrum of renters, from student-debt-laden Millennials who can’t afford a down payment to Baby Boomers seeking a maintenance-free lifestyle without sacrificing space. Some communities even offer resident amenities akin to luxury apartment complexes such as swimming pools, clubhouses and fitness centers.
“As the housing needs and demographics in the United States continue to evolve, we believe that the single family rental sector will continue to outperform,” said William Rahm, Senior Managing Director and Global Head of Real Estate at Centerbridge.