The single-family rental market provides housing to 25 million Americans and is valued at more than $4 trillion. In fact, it’s the largest source of rental housing in U.S., and plays a particularly important role in rural areas where they account for two-thirds of the rental housing stock, according to “Single Family Rental: An Evolving Market” a white paper from Freddie Mac. It found that the secondary market for SFR home loans is limited.

“The single-family rental market is an important segment of the housing market and the data reveal it to be an affordable housing option for many American families,” said Steve Guggenmos, vice president of multifamily research and modeling. “Much of the single-family rental market is primarily driven by small investors, and there is not a uniform set of terms and credit standards for loans on SFRs. Freddie Mac’s pilot program in this space sought to demonstrate how secondary market infrastructure focused on SFRs might benefit the marketplace.”

The most important takeaways from the report are as follows:

• The SFR market makes up about half of the overall rental market. It is the single largest segment of the rental market by valuation and households served.
• Small investors dominate the SFR space. The overwhelming majority of SFRs are owned and operated by individuals or very small investors.
• There is a slow-growing middle-tier investor market with further potential for growth. Large-scale institutional investors are a new entry into the market but are limited to a select few firms that own approximately 1 percent of SFRs.
• Secondary market opportunities for SFR loans are limited. Apart from these select few institutional investors with access to the capital markets, there are limited secondary market opportunities for SFR loans with middle-tier investors that would provide liquidity and stability, and there is not a uniform set of terms and credit standards for loans on SFRs.

The pilot included both middle-tier investors and affordable homes in select large-investor portfolios and demonstrated how a secondary market infrastructure focused on SFRs affordable at 80 percent of the area median income could be created and operated, particularly for middle-tier investors, according to Freddie Mac.