Demographic Trends and the Outlook for Single Family Rentals · Sources: U.S. Census Bureau ACS; John Burns Real Estate Consulting, LLC estimates for 2014 and 2015 data. Data is a

2017 NMHC Research ForumApril 5-6, 2017

Demographic Trends and the Outlook for Single Family RentalsJohn Burns

WHAT DO THESE TWO HAVE IN COMMON?

32 year oldWorking Father

16 year old High School Junior

1984 2002M I L L E N N I A L S

Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau 2014 National Projections

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000US Born Alive Today

Foreign Born

27 M

40 M43 M

41 M44 M 44 M

41 M

1930s SaversAge 78-87

1970s BalancersAge 38-47

1980s SharersAge 28-37

1990s ConnectorsAge 18-27

1940s AchieversAge 68-77

1990s ConnectorsAge 18-27

1950s InnovatorsAge 58-67

14 M1970s Balancers

Age 38-471980s Sharers

Age 28-371950s Innovators

Age 58-671960s Equalers

Age 48-57

1960s EqualersAge 48-57

2000s GlobalsAge 8-17

2000s GlobalsAge 8-17

1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-101930s Savers

Age 78-87

STEP 1: NEW GENERATIONAL DEFINITIONS BY DECADE2015 US POPULATION BY PLACE OF BIRTH

1940s AchieversAge 68-77

FEWER YOUNG COUPLES AND FAMILIES

20%

35%

64%8% 13% 10%

4% 20%

35%

25%1% 6%

49%45% 17%

68%31%

4%87% 86% 7%13% 13% 19% 16% 4%

88%12%

2015 UNITED STATES

5%16%7% 13% 19% 20% 18%3%

STEP 2: FILTER THE GENERATIONS THROUGH THE 4-5-6 RULE

Cl a r i t y

4 BigInfluencers 6 Key Questions5 Life

Stages

3 IMMIGRATION LAWS IN THE 1980S2015 POPULATION BY LEGAL IMMIGRATION BY DECADE

8.2 M

6.3 M

4.3 M

700K 857K

2.5 M3.2 M

4.1 M

6.2 M

9.8 M10.3 M

Source: Department of Homeland Security, legal green card recipients only, fiscal years ending September

TECHNOLOGIES SHIFT DEMOGRAPHIC BEHAVIOR

SOCIETAL SHIFTS HAPPEN MORE QUICKLY NOW

Interracial Marriage

Prohibition

Women’s Suffrage

Abortion

Same-Sex Marriage

12345678910111213141516171819

1234567891011121314

12345678910

123456

12

Source: Bloomberg; measured from the year at least one state took action to federal action

CLARITY: EACH GENERATION FROM 1950 ON SHOULD FORM 23-25 MILLION HOUSEHOLDSESTIMATED 2016 HOUSEHOLDS BY DECADE BORN

CLARITY: 12.5 MILLION HOUSEHOLDS SHOULD FORM OVER 10 YEARSNET CHANGE IN HOUSEHOLDS BY DECADE BORN, 2016–2025 (MILLIONS)

-3.1-4.9

-3.8

-1.4 -0.11.6

4.3

14.0

5.9

-5

0

5

10

15

Pre 1930s

1930sSavers

1940sAchievers

1950sInnovators

1960sEqualers

1970sBalancers

1980sSharers

1990sConnectors

2000sGlobals

13.3 million losses

25.8 million gains

CLARITY: BIG SHIFT IN HOUSEHOLD COMPOSITIONHOUSEHOLD FORMATION BY AGE GROUP, 2016–2025

-2,000,000

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Under Age 45

Age 45–64

Age 65+

0.01 M0.8 M

2.5 M

-0.8 M-0.2 M

5.4 M

4.3 M

0.5 M

CLARITY: 42% OF THE 12.5 MILLION NET NEW HOUSEHOLDS SHOULD BECOME HOMEOWNERSHOMEOWNER GROWTH BY GENERATION (MILLIONS), 2016–2025

Pre 1930s

1930s Savers

1940s Achievers

1950s Innovators

1960s Equalers

1970s Balancers

1980s Sharers

1990s Connectors

2000 Globals

-2.2

-4.1

-3.2

-1.1

0.6

2.8

5.4

6.2

0.9

15.9 M

-10.6 M

SHARERS AND CONNECTORS HAVE SHOWN A HIGHER TENDENCY TO RENT THAN OWN THEIR HOMES

17% 16%22%

13% 11%18%

9% 8% 12%

40% 44% 36%62% 64% 54% 70% 72% 65%

39% 35% 37%

21% 19% 22%16% 15% 16%

4% 5% 5% 4% 5% 6% 5% 5% 7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1994 2004 2014 1994 2004 2014 1994 2004 2014

Age 25–34 Age 35–44 Age 45–54

SF rent SF own MF rent MF ownCohort Structure and Tenant Share of Single-Family and Multifamily Residences

Source: Mortgage Bankers Association; John Burns Real Estate Consulting, LLC (Data: Jul-15, Pub: Feb-17)

A LACK OF TAX SAVINGS FOR HOMEOWNERS IS HELPING RENTAL OPERATORS

$7,446

($2,871)

($979)

($4,000)($3,000)($2,000)($1,000)

$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

*Assumes a married couple with a mortgage equal to 95% of median home price, and a 1.5% property tax rate.

Mortgage Interest and Property Taxes in Excess of Standard Tax Deduction*

Source: John Burns Real Estate Consulting, LLC (Data: 2016, Pub: Mar-17)

6 TREMENDOUS HOUSING GROWTH OPPORTUNITIES THROUGH 2025

+3.3 millionYOUNG (<45) HOUSEHOLDS

+8 millionIMMIGRANTS

+10.2 million SENIOR (65+) HOUSEHOLDS

+5.3 millionHOMEOWNERS

+7.2 millionRENTERS

“SURBAN” LIFESTYLE

RENTAL HOUSING UNITS ACCOUNT FOR 38% OF ALL US HOUSEHOLDS

2.1 MM Mobile Homes, Boats, Etc.¹

51.2 MM With

Mortgage²48.2 MM With

Equity³

3.1 MM With Negative Equity³

2.9 MM Attached One Unit Rentals¹

14.3 MM Units in Large Buildings [10+ units]¹

13.4 MM Units in Small Buildings [2 - 9 units]¹

13.0 MM Detached One Unit Rentals¹

136.5 MM Housing

Units¹

14.9 MM Vacant¹

121.6 MM Households¹

45.7 MM Rented¹

75.9 MM Owned¹

24.7 MM With No Mortgage²

.1 MM Current*

1.6 MM 30-90 Days Delinquent*

1.4 MM 90+ Days or in Foreclosure*

1.9 MM Above Average Vacant¹ª

13.0 MM Average Vacant¹ª

0

LESS THAN 1% OF SF RENTALS ARE OWNED BY AN INVESTOR WITH MORE THAN 1,000 HOUSES

1 Property54%

2-10 Properties

34%

11-50 Properties

7%

51-250 Properties

2%

>250 Properties2%

U.S. Single-Family Rental Market Ownership

Sources: Rent Range, aggregated by John Burns Real Estate Consulting, LLC (Data: 2015)

15.9 MILLION SINGLE-FAMILY RENTAL HOMES; NOW 11.6% OF ALL HOUSING UNITS

8.5%

9.0%

9.5%

10.0%

10.5%

11.0%

11.5%

12.0%

10

11

12

13

14

15

161Q

062Q

063Q

064Q

061Q

072Q

073Q

074Q

071Q

082Q

083Q

084Q

081Q

092Q

093Q

094Q

091Q

102Q

103Q

104Q

101Q

112Q

113Q

114Q

111Q

122Q

123Q

124Q

121Q

132Q

133Q

134Q

131Q

142Q

143Q

144Q

141Q

152Q

153Q

154Q

151Q

162Q

163Q

164Q

16

% o

f tot

al h

ousi

ng u

nits

Hom

es (i

n m

illio

ns)

Attached and detached (in millions) Single-family rental homes as a % of total housing unitsSingle-Family Rental Homes

JBREC estimates using 2010 Census figures and trending data from ACS / HVS.Sources: U.S. Census Bureau ACS; John Burns Real Estate Consulting, LLC estimates for 2014 and 2015 data. Data is a rolling 4-qtr. average (Data: 4Q16, Pub: Mar-17)

PUBLIC SINGLE-FAMILY RENTAL OPERATORS’ FOOTPRINTS INCREASED ACROSS THESE MARKETS

Sources: John Burns Real Estate Consulting, LLC (Data: 3Q2013/3Q2016; Pub Feb-17)

Public Single-Family Rental Operator Portfolios and Share by Market

RENTALS ARE A GROWING SHARE OF SINGLE-FAMILY HOMES IN MAJOR MARKETS

8%11%

14%12%

13%13%

13%14%14%

15%15%15%

13%13%

16%16%

13%18%

20%17%

13%14%

16%16%

17%18%18%18%

19%19%

20%20%21%21%21%

22%24%

26%28%

29%

0% 5% 10% 15% 20% 25% 30%

Chicago**Salt Lake City

NashvilleCincinnati

DenverDallas*

HoustonIndianapolis

Raleigh-DurhamColumbus, OH

CharlotteJacksonville

AtlantaTampa

San AntonioOrlandoPhoenix

Riverside-San Bern.Miami*

Las Vegas

2005 2015Single-Family Rental Homes as a Percentage of All Single-Family Homes

Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC (Data: 2015, Pub: Mar-17) *Metropolitan division **Combination of metropolitan divisions

25%+

SINGLE-FAMILY RENTERS TEND TO BE MORE FAMILY-ORIENTED THAN MULTIFAMILY RENTERS

Source: John Burns Real Estate Consulting LLC calculations of Census Bureau 2015 American Community Survey via IPUMS-USA

STRONG FUNDAMENTALS PERSIST FOR SINGLE-FAMILY RENTAL OPERATORS

Job growth +1.6%

Rents +3.9%

Home prices +6%

Source: John Burns Real Estate Consulting, LLC (Pub: Mar-17)

34K NEW SINGLE-FAMILY HOMES BUILT FOR RENT OVER THE PAST YEAR

0

5

10

15

20

25

30

35

40

45

5019

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

1420

1520

16

Sing

le-fa

mily

hom

es b

uilt

for r

ent (

in th

ousa

nds)

Historical averageNew Privately Owned Single-Family Starts Built for RentTrailing-twelve months

Note: This does not include new homes purchased by investors with the intention of renting out.

Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC (Data: 4Q16, Pub: Mar-17)

(Detached and Attached)

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