Housing Starts Fall, Institutional Interest in Multifamily Rises: August Multifamily News Roundup

We have summarized the biggest multifamily and real estate stories to emerge in August of 2021. Housing starts fell unexpectedly, while institutional interest in student housing and single-family homes increased.

Housing Starts Fall Unexpectedly

Numbers released in August showed that housing starts fell more than expected. Pandemic-induced supply chain issues and labor scarcity have remained challenges for builders. The decline was 7% below estimates from June. These supply issues have resulted in decreased demand for housing, an issue that could be resolved by lowered supply costs.

Joint Ventures Shake Up Student Housing

Interest in the student housing market has increased. Brookfield, one of the world’s largest owners of real estate, has entered the late stages of forming a joint venture with student housing owner Scion Group LLC. Brookfield owns student housing in the United Kingdom but the $1 billion fund will mark the asset manager’s first entrance into the market in the United States.

American private equity giant Blackstone has also entered the space, forming a joint venture with Landmark Properties. The student housing market was negatively impacted by the pandemic last year, but many students have returned to campus. Asset prices have yet to fully recover, powering the new interest in this corner of the multifamily market.

Single-Family Housing Still Popular with Large Investors

Blackstone’s recent real estate activity includes more than their student housing joint venture. The company has also become a major player in the single-family rental space, having completed a spate of acquisitions over the last two months. These include Home Partners of America, an owner of houses across the United States, and a portfolio of apartments from AIG.

Single-family rentals—and residential rentals in general—represent a hedge against inflation, as rents tend to increase by a rate of 6.6% each year. Coupled with increased interest in suburban living, these returns have made the space much more compelling to investors. As of August, institutional buyers in the United States own some 2% of single-family homes. Though they have not yet begun to meaningfully distort the market, similar acquisitions by institutional investors in Ireland led to reforms designed to channel well-capitalized companies away from single-family homes. Investors should be wary of the broader public blaming this investment strategy for housing shortages.

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