The Numbers Tell the Story
The data is striking: SFH's share of total BTR investment has skyrocketed from just 6% in 2018 to an impressive 45% by 2024. This represents more than a quadrupling of investment in this subsector, with the most dramatic shift occurring between 2022 and 2023 when 44% of all money deployed within the operational living market moved into single family developments.
To put this in perspective, roughly 36-37% of investment has migrated from what was traditionally multifamily deployment into single family housing. This isn't just a minor market adjustment—it's a fundamental reallocation of capital that signals deep structural changes in investor appetite and market dynamics.
Why the Shift is Happening
Several converging factors are driving this transformation, with the Building Safety Act of 2022 serving as perhaps the most significant catalyst. The additional costs and time required for high-rise building accreditation, particularly the Gateway Two process, have become prohibitively expensive and time-consuming for many developers.
During a recent roundtable hosted by Bidwells, one participant noted: "I can build three houses in the same time that I can build one apartment. With cost of capital so high, I'd rather focus on the single family component and digest that quicker."
The economics are compelling. Single family housing offers:
• Lower regulatory burden: Unaffected by Building Safety Act requirements
• Faster delivery times: Quicker construction and approval processes
• Granular risk profile: Multiple smaller assets rather than one large development
• Better gross-to-net efficiency: Lower operational costs compared to multifamily schemes
The Unintended Consequences
While this shift addresses immediate viability concerns, it raises serious questions about long-term housing supply. The move away from high-density multifamily developments could significantly impact urban housing delivery, particularly in areas where land is scarce and expensive.
One developer highlighted this dilemma: "If we put single family houses on our 400-acre brownfield site, we lose a huge amount of density. We're very conscious that we need to deliver homes at scale in sustainable locations."
The concern is that while single family housing solves today's investment challenges, it may create tomorrow's housing crisis. When there's less multifamily stock coming to market in two to three years, rental price increases could be severe enough to "really scare people."
Geographic Implications
The single family housing trend is also driving geographic diversification, with investment spreading beyond traditional urban centers into more rural and suburban locations. This dispersal of capital could help address regional housing shortages but may also challenge existing infrastructure and planning frameworks.
Looking Ahead
The surge in single family housing investment appears set to continue throughout 2025, driven by the ongoing regulatory challenges facing multifamily development. However, the industry must grapple with whether this shift represents a sustainable long-term strategy or a temporary response to current market conditions.
For investors, the message is clear: single family housing within the BTR sector offers compelling returns and reduced complexity in the current environment. But for policymakers and planners, the challenge is ensuring this shift doesn't compromise long-term housing supply objectives.
The question isn't whether single family housing has a place in the BTR sector—it clearly does. The question is whether the pendulum has swung too far, and what this means for creating the diverse, dense, and sustainable communities we need for the future.
