Single-Family Rentals Outpace Apartments by 20% in Rent Growth—Here’s What Investors Need to Know

A new Zillow rental market report for December 2024 highlights a growing divide between single-family rental (SFR) homes and apartments, with SFR rents now outpacing apartment rents by a staggering 20%. The gap between these two rental sectors continues to widen, presenting both challenges and opportunities for investors.

Key Findings from Zillow’s Analysis of the 50 Largest U.S. Metro Areas

• Single-family rental homes saw a median asking rent of $2,174 per month, reflecting a 4.4% annual increase and a 40.6% jump since the pandemic began.

• Apartment rents averaged $1,812 per month, up 2.4% year-over-year and 26.2% higher than pre-pandemic levels.

• Concessions are now being offered on 40% of rental properties listed on Zillow.

• Housing inventory is recovering but remains 25% below pre-pandemic levels.

• The biggest SFR vs. apartment rent gap was in Salt Lake City (59%), while Detroit had the smallest difference (9%). Pittsburgh, following a single-family construction boom, recorded a 14% gap.

• Denver joined Austin and San Antonio as the only metros where rents declined year-over-year. However, 32 major metro areas saw monthly declines, led by:

  • Denver (-1.3%)

  • Salt Lake City (-0.6%)

  • San Jose (-0.6%)

  • Portland (-0.6%)

  • Austin (-0.5%)

• Rents rose in 47 out of the 50 largest metro areas, with the sharpest annual increases in:

  • Hartford, CT (+7.9%)

  • Cleveland, OH (+7.0%)

  • Richmond, VA (+6.5%)

  • Providence, RI (+6.2%)

  • Chicago, IL (+5.8%)

Why the Rental Market Is Shifting

According to Zillow Chief Economist Skylar Olsen, the main driver behind this growing discrepancy is supply and demand dynamics.

"Right now, more multifamily units are hitting the market than at any time in the past 50 years, but detached homes aren’t seeing the same surge in construction. The large millennial generation is looking for more space, and unpredictable mortgage rates are pushing them to rent instead of buy. Some homeowners are also selling to cash in on record-high home prices rather than waiting for lower mortgage rates."

Multifamily Construction Boom Leads to Record-High Concessions

The rapid influx of new apartment developments has led to fierce competition among landlords, resulting in higher-than-usual concessions such as free rent, waived fees, or parking incentives.

Another key trend is that millennials are renting for longer than ever before. Zillow’s latest Consumer Housing Trends Report found that the median renter age in 2024 is 42, up from 33 in 2021—suggesting delayed homeownership is playing a role in the demand shift.

Wall Street’s Impact on Single-Family Rental Pricing

The rising cost of homeownership, mortgage rates, and insurance is making it harder for families to buy homes. Instead, many are renting single-family properties in suburban areas—often in search of more space and better school districts.

Institutional investors have taken notice. Major firms like Blackstone, Invitation Homes, and Pretium Partners have aggressively expanded their build-to-rent (BTR) portfolios. According to the National Association of Realtors, BTR housing starts doubled to 10% of all new single-family homes between 2021 and 2023.

However, corporate ownership of SFRs is not without controversy.
In September 2024, Invitation Homes—the largest SFR operator in the U.S.—paid $48 million to settle Federal Trade Commission charges related to deceptive rental pricing practices and unfair evictions.

Housing advocate Ruth Jones Nichols highlighted concerns in a Wall Street Journal interview:

"When institutional investors or larger landlords own rental units, we see an increase in evictions."

Investment Outlook for 2025: Single-Family vs. Multifamily

For real estate investors, the question remains: Should you buy single-family rentals or multifamily properties in 2025? The answer depends on your investment strategy, funding, and risk tolerance.

Key Investment Considerations

1. Scalability

• Multifamily investing allows for faster portfolio growth and economies of scale.

• SFR portfolios require multiple purchases but can be highly profitable in strong rental markets.

2. Risk Management

• Multifamily properties (16+ units) mitigate risk by spreading vacancies across multiple units.

• Single-family homes have lower tenant turnover but higher vacancy risk per unit.

3. Appreciation Potential

• Single-family homes are appreciating rapidly and remain in high demand.

• Multifamily properties (5+ units) are valued based on rental income, allowing investors to force appreciation through value-add strategies.

4. Financing Options

• SFRs and small multifamily (2–4 units) can qualify for FHA loans (3.5% down).

• Larger multifamily (5+ units) requires commercial financing, with 25–30% down payments.

• 1031 exchanges can help investors scale tax-efficiently.

5. Tenant Turnover

• SFRs typically have lower turnover, leading to more stable cash flow.

• Multifamily units see higher turnover, but strong property management can mitigate vacancy risks.

Final Thoughts: Picking the Right Investment Strategy

If you're deciding between SFRs and multifamily properties, consider local market conditions:

• If your area has a surplus of new apartments, competing against deep-pocketed landlords with concessions may be challenging.

• Single-family rentals generally have less competition, but BTR communities are emerging as a new force in the market.

• Investors must carefully select locations that maximize rental demand while minimizing competition.

In 2025, both SFRs and multifamily buildings present lucrative opportunities—but strategic investment decisions will be key to navigating the shifting market.