The COVID-19 pandemic changed much of what we consider “normal” for the real estate market. The trends we saw were often unexpected and unprecedented. Now, almost five years later, where are we? The age-old debate between multifamily and single-family rentals continues to rage, but we’re still placing our bets on the latter.

Here’s a quick recap on where the multifamily and SFR sectors have been, what they’re facing, and where we’re headed!

3 Multifamily VS SFR Comparisons to Consider in 2025

Key Market Trends

Multifamily

• Rental Growth and Occupancy: Rental growth has softened, with some regions experiencing negative growth, particularly in markets with high new supply, such as Austin and Phoenix. However, short-supply areas like Kansas City and St. Louis have seen above-average rent increases​. Occupancy levels remain stable due to limited home-buying options caused by high mortgage rates and tight inventory​.
• Construction Slowdown: Multifamily housing construction has slowed, driven by higher interest rates, supply chain issues, and increasing costs.
• Regional Variation: Rent growth is slightly negative in the South and West but positive in the Northeast and Midwest. These trends reflect regional economic conditions and housing supply-demand balances​.

Single-Family Rentals

• Increased Demand: In the years since the pandemic, SFRs have thrived. People increasingly want more space and flexibility, preferring suburban living with lower population densities. They’re renting due to high mortgage rates and property prices. Renting, even with price hikes, is more affordable in many markets – especially when considering maintenance costs.
• Development Changes: The stats don’t lie. Single-family BTRs (built-to-rent) are on the rise, with an almost 20% increase in new construction over the last four quarters. That said, rising construction costs are causing developers to think creatively about methods and materials.

Current Challenges

Multifamily

• Financing Issues: Buying multifamily housing is more costly than ever due to higher borrowing costs and, in some places, limited new developments. This has many multifamily investors worrying about acquisition costs.
• Labor Shortages: A lack of skilled workers slows new construction and creates added costs.
• Absorption of Supply: Naturally, due to limited new construction, the units that have been added to the market in recent years are often absorbed, leaving the supply and demand balance largely unchanged.

Single-Family Rentals

• Affordability & Supply: As expected, competition for SFRs is fierce. Because these properties are often in the same listing environment as run-of-the-mill residential homes, there’s more competition. We’re not just up against other investors but homebuyers as well. Lagging supply is one of the reasons efforts to improve affordability, such as reducing interest rates, have largely been ineffective.
• Economic Uncertainty: Naturally, the financial uncertainties of the times make some investors apprehensive. The cost of borrowing raises the stakes for each investment.
• Regulatory Hurdles: Finally, zoning challenges and other regulations impact the market overall. For example, dense cities with strict zoning laws may prevent new supply. This leads to higher home prices, both for buying and renting.

Further Reading: 3 Reasons Today’s Housing Market Secretly Favors SFRs

Projections & Emerging Trends

Multifamily

• Amenity Focus: Perhaps to compete with the freedoms afforded to SFRs, multifamily developers are focusing on providing amenities, like green spaces, dog parks, and wellness centers, as part of their offerings.
• Senior Living Expansion: Aging Boomers are more likely to turn to renting as a matter of convenience. Demand for senior housing, such as luxe retirement communities, will rise significantly in the coming years.

Single-Family Rentals

• Healthy Rent Growth: The numbers for SFRs are robust, plain and simple. The national SFR occupancy rate was 95.4% earlier this year, higher than multifamily housing. Additionally, the average SFR rent rose to an all-time high of $2,154 in April this year. However, these statistics may vary by market, so stay tuned to your individual properties. Even as prices push higher, the market is minimally distressed with stable occupancy rates and healthy rent increases.
• SFR & BTR Developments: SFR development – that is, purpose-built BTRs – are the name of the game. In Q2 2024, SFRs held an 8.1% share of construction. These efforts will relieve some of the undersupply pressures while streamlining the process and demands on SFR investors.
  

What’s the Takeaway Here?

At the end of the day, the single-family rental market is stronger currently than the multifamily sector. Multifamily is faring better than it did in the wake of the pandemic, but it still lags behind SFRs in terms of accessibility, affordability, and demand. That isn’t to say that the SFR sector is without its challenges.

Affordability is ever the looming question, though construction efforts are set to alleviate the pressures of short supply.

SFRs remain one of the top options for real estate investors looking to earn passive income.

Ready to purchase your next investment property? Tap the button below to connect with one of our experienced Portfolio Advisors.