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» VISIT US ONLINE @ DSNEWS.COM 25 BUILDERS PLAN TO BUILD MORE DETACHED HOMES FOR SINGLE-FAMILY RENTALS More detached homes will be built as single-family rentals to meet increasing demand for rental housing, according to a report from John Burns, CEO of John Burns Real Estate Consulting, released in early August. For many years, resale homes have filled the demand for rental housing while builders ignored a significant share of the nation's households—12.7 million out of 120 million, or nearly 10 percent—that rented a single-family detached home, according to Burns. "e 12.7 million detached home renters have largely been ignored by builders and developers for years as both supply and demand steadily grew over many decades," Burns wrote. "e vast majority of the growth of individually owned rental homes has historically come from households who lived in the home before relocating and decided to continue owning and renting the home rather than selling it." at number of 12.7 million detached homes currently in the single-family rental market comprise about 29 percent of the demand for rentals nationwide (out of 44.3 million), according to Burns. Burns' report noted the single-family rental market has been "historically a mom and pop business," noting RentRange reported about 54 percent of landlords who own single-family rental homes own only one home. e research from Burns, confirmed with CEOs from several institutional investors, found renters generally live in detached homes because that is the lifestyle they preferred and most of them did not even consider renting an apartment. Burns found the three top reasons people lived in a detached home and rented were: Necessity, because they could not qualify for a mortgage; flexibility, because renting allowed them the flexibility to move more easily if they wanted to; and choice, because they would rather spend their money than save for a downpayment on a mortgage. e competition of single-family rental homes with the detached resale and new home market has created a need for new homes to be built for single-family rentals, according to Burns. "Clearly, there is a subset of renters who will pay a premium to rent new, as evidenced by the 200K+ apartment units that are built and leased every year," Burns said. "If it works for apartment developers, why has there not been much attempt to build single-family homes for rent? ose days are now ending." Burns cited several builders, including American Rental Properties, Starwood Waypoint, Lennar, and Rancho Sahuarita, that have expressed plans to build more single- family detached homes either to sell to investors or manage themselves. "Last year, approximately 25,000 detached homes were built for rent," Burns wrote. "We believe that number will increase significantly over the next several years. We expect detached homes for rent to become an important segmentation opportunity for the top masterplans in the country, who will no longer ignore 10 percent of housing demand." e increased popularity of single-family rentals has prompted industry leader e Five Star Institute to host its first-ever Single- Family Rental Summit in Las Vegas, October 11 through 13. Five Star's summit will provide an education and networking event for private equity, REIT, Institutional/bank, and small/ mid-sized investors. Note: e Five Star Institute is the parent company of DS News. BILL TO LIMIT COMPENSATION FOR TOP GSE EXECUTIVES ADVANCES IN HOUSE COMMITTEE e House Financial Services Committee announced that proposed legislation to cap the salaries of CEOs at Fannie Mae and Freddie Mac advanced to the markup phase, which took place in the committee on Tuesday, July 28. H.R. 2243, also known as the Equity in Government Compensation Act of 2015, was introduced by U.S. Rep. Ed Royce (R-California) in May shortly after Federal Housing Finance Agency (FHFA) Director Mel Watt directed the GSEs to submit a proposed executive compensation for the CEO position that could be as high as $7.26 million a year, the 25th percentile of the market. Early in July, Fannie Mae and Freddie Mac announced their respective CEOs, Timothy Mayopoulos and Donald Layton, would receive a raise from their current annual salaries of $600,000 (the cap set by Watt's predecessor, Edward DeMarco) up to $4 million. e announcement of the substantial raise for the GSE's top executives drew the ire of many lawmakers, including Royce, who said it is "unconscionable" that the GSEs would elevate the pay of their CEOs to that level while taxpayers are still on the hook. e GSEs have been under the FHFA's conservatorship since September 2008, when they received a $187.5 billion taxpayer-funded bailout. Similar legislation was introduced by former Rep. Spencer Bachus (R-Alabama) in January 2012 and passed the House Financial Services Committee on a bipartisan vote of 52-4. One of the four who voted against the legislation was Mel Watt, then a member of the committee. "Congress needs to put a stop to the planned multi-million dollar paydays at Fannie Mae and Freddie Mac," Royce said upon the announcement that his bill was scheduled for markup. "Holding compensation packages at taxpayer-backed organizations to responsible limits is in the interest of the public trust. I thank Chairman Hensarling for advancing this legislation and look forward to building the bipartisan backing it previously garnered." Watt said in a statement earlier this month that the purpose of the pay raises was to "promote CEO retention, allow reliable succession planning, and ensure the continuity, efficiency and stability" at Fannie Mae and Freddie Mac. Royce's bill would suspend the compensation packages for Fannie Mae and Freddie Mac executives and would limit the salaries to the highest level paid at the FHFA, which the Congressional Budget Office estimated in 2011 to be $255,000 per year. It would also place non-executive GSE employees on the General Schedule (GS) pay scale, where the most they could earn annually would be $132,122. Other government agencies have weighed in on the pay rate for the top executives at the GSEs. e Department of Treasury released a statement in July saying, "Treasury does not support FHFA's new approach to CEO compensation at Fannie Mae and Freddie Mac and urged the agency to reject any increase. Treasury has consistently recommended that existing limits on compensation continue." White House press secretary Josh Earnest stated, "I think it is entirely legitimate for the executives at those institutions to be subject to compensation limits."

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