Home purchase as a critical component of an individual’s lifecycle is becoming unaffordable and hence rental housing businesses could be an idea competing with home building companies

Renting for a lived experience

Ownership is going to be a passe for the generation born after 1997 as they have started off in times when technology was already evolved and by the time, they were in their teens they were connecting with the web through their mobile devices. Developing countries like India and China more broadly the BRIC cohorts had access to similar technology but did not have affordable handheld devices by their country standards. By 2010, these countries too now see the teenagers and adults have access to the web and can be safely clubbed as the digital generation.

Source: The Economist

What is this digital generation?

Those born after 1997 have been clubbed by Pew Research Centre as Generation Z. This generation with its attitudes is going to define the business models of the future, and hence it is key to understand their morals, drivers and aspirations to trend spotting the new businesses of the future.

Source: Pew Research Center

Gen Z follow

“Gen Y vs Gen Z Workplace Expectations,” a study by Millennial branding done in 2014.

  • They adapt intuitively to electronic devices.
  • They understand gaming, swiping and hacking apps without being trained on them.
  • They create a world that lives through the device and engage less face to face.
  • They have an 8-second attention span.
  • The desire to start their own business is 55 per cent more in Gen-Z.
  • Only 28% of Gen Z said the money would motivate them to work harder and stay with their employer longer.
  • Gen-Z’s find it easier to start a new business on Etsy or Shopify with minimum financing.
  • They are an asset-light generation. They prefer to experience life now. So using an uber instead of buying a car or using Airbnb instead of staying in an expensive hotel are choices they exercise to get the experience at lesser spends.
  • Pew Research found in 2018 that 88% of Millennials now live in metropolitan areas.

Since experiences are important, the sharing economy is now a regular part of the new generation. So if I need to travel, they don’t mind using the Airbnb stay options as compared to a costlier hotel. Instead of waiting to own a car before they can move to travel in comfort and time, they can hire a Uber. Instead of walking into a permanent office, they can walk into a WeWork desk. Want to watch a new movie, switch on Netflix. 

What do they aspire for?

The instant gratification need is increasing over generations from the millennial to Gen Z and arguably will continue to the generations coming after them. The shift of morals from we are destined to live like this to wanting a good life experience now has been reached in just five decades. The earlier generations used to strive, save and buy for the future generations. The new citizens of the earth today want to live the experience now with whatever levels of affordability they can at this point in time.

The advent of technology has played an immense role in aiding this shift and helped build businesses that cater to this need for instant gratification. Starting from ordering an ice cream to be delivered home the moment I crave for it to be able to travel on vacation through fractal sharing models have helped satisfy this craving. This has now acquired a new lexicon called the Sharing Economy.

Pay Per Use or Sharing Economy?

Using the language of business, I would like to label it a pay-per-use instead of buy and use.

Services that can be rented

  • House
  • Serviced apartments
  • Home Equipment
  • Car
  • Furniture
  • Office Space

Today a large number of startups offer rental services across popular categories like furniture, electronics, home appliances, cars, and fashion.

Home renting influenced by policy?

Source: OECD
Home Ownership Rate in Anglo countries

There is a conservative belief that home-ownership makes for rich and happy citizens. Singapore heavily believed in it, and its first prime mister Lee Kuan Yew said that housing gives ordinary people “a stake in the country and its future”. Copying Singapore, Margaret Thatcher’s “right-to-buy” programme in the 1980s, allowing Britons in social housing to buy their property at knock-down prices as quoted in an Economist article. 

The majority of people would still prefer to be homeowners. Surveys from the US suggest that the share of people who think home ownership represents good investment is growing

Increase in Rental Housing

Home-ownership has become a cultural must-have like marriages because of a combination of rising household incomes and government policies. Many countries provide fiscal incentives like tax deduction on mortgage interest or subsidise mortgages and down payments. Inheritance Tax or capital gains tax are waived in many 

Home-ownership leads to a good society is a perception amongst many policymakers in Singapore where 9 out of 10 own a home, has a clean, crime-free society, but there is counter-evidence to that too. Romania, with a 96% home-ownership rate, has its fair share of social problems, while Switzerland, with less than 2%, has low crime and high social trust.

Home-ownership does subtler sorts of economic damage, as responsibility for a large mortgage debt may make people loath to take on further risk are 30% less likely to become entrepreneurs or move to different places in search of work. According to David Blanchflower of Dartmouth College and Andrew Oswald of Warwick University, there is a causal relationship between the rise in the home-ownership rate and a sharp rise in unemployment. 

Housing challenges for the Gen Z

Young adults shifting towards Rental housing
  1. Affordability – 
    1. The cost of housing in the center of cities is becoming very high.
    1. Mortgages should not be more than 25% of the gross income.
    1. Tighter norms for lending, especially with gig economy workers.
    1. Many millennials are living off assets created by their parents.
  2. Delayed Marriages
  3. Cheaper Mass transports
  4. High Level of student debt
Education has no link to increase in Rental Housing
  1. They are keen to get experience over owning assets.
  2. Statutory constraints on encroachment – hence affordable housing.
  3. Mobility across cities
  4. Inequality increasing makes a large segment with lesser income than the rich.
  5. 17% of GenZ want to start their own business much early on in life. They did rather invest their savings in creating a business than buying a house.
  6. Even those not wanting to start a business believe that they might as well use their incomes to experience the world more by traveling and exploring newer activities than living a miserly life to buy a house.

Instant gratification drives GenZ behaviour. The need to wait for adequate savings for purchasing or experiencing has been replaced by living through the shared and rental economy

  1. A drop in real estate prices means the rent to capex ratio becomes investor friendly
  2. Buy houses at bargain prices from people who default on mortgages or banks auctioning properties.
  3. Large PEs like Blackstone and large pension funds like CALPERs treat properties as a part of the investment portfolio. They then lease these out to generate steady dividends for their investors and pensioners, respectively.

Factors affecting rental housing growth

  1. Softer factors – like identity issues, showing of assets to family and friends, criteria for marriage.
  2. Asset definition – Western Capitalism has sold it as an asset class, and people perceive it to be one of the best assets for their progeny.
  3. Having to shift – Renters don’t have security in many places, and the thought of having to regularly move houses makes it a limiting feature.
  4. Rent escalation – Owners force rent escalation regularly on renters, which adds to the perception that owning is better than renting as mortgage payments add up to property ownership. 

House Renting businesses and startups

Rental property business leases out houses for various types of residents by purchasing and managing the asset over its lifetime. These businesses can be as small a single property management to multiple units across various locations. They generate income through lease rentals and spend money on maintaining the property.

Source: The Economist

Rental companies are increasing according to research by Hyojung Lee of Virginia Tech due to;

  1. The cost of living in Silicon Valley is very high.
  2. People can rent a dwelling and share common spaces such as kitchens, washing facilities, and gyms.
  3. Dense locations like high-rise apartment blocks in Germany tend to have less ownership than they are in a detached house.
  4. An expansion of corporate housing will raise average standards in the rental sector.
  5. As companies scale up, they will be able to bring efficiencies that can reduce the rental charges.
  6. A study of Atlanta, Georgia, published by the Federal Reserve Bank of Atlanta in 2016, found that large corporate owners of single-family rentals were 8% more likely than small landlords to file eviction notices.


Hmlet, a co-living firm, Since Hmlet was first conceptualised in 2016, we’ve evolved from a single home to thousands of doors in multiple countries. People want an affordable, hassle-free living experience in a community where they belong, so they’re free to focus on what’s important in life! Yoan Kamalski CEO & Co-founder. Sharing a kitchen might sometimes be annoying, but Hmlet’s properties are well kitted out.


Gurugram-based, a technology-driven online marketplace for home rental services, lets users rent or let out their homes without brokerage. 

Greystar Real Estate Partners

The largest property management company in the US, Greystar Real Estate Partners, has more than 415,000 units under management. It develops and invests in many of the properties it manages. Currently, the company employs more than 12,000 people and has more than 30 offices worldwide. In addition, the firm has a reported $26 billion assets under management. Greystar was founded by CEO Robert A. Faith in 1994 and is headquartered in Charleston, SC.  for more organisations like this: National Multifamily Housing Council


Housewise is India’s fastest-growing rental property management company. From advertising, tenant screening, rent collection to repairs and beyond, Housewise provides end-to-end property management services for Non-resident Indians across the globe. 


After the foreclosure crisis in the US, over 2,00,000 properties came up for sale and at dirt-cheap prices. These were picked up by private-equity companies to be sold later. While holding on to it, they realised that rental incomes could be a good revenue source. As a result, the previously “mom and pop” industry of single-family rental housing is now, for the first time, financialised within the global market and institutionalised by an emerging oligopoly of large-scale rental companies.

Singapore government residences

Singapore HDB flats were built primarily to provide affordable housing, and their purchase can be financially aided by the Central Provident Fund.[3] Due to changing demands, HDB introduced the Design, Build and Sell Scheme to produce up-market public housing developments.

Largest single-family rental companies in the US

CompanyTotal HomesSecuritizes homesPublicly traded
Invitation Homes82,570YesYes
American Homes 4 Rent51,840YesYes
Progress Residential20,000YesNo
Main Street Renewal17,000YesNo
Tricon American Homes16,800YesNo
Front Yard Residential12,416YesYes
Source: Financial Filings, News reports,

Challenges to the rental housing model

Housing has an emotional connection with both the family living in the house and the landlords owning it. Leasing largely has been an individual affair with apartment owners leasing out their properties to tenants seeking accommodation. This one affair had a huge dependency on both financials and chemistry between both these individual parties.

With scale, large companies tend to be very formal, and the intimacy with the local landlords are lost. The local landlords tend to be invested in his or her neighbourhood and tenants and hence are far more flexible. Centralising operations, Call Centres, Technology controlled access with tenants tend to make the relationship very robotic and less humane. Managing conflict is easier in a one-on-one relationship than with an organisation that is very large, and there would be multiple levels of decision making involved. That said, corporate landlords have a more transactional relationship with their tenants. A study of Atlanta, Georgia, published by the Federal Reserve Bank of Atlanta in 2016, found that large corporate owners of single-family rentals were 8% more likely than small landlords to file eviction notices.

My Take

With increasing urbanisation, densification of cities, and mobile working communities, individuals will prefer to rent a place rather than lock themselves in a costly immovable asset. While Covid conditions have challenged these notions mentioned above, especially with higher acceptance of work from home, these very trends could add to the momentum of not waiting to invest in houses. So while backing startups in home rental businesses it will be critical for the startup to have a clear definition of its Return on Investment calculations, as here the asset has equity, in contrast to other businesses wherein a closed business can only generate salvage value. The Rental company should take time to have detailed research of its ownership locations at the same time be nimble-footed to strike deals speedily. One of the advantages of this business is that it can leverage the very assets through mortgages to fund further scale.

The size of the market is so large and unique to each city that there is scope for a thousand startups to bloom. Yet there is scope for building unique brands by targeting different profiles of renters and offering them services that could cater to their personal life stations. Keep a lookout for the next rental housing company, you might spot next wework here!

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The author has over two decades of experience navigating, crossing channels, sinking, and floating across different retail businesses and various categories. He believes that the final game of any business is in getting its consumers to enjoy the whole process of pre to post-purchase moments, and a smart investor chooses businesses that consistently delivers these moments.



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