EP#84 Jesse Lederman | 4 Takeaways From Q1'26 SFR REITS' Earnings Calls

The SFR REIT sector is facing a paradox: federal legislation targeting large-scale rental investors is reducing housing supply despite being framed as a solution to affordability. The Road to Housing Act, which would ban or severely limit BTR construction, has already chilled capital allocation, with both Invitation Homes and AMH scaling back development and forward purchase agreements. Yet, in a twist of irony, the resulting drop in stock prices allowed the REITs to buy back shares at a discount—using proceeds from selling older homes—boosting investor confidence and stock values back to pre-legislation levels. This capital shift from new construction to buybacks means less housing supply is being built, directly undermining the policy’s intended goal. Meanwhile, spring leasing season brought encouraging signs: new lease rent growth turned positive in April, occupancy rose, and leasing volumes surged. However, these gains are fragile, with fundamentals still historically weak and supply overhangs persisting in Sunbelt markets. Jesse Letterman of Zellman explains that while the sector is in a near-term trough, affordability improvements and supply absorption could set the stage for modest rent growth acceleration in 2027—though not a return to pre-COVID highs. Investors are increasingly valuing cash flow and capital allocation over NAV, signaling a structural shift in how SFR REITs are assessed.