The Rent Roll with Jay Parsons

Episode 66: Josh Hartmann | Q1'26 SFR/BTR Update & Outlook
Release Date: January 8, 2026
Host: Jay Parsons
Guest: Josh Hartmann (CEO, Next Metro)

Episode Overview

This episode dives deep into the current state and outlook for the Single Family Rental (SFR) and Build-to-Rent (BTR) sectors as we enter Q1 2026. Host Jay Parsons provides a data-driven overview of market fundamentals, supply-demand dynamics, and regulatory headlines, then welcomes guest Josh Hartmann, CEO of Next Metro, to share insights as a leading BTR developer and operator in the Sun Belt. The conversation includes history, market evolution, demographics, and practical reflections on building and scaling BTR operations.

Key Discussion Points & Insights

1. Regulatory & Policy Environment

[02:45] Special Segment: Breaking News

• President Trump announced intentions to work with Congress to ban large institutional investors from buying more single family homes.
  • Jay reminds listeners this policy direction isn't a surprise: VP candidate JD Vance has been highly vocal against institutional SFR investment.
  • Quote:
    • “Institutional investors comprise about 0.5% of the single family stock in the U.S.—that’s a fact…even in places like Atlanta, it’s in the single digits.” – Jay Parsons [04:53]
• Jay’s Recap of Market Facts:
  • Most SFRs are owned by small, “mom and pop” landlords.
  • Homeownership rates have increased nationally and in markets like Atlanta since the mid-2010s until recent affordability declines.
  • Institutional investors have focused more on BTR/new construction than resale homes in recent years.
  • Legislative impact is likely limited: similar bills have previously failed regardless of party control.

2. Market Data: SFR & BTR Fundamentals

[09:45] “Here’s a Chart” Segment

• Cost of Owning vs. Renting:

  • It costs ~$1,042/month more to buy a starter home than rent an SFR, a 41% premium (historic norm: ~16%).
  • Despite the gap, rent and leasing growth in SFR have not surged due to supply outpacing demand.

• Leasing Indices: (John Burns Research)

  • All indices (leasing activity, expected activity, time-on-market) are below or at 50, indicating flat or softening market:
    • Leasing activity score: 43 (below normal)
    • Expected leasing activity: at 50
    • Vacant Property Index: 36 (more properties sitting vacant longer, especially in the Sun Belt) [16:25]

• Inventory Trends:

  • Top 15 SFR operators report listings up 14% YoY.
  • Additional supply comes not just from new builds but also from “accidental landlords” and delayed sales.
  • More supply—whether from BTR, apartments, or SFR—puts downward pressure on rents. [18:00]

• Operator Concerns:

  • 50% of SFR operators see new apartment supply as their #1 concern.
  • 47% worried about BTR supply; 33% worried about new SFR listings from for-sale conversions, especially in California and Texas. [20:00]

• New Supply Outlook:

  • BTR deliveries are dropping: <10,000 units expected nationally this year (down from 25,000 at the peak).

• Turnover:

  • Annualized turnover rate for SFR REITs remains extremely low at 25%.
  • Structural factors (later marriages, better property management) play a major role—less correlated with home sales than many believe.
    • “If a renter isn’t happy where they are and they can’t buy a house, they’re just going to move to another rental for the most part.” – Jay Parsons [25:40]

3. Rent Growth & Regional Variance

• Nationally:
  • SFR rent growth is the slowest in 12 years (~2%); forecast for 2026 is 1.8%.
• Regionally:
  • Midwest markets (Chicago, Cincinnati, Columbus, etc.) see strongest rent growth (>5%).
  • Rents are falling >3% in Austin and parts of southwest Florida, with declines also in Dallas, San Antonio, Phoenix, Orlando, Tampa, Raleigh.
    • “SFR rents are falling where home prices have fallen...across the higher supplied Sun Belt.” – Jay Parsons [32:00]
• Wages vs. Rents:
  • Wage growth (4.1%) continues to outpace rent increases (SFR: 2.1%, BTR: -0.1%, Apartment: -0.7%).

4. Capital Markets & Investor Activity

• Institutional Ownership:
  • Large investors bought <12,000 homes in the past year (<0.5% of all home sales).
  • BTR sales volume is down: just $1.1B through most of Q3 2025 vs. $2.7B in 2024, $4.1B in 2021.
• Cap Rates:
  • BTR cap rates remain in the low 5’s; moderate upward shift from the “cheap debt” era but still competitive.

Interview Segment: Josh Hartmann, CEO of Next Metro

[35:47] Guest Introduction & Background

Josh’s Career & Next Metro Origin Story

• Former civil engineer from Wisconsin; transitioned to Arizona real estate development.
• Joined Sunbelt Holdings (large master-planned developments), moved to Pulte for large-scale projects.
• Witnessed the GFC (“greatest project that was never built”), managed survival and consolidation during the downturn.
• Entered BTR through a group in Tucson experimenting with detached, single-story rental homes as a post-GFC cyclical play—became a core business after unexpected demand from young professionals and not, as anticipated, only families displaced by foreclosure.
• Next Metro officially formed after market analysis showed broad southern US demand for this product type.

Quote:
“We thought, hey, we’re going to have people who have kind of bad credit…families…[but] it completely wasn’t that. It was people who were young professionals, had never owned a home, weren’t sure if they wanted to own.” – Josh Hartmann [40:55]

Company Scale & Evolution

• 63 projects, 11,000 homes completed or under development, 7 active markets (AZ, CO, TX, GA, FL).
• Original “merchant build” (build & sell) strategy, pivoted to long-term holds after investor appetite (“mailbox money”) and proven cap rate sales matching Class A multifamily.
• Today: 15 projects under development; most investors are high net worth individuals/family offices ("friends, not retail").
  • “We weren't sure what our investors would do, but 96% of them said, ‘Yeah, we’ll roll into the new investment to recap for another 10 year hold.’” – Josh Hartmann [44:05]

Phoenix as BTR Epicenter

[45:40]

• First Next Metro projects in Phoenix (2014-2015); others copied the model after “tape-measuring” the first sites.
• Local developer Greg Hancock replicated and/or jumpstarted several of the region's subsequent big BTR operators.
• Why not in Dallas/Denver? Higher barriers or slower approval processes in other metros kept initial expansion focused in Phoenix.

Product Lessons & Evolution

[49:28]

• Early focus: distinctive, contemporary architecture (flat roofs, vibrant colors) met with zoning resistance, made scaling harder.
• Pitched roofs and more traditional exteriors now the norm—easier entitlement, more broadly accepted.
  • “Once we went to a more traditional looking home, it was a lot easier to get our approvals.” – Josh Hartmann [50:55]
• Floor plans and sizes are 90%+ consistent, with minor tweaks (e.g., pantry addition, slight adjustments) driven by resident surveys.
• Amenity “arms race” leads to moderate improvement over time, but core offerings remain standardized for ease of scaling.

Resident Demographics

[56:35]

• Originally: 25-35 y/o, high-income, mostly single young professionals.
• Now: Broader – still 25-35 (30%), but also 35-55 (25-30%), and 20% 55+ retirees/empty nesters.
• Incomes average $105,000-$110,000.
• 50% married, 50% single/divorced/widowed; 15% subsidized by parents ("never would have expected that").
  • “We have 15% of our residents whose parents are subsidizing their rent.” – Josh Hartmann [58:45]
• Children in only ~15-20% of homes (very low for rental housing, attributed to product type: 1,000-1,250 SF cottages too small for most families with kids).

Market Fundamentals, Supply, & Investor Perception

[61:38]

• BTR supply perception: Most investors Next Metro encounters are well-informed, know it’s a tiny sliver of market stock—even in big Sun Belt metros.
• “To point out one [type] and say, 'this is too much'—I think it's just because it's been so hyped…" – Josh Hartmann [62:24]

Current Market Dynamics & Outlook

[63:45]

• Strong long-term demand drivers: lack of supply, high interest rates, construction cost declines.

• Short-term headwind: Rent growth in some markets (notably Dallas) has been flat/negative for 3+ years, unprecedented outside of GFC, putting pressure on valuations.

  • “I haven’t seen that…three years of rent declines, which has just put incredible downward pressure on valuations. But you gotta think at some point based on all the tailwinds, that rents are going to start increasing.” – Josh Hartmann [64:38]

• Recovery as supply pipeline slows: Once new supply diminishes, strong migration and job growth should restore rent growth, especially in high-growth corridors.

Next Metro’s Strategy & Future

[68:17]

• Growing cautiously with 1-2 starts per market; “hibernation mode” until conditions improve.

• Pivoting toward holding and operating assets (“less cowboyish, more institutional quality”).

• Focus is on building internal operational and asset management expertise to match development skills.

• Open to eventual acquisitions within a defined “buy box” and continuing to let the long-term portfolio, not just single-asset developments, drive growth.

  • “What I love about the portfolio strategy is it puts you in a position to make it through these downturns with still having cash flow to support the development.” – Josh Hartmann [70:31]

Notable Quotes

• Jay Parsons [04:53]: “Institutional investors comprise about 0.5% of the single family stock in the U.S. — that’s a fact…even in places like Atlanta, it’s in the single digits.”
• Jay Parsons [25:40]: “If a renter isn’t happy where they are and they can’t buy a house, they’re just going to move to another rental for the most part.”
• Jay Parsons [32:00]: “SFR rents are falling where home prices have fallen...across the higher supplied Sun Belt.”
• Josh Hartmann [40:55]: “We thought, hey, we’re going to have people who have kind of bad credit…families…[but] it completely wasn’t that. It was people who were young professionals, had never owned a home, weren’t sure if they wanted to own.”
• Josh Hartmann [44:05]: “We weren't sure what our investors would do, but 96% of them said, ‘Yeah, we’ll roll into the new investment to recap for another 10 year hold.’”
• Josh Hartmann [50:55]: “Once we went to a more traditional looking home, it was a lot easier to get our approvals.”
• Josh Hartmann [58:45]: “We have 15% of our residents whose parents are subsidizing their rent.”
• Josh Hartmann [62:24]: “To point out one [type] and say, 'this is too much'—I think it's just because it's been so hyped…”
• Josh Hartmann [64:38]: “I haven’t seen that…three years of rent declines, which has just put incredible downward pressure on valuations. But you gotta think at some point based on all the tailwinds, that rents are going to start increasing.”
• Josh Hartmann [70:31]: “What I love about the portfolio strategy is it puts you in a position to make it through these downturns with still having cash flow to support the development.”

Timestamps for Major Segments

• [00:00] Intro, recent SFR/apartment predictions, episode focus
• [02:45] Special policy segment: Trump’s SFR investor ban proposal & Jay’s market fact check
• [09:45] Data-driven SFR/BTR market update: supply, demand, rent growth, regional highlights
• [18:00] SFR operator survey: top supply concerns, apartment competition
• [25:40] Turnover & renter stickiness
• [32:00] Regionally divergent rent trends & correlation with home prices
• [35:47] Interview: Josh Hartmann – career, Next Metro founding, product & market insights
• [56:35] Resident demographics & demand evolution
• [61:38] BTR supply/overbuild perceptions, capital markets
• [63:45] Current fundamentals & forward-looking strategy

Episode Tone and Takeaways

The episode blends Jay’s measured, analytical style with Josh’s practical, entrepreneurial candor. Together, they demystify several narratives around institutional ownership, supply, and rent trends in SFR/BTR, providing valuable clarity for investors, developers, and operators. The message is optimistic but measured: SFR/BTR remains a structurally sound business, but current market headwinds (overhang of supply, sluggish rent growth in a few Sun Belt areas) require discipline, patience, and operational focus.