At 24, with a roommate and another on the way, Luke Janney knew he needed more than his two-bedroom East Brainerd apartment, but wasn't ready to become a homeowner.
"I entertained that [ownership] option, but I didn't think I was ready," says Janney, who works in Chattanooga for Knoxville-based Axle Logistics. "Renting felt like the smart decision; it's definitely more convenient, given my stage of life and with things pretty hectic at work."
So in mid-July, he, Tyler Daniel and Brad McCurdy moved into a detached, single-family style home at Mill Town, a neighborhood going up on the site of the long-abandoned Standard Coosa Thatcher mill.
Janney says he and Daniel used to split their $1,300 monthly rent. Mill Town will be $2,390 monthly, he says, but worth the price.
"With three of us, it really won't be a ginormous difference," Janney says. "And with a third bedroom, being closer to downtown, it was the right thing to do."
According to rentcafe.com, Janney's housing choice is wildly popular. In a December 2021 survey of 3,300 renters done by the nationwide apartment-finding website, 78 percent of respondents expressed a preference for living in a community of single-family rental homes. A plurality, 29 percent, of respondents said they opted for a single-family rental over an apartment because, like Janney, they needed more space.
Mill Town builder Ethan Collier says detached, single-family rental homes are proving attractive on multiple levels.
"They give individuals an opportunity to stabilize their families before starting the arduous process of finding a home [to buy]," he says. "And I do think there's been a generational change in that some individuals don't see home ownership as the primary way to building wealth - and they're thinking that if you can build wealth without owning a home, why take on that liability?"
Collier says quality of life and flexibility tip the balance for many who choose renting over buying.
"It's like living in a hotel," he says. "You don't have to cut your grass. You don't have to replace the roof or the HVAC. I grew up with a dad who spent every weekend working on a house because something was always broken. People don't want to spend their weekends at Home Depot and trying to fix their sinks.
"And if you're renting here and get a job in Seattle, you move to Seattle – you're not stuck having to try to sell a house first," he adds.
Collier says that one advantage build-to-rent communities to have over traditional neighborhoods, in which houses are built to sell, is the economy of scale.
"Build-to-lease gets built much more quickly because of how its financed," he says. "The entire community is financed at one time and all the houses are built at one time. The sub[contractor] comes to dig footings, starts with No. 1 and doesn't quit until he's done all 48, for instance.
"In build-for-sale, you might do six or eight homes at a time. Then, once those are financed, the builder will go get more debt and build more houses," he adds.
According to data compiled by Yardi Matrix for rentcafe.com, its sister company, there are more than 700 communities nationwide with some 90,000 built-to-rent homes. The website says that a single-year- record 6,740 of those homes went up last year, and 14,000 more are under construction nationwide this year.
Hamilton County is "mirroring the national trend," says Doug Fisher, CEO of the Homebuilders Association of Greater Chattanooga. Among Chattanooga-area built-to-rent communities are The Guild on Shallowford Road, which is set for completion later this year; Cannondale Court Townhomes, slated for completion next year, and three properties by Collier, Generation Property Management and Texas- based developer RoseRock – Julia's Park in Hixson, which is completed; Mill Town and Audrey's Park, just off Brainerd Road.
Doug Ressler, manager of business intelligence for Yardi Matrix, said the trend toward single-family rentals (SFRs) began in the wake of the financial crisis of 2008, including the "collapse of a lot of the housing market."
"It picked up steam to the point where you see large real-estate investors moving into this," he says.
"There was a tremendous need for affordable housing on the consumer side and a good rate of return on the ownership side.
"The demand for SFRs increased during the COVID-19 pandemic," Ressler adds. "Even though the economy shut down for an extended period, the demand for SFR homes soared as people moved to larger homes in the suburbs and smaller markets."
Ressler says single-family rental operators are optimistic over the next six months, but adds that, as interest rates rise and the threat of recession looms, the SFR market will likely "go through a cycle."
"It's not a linear type of progression," Ressler adds. "The rising cost of money and construction will make for a cyclical type of development. It's a strong asset class, and doing quite well but, like any other asset, it'll be challenged."
* Getting real: After a decade of rising sales, higher mortgage rates may curb growth this year but Chattanooga continues to draw influx of home buyers from other markets