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Renters Only: These New Homes Aren't For Sale

Oct 7, 2019
Originally published on October 9, 2019 7:10 pm

A different sort of American dream is under construction outside Denver. More than 130 homes are being framed and nail-gunned together. But there won't be any real estate agents staging open houses. Instead of homeownership, this development is all about home-rentership.

"We got started in around 2010 after the housing crash and people were losing their homes," says Josh Hartmann, the CEO of NexMetro Communities, the company building these homes.

He says the business idea was that all those families losing homes to foreclosure wouldn't want to go back to renting apartments. They'd want to rent single-family houses until they got back on their feet financially.

But that's not who kept walking into the sales office to rent the houses.

"What we were shocked to find out was it was people that had great credit, they had money for down payments, they had great incomes, but they just didn't want to own a home," Hartmann says. "They were a lifestyle renter, renter by choice."

Josh Hartmann, the CEO of NexMetro Communities, says he started developing houses for rent after the housing crash.
Chris Arnold / NPR

And there were a lot of them. So NexMetro kept building homes. It's built 2,800 so far in Colorado, Arizona and Texas, and they fill up quickly. Other builders are doing this around the country, too.

So why are so many people who could buy a house renting one instead?

"This is perfect for me," says Lou Ann Erwin, who lives in a finished NexMetro development in Commerce City, Colo., a Denver suburb. "I wanted the house feel, but not the house payment and not the commitment of a 30-year mortgage."

"I wanted the house feel but not the house payment and not the commitment of a 30-year mortgage," Lou Ann Erwin says.
Chris Arnold / NPR

Erwin just got divorced. She's not sure where she's going to want to live longer term. Her cottage-style house here isn't big. But it has 10-foot-high ceilings and a spacious-feeling kitchen and living area. The yard is tiny and the homes are packed tightly together, but that doesn't bother Erwin.

"I've got a gas grill out there. I've got a fire pit and we sit out there at night," she says. "My neighbor next door came over the other night, and we just sat around, drank wine and just talked. It felt like home to me."

There's also a pool for residents to share with a big hot tub. "Yeah, this is the spot where our residents love to hang out in the evenings or on the weekends with their friends," Hartmann says.

He says there are basically three types of renters of these houses: recent divorcees like Erwin, aging baby boomers who don't want the headaches of owning a house anymore and millennials.

Most millennials say they want to own a home someday. But they're not buying as young as prior generations. For some, student loan debt is a factor. And the high cost of rent in many areas can make it difficult to save up for a down payment.

Itzel Alarcon, 25, moved in recently, shortly after getting married.

In the past year, developers like NexMetro near Denver built more than 40,000 homes around the country as single-family rentals, the National Association of Home Builders says.
Chris Arnold / NPR

She says she saw relatives hurt by the housing crash. And home prices have doubled in this area since then, so she's nervous they might fall again.

Alarcon says home prices seem ridiculously high, "so we'll stay here at least for a year or two for sure." At $1,500 a month, she says, the couple's one-bedroom cottage is cheaper than buying a house in the neighborhoods she finds appealing.

So for many residents, renting seems to make perfect sense. But if they stay here too long, would they be violating one of the fundamentals of good personal finance? After all, owning a home and building equity in it is still the most powerful way for most Americans to accumulate wealth.

"Owning still makes much more sense," says William Wheaton, a housing economist at MIT. He says these rental homes are fine short term, but he hopes young people don't wait too long to buy into the housing market.

"If prices continue to rise like they have in Denver, buying in Denver will be a money tree," Wheaton says. "But even if you're very cautious and say, 'No, no, no, they're not going to continue to rise a lot, they'll inch up a few percentage points each year' — over five or 10 years, that adds up to a sizable nest egg. And that's what you're giving up by renting."

At NexMetro's development in Commerce City, Hartmann says he, too, hopes more young people buy homes and build equity. That's what he did. But until they're ready, he has 3,000 more single-family rental houses under construction or in development in Arizona, Texas, Colorado and Florida.

Hartmann is not alone. In the past year, developers around the country built more than 40,000 homes as single-family rentals, the National Association of Home Builders says.

For her part, Erwin says her little cottage beats an apartment any day.

"I've got my own private patio," she says, walking out through the sliding porch doors. "So I love this. I really do. I mean, you're not gonna get a patio like this in an apartment. You're just not."

Copyright 2019 NPR. To see more, visit https://www.npr.org.

MARY LOUISE KELLY, HOST:

Another story now. Developers around the country are building entire subdivisions of new single-family homes. These houses are not for sale. You can't buy them. That is because they are for rent. Homebuilders are discovering there are a lot of people right now who could afford to buy a house, but they would rather not. NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: A different sort of American Dream is under construction outside of Denver. One hundred thirty six homes are being framed and nail-gunned together. But there won't be any realtors staging open houses here. Instead of home ownership, this development is all about renting.

JOSH HARTMANN: We got started in around 2010 after the housing crash. People were losing their homes.

ARNOLD: Josh Hartmann is the CEO of NexMetro Communities, the company building these homes. And he says that the business idea was that all those families losing homes to foreclosure, they wouldn't want to go back to renting apartments. They'd want to rent single-family houses until they could get back on their feet financially. But that is not who kept walking into the sales office to rent the houses.

HARTMANN: What we were shocked to find out was it was people that had great credit. They had money for down payments. They had great incomes, but they just didn't want to own a home. They were a lifestyle renter - renter by choice.

ARNOLD: And there were a lot of them, so NexMetro kept building homes. It's built 2,800 so far in Colorado, Arizona and Texas. And they fill up quickly. Other builders are now doing this around the country, too. So if many of these people actually could buy a house, why are they deciding to rent one instead?

LOU ANN ERWIN: This is perfect for me. I wanted the house feel but not the house payment and not the commitment of a 30-year mortgage.

ARNOLD: A few miles away in a finished development, Lou Ann Erwin is showing me around the little cottage-type house that she's renting. Erwin just got divorced, and so she's not sure where she's going to want to live longer term. Her house here is not big, but it does have 10-foot-high ceilings and a pretty spacious-feeling kitchen and living area. The yard is definitely tiny, and the homes are packed tightly together, but that doesn't bother Erwin.

ERWIN: I've got a gas grill out there. I've got a fire pit, and we sit out there at night. My neighbor next door came over the other night, and we just sat around, drank wine and just talked. It was - it felt like home to me. So this was just a real win-win for me.

ARNOLD: There is also a nice pool for residents to share, complete with...

(SOUNDBITE OF WATER BUBBLING)

ARNOLD: OK, so this is my favorite thing so far. This is a nice, big, hot tub.

HARTMANN: Yeah, this is the spot that our residents love to hang out in the evenings or on the weekends with their friends.

ARNOLD: Josh Hartmann, the CEO, says there are basically three types of renters of these houses - people who recently got divorced, like Erwin, also aging baby boomers who don't want the headaches of owning a house anymore, and he says there are a lot of younger people, too. Twenty-five-year-old Itzel Alarcon just moved here with her husband.

ITZEL ALARCON: We just got married actually two months ago as well, so as soon as we got married, we moved in.

ARNOLD: Now, most millennials say that they want to own a house someday, but they're not buying as young as prior generations. For some, student loan debt is a factor. Alarcon says she saw relatives get hurt by the housing crash, and home prices have doubled in this area since then, so she's nervous that they might fall again.

ALARCON: Yes, prices right now are extremely ridiculously high. And so we'll stay here at least for a year or two for sure.

ARNOLD: And at $1,500 a month, she says the couple's one-bedroom cottage is cheaper than buying a house in the neighborhood she finds appealing. So for the people that we've just met, renting seems to make perfect sense. But if they stay here too long, would they be violating one of the fundamentals of good personal finance? Because owning a home and building equity in it is still the most powerful way that most Americans accumulate wealth.

WILLIAM WHEATON: Owning still makes much more sense.

ARNOLD: William Wheaton is a housing economist at MIT. He says these rental homes are fine short term, but he hopes the young people don't wait too long to buy into the housing market.

WHEATON: I mean, if prices continue to rise like they have in Denver, buying in Denver will be a money tree. But even if you're very cautious and say, no, no, no, they're not going to continue to rise a lot, they'll, you know, inch up a few percentage points each year, over five or 10 years, that adds up to a sizable nest egg. And that's what you're giving up by renting.

ARNOLD: Back at NexMetro's development, Josh Hartmann says he hopes that more young people buy homes, too, but until they're ready, he's got 3,000 more single-family rental houses under construction or in development. Over the past year, developers around the country built about 40,000 homes as rentals. And Lou Ann Erwin, for her part, thinks that her little cottage beats an apartment any day.

ERWIN: I don't know if you noticed the patio, but I've got my own private patio, so I love this. I really do. I mean, you're not going to get a patio like this in an apartment. You're just not.

ARNOLD: Chris Arnold, NPR News.

KELLY: And we have a lot of good pointers on whether to rent or buy a home in NPR’s Life Kit podcast. That’s at npr.org/lifekit. Transcript provided by NPR, Copyright NPR.