The BTR Boom Is Colliding With NIMBY Pushback. Local Planners Are Caught In The Middle
Local planning and zoning officials across the country are increasingly overwhelmed by the surge in build-to-rent community developments, as fear of the unknown, a lack of historical precedent and opposition to density drive a groundswell of NIMBYism against the product.
BTR, or large-scale communities of single-family homes built specifically as rentals, is a fairly new phenomenon proliferating across the Sun Belt. In 2021, BTR development hit an all-time high of 6,740 new homes completed, according to Yardi Matrix’s RentCafé research. Nearly 14,000 BTR homes set to open this year were under construction as of January.
Amid a surge in development, heads of local planning departments are being confronted with a new type of product that doesn't conform to existing zoning codes. As they struggle to write rules on the fly, they are also grappling with intense pushback from residents — and even some elected officials — who tend to conflate BTR with traditional multifamily.
“Because multifamily zoning cases are always hot potatoes, neighbors around them never want it — there is always opposition, council is always very hesitant,” said Jennifer Arnold, director of planning for McKinney, a suburb north of Dallas where the roughly 750 BTR units in the pipeline will double the city's existing supply.
Demand for rentals has reached new heights as fewer families can afford to buy a home, spurring a historic trajectory in rent growth and occupancy rates last year. Average rents for BTR homes increased 14.3% between September 2020 and September 2021, and in some metros, like Tampa and Miami, rent growth was north of 30%, according to Yardi.
Phoenix leads the nation in BTR development — a third of the nation's new BTR homes this year are set to open in its vast metropolitan area, after 6,400 delivered in 2021, according to Yardi. A northwest suburb of about 190,000 residents, Peoria is home to three active BTR communities, two under construction and two in the planning process.
Chris Jacques, the city’s planning director, said the area’s affordability challenges have prompted outsized demand for BTR, especially near job centers. The new developments come with amenities, but no mortgage or maintenance obligations.
The product addresses a gap in the market, Jacques said, but only those in a certain financial strata can afford it. BTR rental rates in Peoria can range anywhere from $1,800-$2,400 per month for a one-bedroom, he said.
“Whereas they are more attainable because you’re not having to put down a downpayment, the rent structures are pretty heightened,” he said. “They’re not cheap to rent.”
Approving BTR projects hasn't been easy in Peoria, Jacques said. Many of the same complaints long levied against apartments — that they generate more traffic, overcrowd schools or lead to higher rates of crime — have been applied to BTR.
“It’s an education process, and we’re not always successful there,” Jacques said. “We have some very challenging cases in the city where there’s a lot of spirited discussion and a lot of interest from the community.”
Arnold's department was first exposed to BTR when NexMetro Communities submitted the site plan for Avilla Northside in 2015. For planning purposes, any project that features multiple units on a single lot is considered multifamily, even if those structures resemble single-family homes. This can create some confusion on the part of residents, who see or hear the term “multifamily” and immediately think apartments.
Developers of new BTR communities have caught on to this resistance and have begun marketing their projects differently, Arnold said. From the outset, savvy developers make a concerted effort to educate residents and council members on what BTR — or cottage multifamily, as it is known by the planning department in McKinney — really entails.
“What we’ve seen in the last two years especially is when a developer wants to rezone for cottage multifamily, they tout that around big time,” she said. “They say, ‘Hey, this cottage format is going to look and feel like single-family.’ That, in McKinney, has really been a great carrot for our council.”
Education is a non-negotiable piece of the process when it comes to pitching a new project to a city, especially those that are not yet familiar with the product or that have had a bad experience with BTR, NexMetro Communities CEO Josh Hartmann said.
“The biggest potential show-stopper for our particular niche is someone doing it really poorly, doing a bad job and leaving a bad taste in the jurisdiction’s mouth,” Hartmann said. “And we’ve had that happen a few times.”
Hartmann said 80% of NexMetro’s BTR projects need some sort of zoning approval, and between 30%-40% never get off the ground due to resident or council opposition. This can cost the company between $15K-$500K depending on how far down the road they get with a project.
“There’s a reason that all of my development team has gray hair,” Hartmann said.
When it comes to convincing the community, Hartmann said 50% of opposition usually melts away once residents realize BTR is different from an apartment. His team has also had success sharing statistics on average income, jobs and crime rates.
West of McKinney, in the burgeoning DFW suburb of Celina, eight BTR projects comprising close to 1,200 units are in design or under construction, Celina Planning Director Dusty McAfee said.
His department terms BTR “horizontal multifamily,” which he said has been sufficient in dispelling any notions that the product may resemble an apartment complex. Effective messaging around how a BTR development will look once constructed has kept NIMBYism at bay in Celina, McAfee said.
“These are generally one-story, sometimes two-story, so in terms of their size and scale, they’re smaller than traditional multifamily,” he said. “If you’re telling people they’re simply going to have some tiny homes behind them, they’re not as concerned.”
While McAfee doesn't view BTR as an affordable option, he said it fills a void in Celina’s housing market. Many suburban cities have severely limited apartment development after rewriting zoning regulations, which make housing a certain segment of the population difficult. BTR may provide a solution, he said.
“We have a huge missing middle problem,” McAfee said. “Federal housing policy in conjunction with local regulations has basically eradicated the individual entrepreneur from the market.”
McAfee’s view of BTR is favorable compared to other municipal leaders, some of whom have made it their mission to put an end to the product in their cities. Homebuilder Alex Kamkar was elected to the city council of Pearland, Texas, outside of Houston, in 2020, and has vowed to never build a single BTR home.
Of the many issues Kamkar takes with BTR, perhaps the most salient is that it exacerbates the for-sale supply shortage that has already led to skyrocketing prices, a trend that has pushed the prospect of homeownership out of reach for many Americans. The product, he argues, pumps the balance sheets of institutional owners while discouraging wealth generation, especially among low-income communities of color.
“All we're doing is building the wealth of people who are already extremely wealthy,” he said. “I do not want to see us turn American families into a crypto farm for BlackRock and Tricon.”
BTR developers argue they are adding a quality product to a given area’s housing inventory, even if that product is a rental. As long as people are unable to afford homes, more rentals are needed, Hartmann said.
“The only solution to the housing challenges we have now is supply — we just need more supply,” Hartmann said. “That is going to drive down — I hate to say it, but, rents and housing prices, or at least stabilize them.”
Kamkar also takes umbrage with the benefits touted by some BTR proponents; the houses can be extremely close together, he said, and lack some of the traditional amenities found in apartment communities.
“The BTR boys are not creative. They're not smart. They're not innovators,” he said. “All they're doing is exploiting a gap in the market and trying to say, ‘Well, we're doing deconstructed apartments.' But they are not building to the apartment standard that most municipalities would expect on parking, green space or amenities.”
Some of the earliest BTR communities in McKinney lacked design variety, prompting Arnold’s planning department to be much more discerning of each project’s proposed aesthetics. The city is in the midst of a zoning ordinance overhaul, and Arnold said BTR requirements will be written into the revised code. Jacques said Peoria is doing the same.
“Cottage multifamily — if not done right — can look almost worse than traditional multifamily. It can look like army barracks, in my opinion,” Arnold said. “Things like building heights, streetscapes, open space, parking — all of that we are baking in to try and lean into that new generation of cottage multifamily that looks a little bit more like a single-family neighborhood.”
The long-term resilience of BTR is also a concern for McAfee, who said it is incumbent upon the industry to make sure their developments are well-maintained and jibe with the surrounding community.
“The history has yet to be written on how these will be viewed in 30-40 years,” he said. “I’ve heard some people say, ‘These are modern-day slums.’ I think that’s a little bit unfair. But will cities in 30 years regret having approved these? Possibly. I don’t know.”
The BTR product is far from perfect, and Jacques said there is still progress to be made in effectively communicating its value to municipalities. Developers need to be more patient with cities, cities need to be more open to the product, and communities need to exercise greater empathy toward their neighbors whose only option may be renting.
“There has to be an openness on both sides to this product type, because it’s new,” he said. “It’s important that there’s a proper fit, and that fit is improved when we have higher-quality design. If we all understand those concerns and really open up that dialogue, then I think [developers] will be in a better position.”