In Maple Grove and Plymouth, a new kind of housing is going up: Rentals

With rows of tidy single-family houses set on carefully tended lawns, Mills Creek in Maple Grove looks like just like any other upscale suburban subdivision, except for one critical difference: There's not a single resident pushing a mower, pulling weeds or painting the trim.

Every one of the 66 free-standing houses here is a rental that's maintained by a management company — and it was built that way, making it the first of a kind in this area, but likely not the last.

"People are busy, everyone works and no one has time to take care of things," said Malinda Potter, the leasing manager at Mills Creek. "They don't want to plow snow, or take care of the yard or fix things if they break."

While developers are pumping out thousands of high-rise apartments and side-by-side rental townhouses, investors are hoping to attract a new generation of renters who want maintenance- and mortgage-free living, but don't want to share a wall, hall or garage with their neighbors.

Mills Creek is one of two single-family subdivisions in the Twin Cities being "built to rent," a concept that's making its way from Florida, Arizona and other Sun Belt states with large transient populations.

The developer, Illinois-based Watermark Equity Group, says it's testing the idea with Mills Creek and Beacon Ridge in Plymouth, a 37-unit project that's about to break ground. The company is also pursuing sites in Nashville, Kansas City, Dallas and other cities.

"Everyone can agree that there are certain benefits to living in a single-family home," said Freddy Ellis, a managing partner and co-founder of Watermark. "At the same time there are certain benefits to living in a rental community."

Since Mills Creek opened last year, 42 of the 66 planned units have been leased; construction is still underway on several of the houses and some of the amenities, including the putting green and pool.

Rents range from $2,295 to $3,200 for two- to four-bedroom houses, which are anywhere from 1,200 to 2,038 square feet. Across the metro the average rent for a two-bedroom apartment is $1,353, according to Marquette Advisors, which tracks buildings with 10 or more units. On a per-square-foot basis, Mills Creek rents are a bit rich compared with most rentals in the suburbs but competitive with new luxury rental buildings in downtown Minneapolis and St. Paul.

Like most traditional market-rate rental buildings, Mills Creek is decked out with resort-style amenities including a clubhouse, outdoor pool and a putting green. And in hopes of attracting pet owners who eschew long hallways and elevators, there's a dog park and a private walking path rings the development.

When Ellis first started mulling the concept about five years ago, his target market was millennials saddled with student loans and other debt and retired baby boomers who are done with maintenance but don't want to live in the city.

"We couldn't have been more right and we couldn't have been more wrong," he said. "We have every demographic you can imagine."

At Mills Creek that includes young professionals with children and still-working empty-nesters like Julie and Craig Kasa, who were among the first batch of residents to live at Mills Creek.

The couple were ready to swap their laid-back life in the country but reluctant to embrace urban living full-throttle.

For nearly two decades, they owned a big house on an exurban lake, but had grown weary of the isolation, the commute and the upkeep.

"It was too big and too much work once the kids had grown and moved out on their own," said Julie Kasa. "We wanted to ensure we could adapt to the different style of living."

That yearning for a more carefree lifestyle is nothing new in the Twin Cities, where subdivisions of owner-occupied houses maintained by an association have been popular for at least a couple of decades. In those projects, owners maintain their homes but pay dues for upkeep on common spaces, including parks and trails, and amenities such as clubhouses and pools.

The build-to-rent concept is an evolution of that idea, but a byproduct of the Great Recession, which created a new generation of renters by choice. The recession, subsequent housing crash and foreclosure crisis also enabled investors to snap up tens of thousands of deeply discounted houses that are now owned and managed as scattered-site rentals.

"The single-family rental market has exploded over the past few years," said Ali Wolf, director of economic research for Meyers Research.

She said that with home prices outpacing incomes, consumers are looking for a more affordable alternative. And with high land prices making for-sale deals more difficult to pencil out, builders are looking for ways to build more density.

"The single-family rental space offers a win-win to help address today's affordability challenges," Wolf said. "The hope is that Americans enjoy the luxuries of a single-family home, including a yard for the kids and dog, while they save for a down payment to buy a home themselves one day."

Meyers Research says that construction of single-family houses intended for rental has doubled over the past 10 years across the United States, a trend that's likely to continue as the stigma against renting wanes and housing affordability concerns increase.

Steve LaTerra, managing director for Meyers Research, said that as the cost of building a house increases, many entry-level buyers will be priced out of the market and will forgo owning a new starter house in favor of a single-family rental.

The trend hasn't been without controversy, particularly in communities where large blocks of single-family homes have been bought by investors and turned into long-term rentals. More rentals in otherwise owner-occupied neighborhoods are seen by some as a destabilizing influence that could erode housing values.

That's why several Twin Cities communities have considered implementing a variety of restrictions on the practice. In Brooklyn Center, where the number of single-family rentals nearly tripled from 2008 to 2018, a recent attempt to cap the number of such rentals at 30% fell short. Maple Grove has no such rules.

The long-term success of the concept, and the willingness of communities to embrace the idea, also depends on how they're managed and maintained.

"Some developers have simply sold the homes to a large-scale investor who then farms out the management to a third-party operator," said Mary Bujold, president of Maxfield Research in Minneapolis. "Some of those have come under fire for not taking care of the homes, raising rents dramatically and basically trying to just take the cash and run."

Those concerns exist regardless of whether it's a single-family home, apartments or duplexes, she said. "If you do not have appropriate management or have an owner that invests in and takes care of the property, it is a problem."

Herb Tousley, director of real estate programs at the University of St. Thomas, is optimistic that more built-to-rent projects will appear in the Twin Cities over the next couple of years, especially as millennials marry and have children but still struggle with student loan debt and the prospect of a job change or transfer.

"A lot of companies have figured out that this is a business model that works," he said.

Watermark's Beacon Ridge project in Plymouth had already been platted for 37 single-family for-sale houses, not including the lot where they plan to build the clubhouse. Instead, the firm plans to build rentals, which will be larger and on larger lots than the Mills Creek project in Maple Grove.

For the Kasas, the decision to move to Mills Creek was more about lifestyle than economics. Julie Kasa said she's already hosted a bridal shower and looks forward to hanging out with new friends at the pool and grilling area when it's completed. They've already signed a two-year lease extension.

"After all the years of owning a country lake home," she said, "not having to worry about yard work, plowing and shoveling in the winter or any maintenance has been a relief."

Jim Buchta • 612-673-7376