Cottage-heavy rental neighborhood adds different approach to tackling Nebraska housing shortage
The Aerie Blue Sage development site across the street from Elkhorn South High School (shown left top corner) was taken by a drone in early September when the cottage construction started. (Courtesy of Ronco Construction)
OMAHA — It's not your typical neighborhood. At least not in Nebraska. Not yet anyway.
Sprouting along a fast-growing Elkhorn area corridor is a collection of what will be 327 market-rate residences with amenities including a clubhouse, pickleball courts and a dog park.
The former 40 acres of farmland is to be occupied largely by 109 stand-alone cottages. Also on the site, called Aerie Blue Sage , will be duplexes with garages, townhomes with private rooftop decks and a cluster of low-rise apartment buildings.
What makes the tract stand out locally, say area industry experts, is the variety of housing styles — and the fact the entire neighborhood is rental property.
Developer Joe Slosburg says that while different for Nebraska, the build-to-rent "modern neighborhood" that his company will own and maintain represents a trend that's been ramping up in other places. He says tenants want the feel of a for-sale house, yet in today's pricey market, they might not have the down payment or an accessible mortgage rate.
Others are just drawn to the unanchored, yard work-free lifestyle.
"We are really big believers in the renter by choice, and that's going to continue to grow," Slosburg, principal of Spruce Capital Group, said during an interview at the development site along 204th Street south of Pacific Street.
Slosburg is part of an Omaha-area family that has been active in commercial real estate for more than a century. He and his father, David, launched the separate Spruce Capital entity about five years ago. This is Spruce's first Omaha project.
'We're catching up'
Other Nebraska developers including Jerry Reimer, known for his out-of-the-box ventures, say there's a need for more housing options, and Reimer welcomes the cottage-heavy neighborhood.
"It's going to bring more choices to the market, which is great," said Reimer. "In a backdoor way, they may start to prove you can afford to build a 1,000-square-foot home and sell it. If it works for renting, it inherently, in my opinion, will work for selling."
John Heine of Oak Investment Real Estate, who monitors the Omaha area rental market, called the build-to-rent model huge in some larger markets.
"We're catching up," he said.
According to a National Association of Home Builders analysis o f Census Bureau data, construction starts on single-family homes built strictly to rent jumped 20% during the first quarter of this year compared to the same time frame the year before, as builders sought to add additional rental housing in an environment of elevated mortgage interest rates.
In the last four quarters, the national association reported that construction began on 80,000 such homes, about a 16% rise from the prior year.
Given affordability and inventory challenges, as well as consumer demand for private living space, Slosburg is confident Aerie Blue Sage will fill up with its intergenerational target population.
The first cottages are to be ready in March. They're rising at a time when, according to the Great Plains Regional MLS, the median price of a house that sold in the Omaha and Lincoln region this past September was $305,000, up from about $254,000 the same month in 2021.
A recent RentCafe analysis ranked the Omaha area No. 7 among most competitive rental markets in the U.S. during the past summer season, signaling strong renter demand.
'A generational thing'
At the Aerie campus, the housing — inspired by Scandinavian and farmhouse designs — ranges from one-bedroom dwellings with about 700 square feet to four-bedroom homes spanning 2,000 square feet. Monthly rents go from $1,450 to $3,500.
Features vary depending on the residence, but Slosburg said the norm is 10-foot ceilings, private entrances and yards. The clubhouse will offer co-working space. He declined to give the project's overall cost.
Shannon Harner, who heads the Nebraska Investment Finance Authority, said any new infusion of housing should help relieve pressure on the shortage of homes in the state. NIFA is leading an unprecedented effort t o find solutions. One goal is to create at least 35,000 new affordable homes across the state by 2028, which NIFA said is just a third of what is needed.
Density, or constructing more units on less land, is a key to beefing up the number of dwellings needed to retain and grow the state's workforce, Harner said.
"Building duplexes or townhomes or smaller cottages is creating diverse housing," she said. "And that's one of the things we lack in Nebraska."
Leaders of two Nebraska homebuilders associations outside the metro Omaha area say their areas haven't seen the scale of single-family rental campuses akin to Aerie Blue Sage, though they say apartment and townhouse rental building continues.
Beau Daffer, president of the Home Builders Association of Lincoln and co-owner of BIC Custom Homes, views it as a "generational thing."
"The younger generation subscribes to everything," he said: music, coffee services. "It makes it easy for them to roll into rentals."
He said his custom homebuilding business is picking up, though, and he believes that more young families will turn to the wealth-building option of homeownership as interest rates drop.
Nibbling at 'core problem'
Todd Enck of Grand Island is president of a Kearney-based association representing four home builders groups across the state. He said he is surprised at how much landlords can command in rent nowadays, citing as an example the amount residents are ready to pay for luxury apartments near the Grand Island hospital.
While his own business focuses on building moderate- to high-end-priced houses, Enck said he also has built multiple rental duplexes on infill lots that draw meatpackers who pay rent of $1,300 or so. No advertising beyond word of mouth is needed.
"People are literally pounding on our door," he said.
Enck believes homeownership "opens doors," but he said he recognizes that rental communities "sell a lifestyle."
"The reason most anything seems to work right now goes back to the core problem ... we just have a lack of housing," Enck said.
He recently returned from a national meeting of builders where Enck said the prevailing thought was government overregulation is now driving the housing shortage. "We have a regulatory crisis, that's their take on it."
Variations of build-to-rent
Meanwhile, Heine says a few local developers have introduced variations of the build-to-rent concept, though perhaps not as wide-ranging in styles and sizes as Aerie Blue Sage.
Among them, he said, are Sandstone Villas near 162nd and Ida Streets in Omaha and the Rows at Coventry row house neighborhood near 207th and Q Streets.
I think you're going to see more and more of it. It ties back to affordability, high cost of building, interest rates and people's ability to get a mortage.
– Dave Vogtman, Hubbell Realty
Reimer says he also sees similarities between build-to-rent communities and one of his newer market-rate developments, Bungalows on the Lake at Prairie Queen in Papillion. There, residents also have their own entrance and choice of unit size.
Bungalow dwellings are in three-plex to seven-plex configurations, not as spread out or free-standing-focused as the planned Aerie layout.
Dave Vogtman of Hubbell Realty said his company about a month ago has started building its $55 million Sagebrook community in Sarpy County, which is to add 180 apartments and 84 townhomes, all rental. Featuring amenities such as a pool, fitness center and garages, the 15-acre campus doesn't include stand-alone residences to rent.
However, Vogtman said Hubbell and its subsidiary, The Home Company, recognize potential in building smaller houses of between 600 and 1,100 square feet for rent, and he is searching for pockets of land in the metro Omaha area to jump deeper into the build-to-rent arena.
"I think you're going to see more and more of it," Vogtman said. "It ties back to affordability, high cost of building, interest rates and people's ability to get a mortgage."
Indeed, Slosberg said his company has a couple more projects brewing in the Omaha area.
Aerie Blue Sage, opening in phases, is to be fully completed in 2026.
