First 'horizontal apartments' hit the OKC rental market. Here's what to know

Richard Mize with The Oklahoman September 4, 2023

"Horizontal apartments" have landed in Oklahoma City with one main selling point, or, actually, leasing point: No shared walls.

It came as a surprise to local leaders in residential construction, but a local expert said it's filling a niche in the market.

Horizontal apartments are what the housing industry calls rent houses with high-end amenities built on small lots as single-family homes. On-site property management handles lawn care, and maintenance on all units — like most if not all apartments, whether built horizontally or as multistory buildings.

Trulo Homes Quail Village, a single-family, rentals-only neighborhood, the first such development in OKC, is well under way with more than a dozen homes leased at 2145 Watermark Blvd.

The 24-acre build-for-rent addition, zoned for up to 230 detached bungalow-style cottages, is just north of Quail Springs Mall on the south side of NW 145, west of N Pennsylvania Avenue. One, two- and three-bedroom homes are for rent. The addition has a clubhouse, fitness center and "resort-style" pool.

The project is a joint venture by Dallas-based Red River Development and Monument Square Investment Group in Beverly Hills, California, which has a similar Trulo Homes neighborhood in Jenks, with plans for one in Bentonville, Arkansas. Red River plans others in Kansas City, Missouri, and Whitestown, Indiana, with different partners.

Build-for-rent housing is "a fairly new twist on an old concept," as U.S. News & World Report put it earlier this year. "Of course, everyone knows about houses for lease, and a lot of people have even owned them as investors. But BFR (build-for-rent) is a little different. Instead of just having a house here or there, BFR homes are clustered together and form a community, much like an apartment community, and with many of the same amenities," U.S. News said.

Oklahoma City's first build-for-rent neighborhood fills a gap in the market

Trulo Quail Village fills "a real nice niche" in the market, said David Chapman, a developer, real estate agent, professor of real estate at the University of Central Oklahoma and chairman of the Oklahoma Real Estate Commission.

"People like not sharing walls" and are willing to pay for it, said Chapman, who gave a presentation on the advent of build-for-rent housing two years ago at the annual Commercial Real Estate Summit at UCO.

Homes in Trulo Quail Village range from 725 to 1,250 square feet. Recently, one-bedroom, one bath homes leased for $1,475 per month; two-bed, two-bath homes from $1,915 to $2,040 per month; and three-bed, three-bath homes at $2,225 to $2,255 per month.

How build-for-rent neighborhoods compare with apartments and owned single-family homes

Chapman had some national statistics on build-for-rent developments:

• Demographics: One-third of build-for-rent tenants are millennials, and 60% are single women.

• Economics: Build-for-rent additions fetch 24% higher rent than traditional apartments, but have a monthly cost 17% higher than single-family home mortgage payments.

• For landlords and investors: Built-for-rent tenants are "stickier" than traditional apartment renters, meaning they have higher retention, even though rent growth outpaces apartments.

• Density: Build-for-rent houses typically are built with 10 to 25 houses per acre, comparable to townhouses at 20 per acre, higher density than single-family additions with homes for sale, which average 10 per acre, and well beneath the typical density for traditional apartments at 50 to 100 units per acre.

Homebuilder trade groups didn't notice a build-for-rent addition started in OKC

Trulo Homes Quail Village, on land the developers bought from OKC building company Homes By Taber, came as a surprise to leaders in Oklahoma homebuilding. Homes By Taber said it is not involved with the addition.

The Central Oklahoma Home Builders Association was not aware of it and had no comment on it "as they are not a member," said Executive Officer Elisa McAlister.

The Oklahoma Home Builders Association didn't know about it either, but, "In a strange time period where we are experiencing a dearth of affordable housing, seeing this setup doesn’t surprise me," said Mike Means, executive vice president. "Investors must put their money somewhere, so they are obviously meeting a need."

Means noted that the state homebuilders group is part of the National Home Builders Association, which has build-for-rent, as well as traditional apartment developers, as members.

"That being said, however, the (state association) is big on homeownership," he said. "If you rent, the only thing you can look forward to is rent going up. If you own, you are on the path of creating wealth."

How Trulo Homes Quail Village, the first build-for-rent neighborhood in Oklahoma City, is treated for Oklahoma County property tax purposes

"Horizontal apartments" aren't apartments in the usual sense, since they are detached homes, but "these will be assessed like an apartment complex" because they are all on one parcel of land, said Steve Storff, director of real estate appraisal for the Oklahoma County assessor's office.

"They are all on one parcel. On top of that, they will not be sold, just rented. So, it’s an apartment complex, but has individual buildings for each tenant," he said.

That means their value, for tax purposes, will be assessed differently from singe-family homes occupied by their owners. Build-for-rent property values will based on the income from them, he said.

"In Oklahoma County, most apartments larger than eight units are valued using the income approach and sales comparisons. We use the direct capitalization method (option within the income approach) almost exclusively," Storff said.

Single-family homes in Oklahoma County are valued by sales comparisons and multiple regression analysis, which is used to predict change in value.

How Trulo Homes Quail Village, OKC's first build-for-rent neighborhood, is treated by the Oklahoma City Planning Department

Trulo Homes Quail Village is in a Planned Unit Development, a kind of zoning district intended to maximize flexibility and innovation in land use and design.

"Although the idea of a designated rental community may seem new or unique, one should keep in mind that the rental community has grown exponentially across the nation and our own city, though typically more dispersed," said Scott T. Wise, manager of the city of Oklahoma City's Development Center.

The building permitting and inspection process?

"Overall, there wont be much difference in the way we permit this development compared to your typical subdivision," Wise said. "This particular project will, however, be developed as one property rather than the individually owned and separated lots you see in your neighborhood."

Here's where the flexibility comes in:

Because it's developed as one property. "They may not be as limited in the placement of carports and other structures as you might on your own property," Wise said. "For instance, your privately owned individual lot will not typically be permitted to have a carport placed within certain distance to the street. However since this is a single property using internal drives, they may not be as restricted without such property lines running throughout."

The interior layout of the addition "is designed to be more compact yet with shared open common areas for parking, sidewalks, and such," he said. "The property will require that a majority of brick, stone, or masonry is used for the exterior aesthetics of each structure. ... There will be interior sidewalks throughout the community. All of this is fairly typical of a (Planned Unit Development) within Oklahoma City limits.

Build-for-rent 'horizontal apartments' arise for the first time in OKC (oklahoman.com)