For nearly two decades, Northern Virginia-based Middleburg Communities has been a busy apartment company in the Southeast and Mid-Atlantic, acquiring, developing, and financing more than 32,000 units.

Middleburg added build-to-rent development a few years ago. It currently has 14 apartment and BTR projects under construction and another 11 projects in the pipeline to develop.

In January, the company established a presence in Atlanta to begin developing multifamily and BTR properties, bringing on Sean Rosko as vice president of development.

During a recent trip to Atlanta, Chris Finlay, Middleburg Communities’ CEO, sat down with The Builder’s Daily contributing writer Richard Lawson to talk about a range of housing industry topics.

In the conversation, Finlay discusses the state of rental and for-sale housing, why he supports the Federal Reserve decision to hold on interest rates, and why Middleburg's strategic team made the recent decision to start developing in Atlanta, having skipped the city during its earlier apartment building spree.

Richard Lawson

How is the apartment market looking now with supply and demand?"

Chris Finlay

Employment is growing in big southeastern markets. People talk about supply all the time—that there's a glut of supply. What I think is fascinating is that nobody talks about the amount of demand that has been generated over the last year and a half. The fact is that last year set all sorts of records. It was more than two times the historical absorption for multifamily, BTS—double the historical average. There were seven hundred and something thousand units absorbed last year. This year, there was record-breaking absorption in the first quarter, ranging from 145,000 to almost 150,000 units in a typically low period for absorption. And that trend will continue."

Richard Lawson

What’s driving the demand?"

Chris Finlay

A few things. One is demographics. We're seeing an increasing surge in demographics in terms of the prime renter age. So, just pure numbers, we're seeing more people in that group, which, by the way, is growing. The average age of a first-time home buyer today is 39, which has moved up six years in just the last six or seven years. It's amazing how much older that first-time home buyer is now. So, you're seeing a pool of primary renters that is growing."

Secondly, renting is half the price of homeownership on an apples-to-apples basis. If you want to buy something similar to one of these BTR cottages or single-family deals, it is double the price to own versus to rent today. People are not buying. So, the cost of home ownership is further pushing people to be renters."

The third thing—and this is more anecdotal—there's growing evidence that people are just choosing to rent rather than to own today. One reason is the ability to respond to job opportunities and the flexibility of lifestyle. They want to travel more because they're not getting married until they're 30. Everybody is pushing out their life decisions until later, having kids later, and then ultimately buying homes much later. That is all increasing demand for rental housing."

Richard Lawson

What would be the impact on demand for rental housing if the Federal Reserve started dropping interest rates?"

Chris Finlay

I don't see interest rates coming down anytime soon. We're still dealing with some inflationary pressures. I think that the Fed is doing the right thing, not lowering rates. They shouldn't have reduced the rates last year. I believe that was overblown and premature. The economy remains extraordinarily resilient, and I don't see them reducing rates, which isn't going to lower the price of home ownership. The underlying trends aren't going to change anytime soon. So, we're really in his sweet spot of demand for rental housing today."

Richard Lawson

What about the supply side? We had record levels of new units hit the market last year—a 50-year high—and developers have ratcheted back new starts to record lows because of interest rates, high construction costs, and concerns about too much supply in places."

Chris Finlay

People think we have an oversupply, as if we don't need housing. Well, you do need more housing. Currently, we've got a temporary oversupply in some markets. It's getting worked through."

New starts have dropped 80%. If you took out affordable housing starts, we're down several 100,000 projected starts this year for apartments, which is a third of what the historical norm is. We're seeing a fascinating intersection right now of a continued strong demand that nobody is talking about and a real drop-off in supply. When I look forward here, 12, 24, 36 months, we see a tremendous imbalance where there's going to be an absolute lack of supply of rental housing, and that's going to lead to some positive fundamentals."

Richard Lawson

That brings me to why Atlanta now? The Wall Street Journal reported that Atlanta’s growth has ended."

Chris Finlay

(Finlay dismissed the story as nonsense) It is an unprecedented circumstance fundamentally today, and we are just very bullish on where the growth and opportunity are headed now in Atlanta. 

Richard Lawson

Anything you start this year will deliver in 2027, given the typical timeline for building apartments."

Chris Finlay

Yep, exactly. We're hoping to start at least one project here this year in Atlanta. We'll likely start two to three new projects next year. And you know, Sean (Rosko, vp, development) is tasked with building an operation here that's going to be doing two to four deals a year in the Atlanta metro. You're delivering the first units in late 2026 and 2027. That is an ideal time to be delivering. It feels a lot to me like delivering units in 2010 or 2011, at the front edge of that recovery.

Richard Lawson

Why didn’t y’all jump into Atlanta earlier and catch the market in the latest run-up?"

Chris Finlay

When we started in 2004, we were an acquisition shop in our first decade. We were buying apartments—bought a bunch of apartments here in Atlanta—went through the downturn, came out the other side, started selling all of our deals, and then redeployed into development assets. We were new in development, quite frankly. We've matured as a business, building the infrastructure and the policies, procedures, and processes to mitigate risk and ensure we're doing the right thing. And we refined an investment strategy."

We may have missed this last run-up—and trust me when I tell you I regret that sometimes—but we traded off building the strength of infrastructure and capabilities for doing extra deals during the last run-up. We are better positioned for growth now going forward. We also don't have inherited bad decisions of deals started in 2021 or 2022 that we shouldn't have done because we were trying to keep running."

We were pretty smart in managing the flow and keeping it consistent with what we were prepared to do during that period, not taking on excess risk, not taking on high debt, not taking preferred equity, not increasing risk in that run-up, and that has positioned us well for developing in Atlanta."