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Page 8 — Multifamily Properties Quarterly — May 2017
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T he U.S. housing and multi-
family market has been on
an eight-year run that has
seen values and rents exceed
their prerecession peaks
in most markets. The increase in
single-family home values and the
regulatory and lending practices
that made it harder for Americans to
qualify for financing, combined with
demographic trends and a shift to
renting versus homeownership, have
fueled the rapid rise in multifamily
rents. While that has been great for
multifamily investors, it has created
a squeeze on workforce housing as
incomes, despite strong employment
growth, have failed to keep pace. This
disparity between rent growth and
income growth has led to an increas-
ing concern over the availability of
workforce housing across the coun-
try.
There are few areas in the country
in which this is more evident than
in metro Denver, a clear leader in
home appreciation and multifam-
ily rents growth. Combine that
with the metro’s strong population
growth, particularly with millen-
nials, and the shortage of work-
force housing becomes a real issue
– potentially dampening future
employment growth. Compound-
ing matters is the severe lack of
new condominium development,
which typically helps to fill the gap
between single-family homes and
apartments, due to the state’s strin-
gent construction defects law.
All of these fac-
tors have led the
apartment mar-
ket to provide the
bulk of the metro’s
workforce housing.
Workforce housing
is loosely defined
as housing that
is affordable to
households earn-
ing 80 percent of
the area median
income, though
most observers
qualify workforce
housing as afford-
able at 60 to 100 percent of AMI (see
the affordable rent analysis chart for
calculation).With
multifamily rents
skyrocketing in
Denver, most proj-
ects now garner
rents in excess of
these thresholds.
A review of the
metro multifamily
housing stock, as
shown on the per-
mits chart, reveals
that the largest por-
tion of multifamily
housing was con-
structed during the 1970s, with mod-
est new development taking place
until the recent construction boom,
which consists almost exclusively of
high-end, highly amenitized projects
with rents not affordable to renters
earning between 60 to 100 percent
of AMI.With much of the vintage
product of the 1980s and 1990s hav-
ing undergone substantial rehab and
landlords pushing post-rehab rents,
the bulk of the area’s workforce hous-
ing stock now is found in the vintage
assets of the 1970s.
Freddie Mac and Fannie Mae, com-
monly referred to as government-
sponsored enterprises, are keenly
focused on this issue. One of the
GSE’s primary missions is to provide
financing for affordable housing,
including workforce housing. To that
end, both have rolled out new prod-
ucts in the past couple of years that
Michael C. May
Executive
managing director,
management
committee
member, Berkeley
Point Capital
LLC, Bethesda,
Maryland
Charlie Haggard
Managing director,
production,
Berkeley Point
Capital LLC, Irvine,
California
Berkeley Point Capital LLC