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A ccessibility to entry-level hous-
ing in metro Denver is limited
as product is scarce and con-
struction costs soar. Prices for
labor and materials are on the
rise – contributing to the increasing
price tag of new construction projects.
Additionally, because of Colorado’s
litigious environment surrounding con-
dominiums, developers are focused on
products designed for rent.The combi-
nation of increased development costs
and lack of supply creates a housing
market with high financial barriers to
entry.The needs, wants and desires of
young people also are changing. Most
potential first-time buyers are millen-
nials whose spontaneous and dynamic
lifestyles are more aligned with the
renting model.The
coupling of financial
hurdles with chang-
ing consumer tastes
has many industry
experts wondering:
Is entry-level hous-
ing a thing of the
past?
It’s very difficult
to build entry-level
housing in today’s
market, limiting the
supply of available
product for first-time
buyers. Developers are facing higher
construction costs, which equates
to more expensive housing, includ-
ing condominiums.The estimated
price tag to build entry-level product
is $225,000-$250,000 per unit.The bill
for new construction projects will not
be decreasing any time soon. Second-
quarter construction costs in Denver
were recorded up 3.6 percent compared
to 2016, tracking ahead of the national
index. It is estimated that these costs
will rise 3 to 3.5 percent throughout the
rest of 2017, according to Mortenson
Construction Cost Index.
The production of entry-level housing
is not only limited by high construc-
tion costs, but also by regulatory barri-
ers facing Denver area condominium
developers. Historically, entry-level
product has been largely composed of
condominiums or attached housing.
Colorado’s controversial condominium
environment has greatly impacted
developers’ and investors’ interest in
attached-housing product, providing a
notable deficit in available condomini-
ums. In fact, new construction permits
for condominium units only totaled
roughly 2 to 3 percent of all permits in
2016, with apartment housing making
up the majority (at approximately 60
percent).Today, the limited supply of
new condos and the resale of former
apartments turned condos make up
the affordable housing market. Colo-
rado has not seen significant condo
construction since the late 1990s.While
recent forward strides in condominium
legislation look positive, the immediate
ARA Newmark/Newmark Knight Frank
INSIDE
Andy Hellman
Senior managing
director, ARA
Newmark, Denver