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Page 4 — Multifamily Properties Quarterly — November 2017
Market Update
*As of 12/31/2016.
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(214) 777-4533,
R enting is at historically high
levels, and despite all the
cranes in major metro areas
across the country, includ-
ing Denver, supply is simply
not keeping up with demand.
Nationally, the U.S. will need 4.6
million new apartments by 2030,
according to a new study produced
by Hoyt Advisory Services and com-
missioned by the National Multi-
family Housing Council and the
National Apartment Association.
Hitting that number will require
an average of at least 325,000 new
apartment homes every year; yet,
on average, just 244,000 apartments
were delivered from 2012 through
2016. The last time the industry
built more than 325,000 in a single
year was 1989. To add to the chal-
lenge of accommodating 4.6 million
apartment households, as many as
11.7 million existing apartments
could need to be renovated or risk
being lost from the stock.
The research, which examines
rental demand in all 50 states and
in 50 major metro areas, finds that
Colorado will need 100,000 more
apartments by 2030, and 56,000 of
those will be needed in Denver.
• Surge in demand. We’re experi-
encing fundamental shifts in our
housing dynamics, as more people
are moving away from buying
houses and choosing apartments
instead. Every year for the past
five years, the U.S. has averaged 1
million new renter households, a
record amount.
There are several factors behind
this surge. Much has been writ-
ten about the millennials, and it’s
true that more
than 75 million
people between
18 and 34 years
old are entering
the housing mar-
ket, primarily as
renters. But rent-
ing is not just for
the younger gen-
erations anymore.
Increasingly, baby
boomers and other
empty nesters are
trading single-
family houses for
the convenience
of rental apartments. In fact, more
than half of the net increase in
renter households over the past
decade came from those aged 45 or
older.
Demographics are driving mean-
ingful lifestyle changes that are
being expressed through our hous-
ing choices. In 1960, 44 percent
of all households in the U.S. were
married couples with children – the
prime drivers of homeownership.
Today, it’s less than one in five (19
percent), and this decline is expect-
ed to continue.
Immigration also is an important
factor. Approximately half (51 per-
cent) of all new population growth
will come from immigration, and
research has shown that immi-
grants have a higher propensity to
rent and typically rent for longer
periods of time.
• The supply gap. In a perfect mar-
ket, the private sector would step
up and fill the growing demand. But
anyone who has ever developed an
apartment property knows there is
no such thing as a perfect market.
Land shortages, local regulations,
complicated permitting processes
and more conspire to make it dif-
ficult for developers to deliver the
necessary supply. They also drive up
prices that make delivering apart-
ments at a wide range of prices
nearly impossible.
The NMHC/NAA-commissioned
research also ranked the top 50
metros to identify cities where it’s
hardest to build new apartments
with a Barriers to Apartment Con-
struction Index. Denver ranked in
the top 10, coming in at No. 9.
If Denver is serious about address-
ing its housing shortage, it will need
to take a hard look at the obstacles
that are delaying or increasing the
cost of new apartments.
• Policies to bridge the gap. While
the number of new apartments
built each year has been rising, it
hasn’t been enough to meet current
demand and make up for any pos-
sible shortfall at certain price points
in the years following the reces-
sion. This imbalance between high
demand and limited supply options
has driven down affordability and
reduced housing options for rent-
ers. We’ve seen that firsthand in
Denver, where average metro rents
are up $700 per month since 2004.
For many reasons, building apart-
ments has become costlier and
more time-consuming than it needs
to be. Over the past three decades,
not only have hard costs like land
and materials risen sharply, but
regulatory barriers to apartment
construction also have increased
significantly, most notably at the
local level.
These obstacles to development,
such as outdated zoning laws,
unnecessary land use restrictions,
arbitrary permitting requirements,
inflated parking requirements,
Kim Duty
Senior vice
president, public
affairs, National
Multifamily
Housing Council,
Denver
National Multifamily Housing Council, National Apartment Association
New research shows that demand for apartments is on the rise. Whether it’s young professionals,
couples, families or empty nesters, Denver will need to add 56,000 new apartment households
by 2030.