CREJ - Multifamily Properties Quarterly - April 2015
A quick scan of the Denver skyline confirms what we all know: The Denver apartment market is booming. Demographic changes, the growing millennial population and a general rediscovery of urban cores are driving historic demand for apartments. And developers are responding. Multifamily construction is at historic highs in Denver and across the country. Of the 15,837 residential construction permits issued last year in the metro area, more than 7,400 were multifamily. In 2013, there were 8,188 multifamily permits. All of that construction means a lot of jobs, and not just from construction, but also from the leasing and operations side. Research commissioned by the National Multifamily Housing Council and the National Apartment Association found that in the Denver metro area – in 2013, which is the latest data available – apartment construction, operations and resident spending contributed $10.4 billion to the economy and supported more than 97,400 jobs. What comprises that $10.4 billion? Local apartment construction contributed $1.6 billion and helped support 12,890 jobs. Operations added another $1.6 billion and provided support for 11,631 jobs. And finally, there is the often-overlooked component of economic contribution – the spending power of the apartment residents themselves. After all, without these apartments, residents might be living somewhere else and spending money in a different community. Denver’s 439,900 renters contributed $7.1 billion to the local economy and helped support nearly 73,000 jobs. On a statewide level, apartments and Colorado’s apartment renters contributed $15.6 billion to the state economy and supported 154,000 jobs in 2013. Nationally, apartment homes and their 36 million residents contributed $1.3 trillion to the economy and supported 12.3 million jobs in construction, operations, leasing, management and skilled trades. Economist Stephen S. Fuller, Ph.D., George Mason University Center for Regional Analysis, conducted research that was published by NMHC and NAA as part of the biggest public relations campaign in the history of the multifamily industry. The award-winning “Apartments. We Live Here.” campaign tells the story of how apartments help people live in a home that is right for them, while making communities stronger and creating millions of jobs. The campaign site, www.weareapartments.org, features an interactive map that showcases the footprint of the apartment industry in all 50 states and 40 metro areas, including Denver. The site also includes tools that real estate practitioners can use with planning boards, citizen groups, investors or anyone else who wants to know about the economic impact apartments bring to communities in Colorado. In my opinion, the most useful tool is NMHC/NAA’s Apartment Community Estimator, or ACE. ACE calculates the economic contribution of a given number of apartment units to Denver or any city and state. By entering how many apartments are in a community, indicating whether it is an existing property or new construction and choosing a city or state, the tool will calculate the total economic impact and number of jobs supported. For example, a new project in Denver consisting of 165 apartment homes would support 322 local jobs annually and generate a $38 million economic impact to the state when the spending of its residents is included. Those are strong numbers by any measure. As construction cranes become the norm in Denver, the question of how and where Denver should develop is a hot, and often heated, topic, at least in my neighborhood of West Highlands. These tools are designed to help address those “not in my back yard” battles. Following are arguments to be made for the continued construction of apartments in Denver and Colorado: Managing budgets. Apartments help manage city and state budgets by concentrating water, sewer, electrical, highway, police and fire protection. According to the U.S. Department of Housing and Urban Development, the total cost for a jurisdiction to support a large-lot detached house (including libraries, parks, fire, police, schools, roads, drainage, water and wastewater) is $13,470. The cost drops to $8,640 for a more compact detached house, and for an apartment or condominium, the cost drops further to $6,405. Fueling the local economy. Appealing multifamily housing attracts the “best of the best” to a city or state. Colorado’s lifestyle made the state and Denver a premier destination for the workers firms want. In fact, some firms have relocated their headquarters to Denver in recent years. All of that economic development is fueling the tax base, supporting the economy and helping support state-of-the-art transportation and other infrastructure changes city leaders are undertaking to make Denver a world-class city. We can’t have all that without creating housing for these new residents. Boosting prosperity. Harvard professor Ed Glaeser has an extensive body of work documenting the benefits of density, including the fact that wages and productivity rise with density. Reducing traffic. Creating walkable neighborhoods and providing the critical mass needed for public transportation lessen traffic. Dense neighborhoods help reduce vehicle miles traveled (which reduces traffic), because most car trips aren’t just commutes to work. Trips also include traveling to buy groceries, going out to eat and picking up children from school, which adds up to millions of miles. When we create dense live-work-play neighborhoods, we reduce traffic. Preserving park space. Having parks and outdoor recreation areas is essential in dense and urban areas. When buildings are built up instead of out it allows space for parks and outdoor areas to be possible. I believe leaders and policymakers in Denver and Washington, D.C., need to understand the importance of the multifamily industry to Colorado and the country.