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The housing shortage in metro Denver continues to drive up costs

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The housing shortage in metro Denver continues to drive up costs

AUSTIN — Even if population growth in metro Denver were to come to a screeching halt, the region would still need to add tens of thousands of new homes and apartments to cover the deficit built up after a decade under construction, according to a report. analysis from Zillow.

The country has seen the strongest pace of new home construction since 2007, the last year of the housing boom. Even with that, Zillow estimates that the nation’s housing shortage rose from 4.3 million units in 2021 to 4.5 million in 2022, the most recent year available for analysis.

“We desperately need more housing,” Orphe Divounguy, a senior economist at Zillow, said Tuesday during an interview at the National Association of Real Estate Editors in Austin.

In metro Denver, there were an estimated 70,197 “missing households” in 2022, about 500 more than the previous year.

Zillow defines missing households as households with non-family members and then subtracts the number of vacant units to determine the housing shortage. Such families and individuals are prime candidates to move and establish separate households.

The count may underestimate the shortage as it does not include cohabiting relatives, such as adult children with parents. And it’s not enough for builders to just focus on the number of missing households. They also need to create enough places for new people entering the market and for young adults who are striking out on their own.

While Denver has a major housing shortage to overcome, it is not the most serious. Boston, Sacramento, Portland, San Diego, San Francisco, San Jose, Seattle, Minneapolis and Los Angeles have some of the worst shortages.

However, Denver is near the bottom in the share of missing households that have enough income to comfortably buy a home, given home prices, Zillow found.

Nationally, 15.1% of households that doubled could afford their own place. But in Denver, that ratio is just 5.1%, one of the lowest shares outside of California. The Colorado Legislature has tried to help families double down by passing a law starting July 1 that would ban occupancy limits on homes or place limits on the number of people who can live in one home.

While construction of homes for sale has increased, gains in apartment construction have been even more robust, reaching the strongest pace since 1985, according to a separate report. study of Apartment List.

According to Apartment List, Metro Denver added 41,000 new multifamily units between 2021 and 2023. That amounts to 4.6 units per 1,000 residents, the fifth fastest rate among major metros and an acceleration from the 3.4 apartments per 1,000 residents. Between 2015 and 2020, the annual average was 3.4 apartments per 1,000 inhabitants.

The additional supply has allowed rents in Denver, which rose 16.8% in 2021, to stabilize. Denver ranks 25th in rent growth among the 50 largest metros.

“Flat rental growth indicates a healthy balance between new supply and new demand,” said Rob Warnock, senior research associate at Zillow.