Metro Denver apartment rents slide, vacancy up to finish 2022
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In good news for renters, apartment prices are trending downward and vacancy is going up in the Denver metro area.
Average apartment rental prices went down by $32 since the third quarter according to the Apartment Association of Metro Denver 2022 fourth quarter Vacancy and Rent Report. While rents are expected to drop this time of year due to the nature of the market, this is a significant dollar amount compared to previous data over the last 40 years, according to Cary Bruteig from Apartment Insights.
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New builds rule the rent rates, as always. The average cost of an apartment in Denver is $1,838 at the end of 2022, but apartments built during or after 2020 carry an average rent of $2,466.
Vacancy rates have also increased to their highest number in two years, sitting at 5.6%. Compared to the second quarter 2022 vacancy of 4.6%, this equals about 4,000 new apartments on the market. A management company’s goal is usually aiming for less than 5%, according to Bruteig.
But renters appreciate higher vacancy for rental options and it brings rents down.
“Vacancy rates increase the pressure on consumers bidding up the price of rent [which] starts to go away,” Bruteig said in a press conference. “Rents are, to a large extent, nothing more than the result of whether there’s enough units to go around.”
Despite the numbers showing increased availability and favorable pricing trends, the experts said there is still a need for new housing in the Denver metro. There are currently 40,000 new units under construction but only about 20-30% of those will be available in 2023.
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“What I worry is that as we report falling rents and increasing vacancies that policymakers will decide ‘well, we can de-emphasize trying to bring more units online’ which is exactly the opposite of what we need to be doing out there,” Bruteig said. “We need more housing units to keep up with demand, we need to keep that pressure up because those additional housing units are what are solving the problem.”
The association noted Denver’s Affordable Housing Ordinance, which took effect in July, has led to slower rental housing growth. The ordinance is being blamed for an 88.3% drop in rental applications for new housing developments the next quarter. That could also have something to do with the volume of applications rushing to file before the July law hit.
While interest rates are affecting the buyer’s market across the nation, it could be good for the apartment industry as people may avoid buying or building a house during this time of high interest rates.
“In addition to that one trend that we’re definitely seeing on site is because of the interest rates and the difficulty to sell right now. A lot of houses that are privately owned are going on the market for rent,” Ashley Jefferson, association board member and public relations co-chair, said in the conference. “So renters (who) would be living at apartment communities are now choosing to rent privately owned homes.”
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