At a moment when high home prices and mortgage rates are barring many Coloradans from purchasing a house, renters are getting a little good news in the Mile High City.

The average rent in metro Denver fell by 3.7% over the past year, according to a report released Thursday by the Apartment Association of Metro Denver. The typical rate in the area has dropped $71 since spring of 2024.

The new data shows a 6.4% vacancy rate in the market at the end of the second quarter, continuing a trend of higher-than-average vacancies over the past year. The metro area’s average monthly rent, the report said, now stands at $1,832.

“For three consecutive quarters now, we have seen rents lower than they were at the same time the year before,” the association’s executive vice president Mark Williams said.

Nevertheless, Williams and other observers worry the apartment market in Colorado could turn to an undersupply, as new projects coming on line taper off and fail to keep up with demand.

The report notes that the trend runs counter to national numbers that show rents rising across the nation. U.S. Bureau of Labor Statistics, it said, marked a 3.8% rise in average primary residential rents over the year.

The association’s report noted that rents typically rise over the first quarter, but that this year’s bump of just $13 was well below expectations for what is typically the time when renters are most active in the market, Williams said.

Cary Bruteig, who authored the report on behalf of the research-and-consulting firm Apartment Insights, drew a parallel between the higher vacancy rate and the dropping average rent.

“This increase is less than half of the typical increase during the 2nd quarter over the past 20 years because vacancy remains elevated,” Bruteig said.

While vacancies remained at a higher level, the number of unoccupied rentals dropped by 0.6% from the first quarter — the largest drop since the second quarter of 2021.  The report also noted that owners were offering renters fewer discounts and concessions over the period, generally suggesting a strengthening market.  

Bruteig noted that the tally of new apartments arriving to the market dropped significantly over the past two years, down around a third from a construction peak in 2023.

“This should lead to fewer new apartments completed in the quarters ahead,” he said.

That raises a question as to whether the supply of apartments being completed can stay ahead of demand. New units arriving now, the report notes, were typically started before a flurry of regulations imposed by the state and the city of Denver over the past two years, that could be acting as a caution light for developers.

“What is troubling for the long-term health of housing in Colorado, is the unprecedented amount of regulations placed on housing providers in the past few years,” Williams said. He called the new regulations overwhelming and complex, and said they could drive investment away from the state.

Rents rise along with newness of the building, the report shows. Average rents for units completed over the past five years run $2,335 a month, where apartment older than 55 years currently average $1,607. Older units also track a higher vacancy rate — at 8.6% for 1970s-era units, double the standard vacancy rate of a 3-year-old unit.

Although vacancies remained higher, rates were dropping across all six of the metro regions the study watches. They ranged from a high in Arapahoe County, 7.1%, to lows in Jefferson, Boulder, and Broomfield Counties, 5.2%.