DENVER – Much of the growth in Denver’s rental market this year can be attributed to an increase in the number of high income earners and the high-end apartments they’re looking for, as highlighted in a new report from ApartmentList.
In analyzing trends in the real estate market over the past 12 months, ApartmentList found that in cities nationwide, affordability increased as income growth outpaced rent growth.
But that overall picture doesn’t really capture what’s happening at a local level as the demographic makeup of the rental pool changes. Many cities, including Denver, have seen large increases in the number of renters with high incomes, skewing the numbers in their favor.
From 2005 to 2016, Denver saw a 5.7-percent increase in the share of renters making more than 120 percent of the area’s median income, according to ApartmentList. By comparison, the share of low-income renters dropped by nearly 9 percent.
Some of that decrease in low-income renters is likely a result of people moving to different areas or choosing to live with family but the lack of homes available for purchase is another factor. Home ownership rates increased slightly in 2017 but remain relatively low and real estate inventory was far below historical averages. In November, for example, there were only about 5,100 homes on the market in metro Denver when typically there would be closer to 15,000.
That means people who normally might be able to afford to buy a home are instead continuing to rent.
“We’ve seen a huge increase in the number of high-income renters,” said ApartmentList Senior Research Associate Sydney Bennet. “People who just moved to the area for high-paying jobs or families who have been there for a while but haven’t saved up enough for a down payment and would be homeowners in a more affordable market.”
ApartmentList also found increases in multifamily residential construction and decreases in occupancy rates but again, these changes favored those in higher income brackets.
While the overall number of rental units increased by 5.9 million between 2005 and 2016, the number of occupied units priced under $800 a month actually decreased by 1.2 million. So whereas more than 40 percent of rentals cost less than $800 in 2005, only about a third of units remain in that price range.
In Denver, the increase in higher-end rentals led to a 0.4 percent decrease in overall occupancy.
Rent growth in Denver has calmed down in the last couple months of the year, which is typical. The median cost of a two-bedroom was $1,320 in November, which is 1.7 percent higher than the same time last year.
Nationally, rents have increased by 2.7 percent year-over-year.
To read the full report, log on to apartmentlist.com.