New Apartment Development in Denver Declined 88% Following Implementation of Affordable Housing Ordinance
Walnut Street Lofts, a permanently affordable housing development adjacent to the 38th and Blake RTD Station. Rendering courtesy of KEPHART.
According to the Apartment Association of Metro Denver, applications for new apartment development declined by a dramatic 88% in the three months since a new Denver affordable housing ordinance went into effect on July 1, 2022.
Denver City Council approved a plan called expanding housing affordability, an ordinance that now requires new residential developments of 10 units or more to designate eight to 12 percent of the units as affordable to those making 60% of AMI, area median income.
Cary Bruteig and Scott Rathbun of Apartment Appraisers, Inc. released this graph that shows the decline in permit applications to the City and County of Denver after implementation of the new ordinance:
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Hey there, noting that to be more effective, this kind of analysis would need to be reformed.
To begin, it should be done with a longer historical period (to show how many permits are applied for in an average quarter over time, reflecting some level of seasonality and YoY changes instead of QoQ changes).
Additionally, we should be waiting another quarter or two to see how this shakes out. Just as in other cities where inclusionary zoning ordinances were implemented, we saw a huge rise in applications just before the deadline to “get ahead” of the new regulations, so much of that application demand was pulled forward. In other words, Q2 was unusually high in applications, particularly for developments of larger units, and we should expect that to be the case based on historical experience with IZ
Will also note that this coincides with a huge rise in interest rates and labor costs that have led to a broader market slowdown in new permits filed – so this should be compared against expected QoQ shifts, perhaps comparing to other cities w/o an EHA-like implementation in the quarter, or historical periods with similar market conditions. A differences in differences analysis might work here.
As is, this is an overly simplistic analysis that doesn’t shed much new light on the situation.
Everywhere this policy is implemented it makes rent skyrocket. It completely failed and has in every case NYC, San Francisco on and on its never worked once. So let’s do the failed policy in Denver, less apartments being built = less inventory = skyrocketing rent prices. Same thing thats happened in every city! So now Denver look forward to much higher rents cause of “affordability mandates” causing higher cost and less inventory/development in EVERY CASE! This is not a surprise this is what always happens 1800 pee month studios now cost 2400 dollars to be developed and less of them being built will rise cost more… This is not affordability this is stupidity.
I would love to see a synopsis of new housing developments that ARE moving forward through entitlement and financing in Denver with intention to comply with affordable set-aside requirements. How? Where? Why? Etc. The accepted wisdom seems to be that the cost/subsidy required to meet affordable housing requirements are just passed on to the market-rate renters or buyers. And no doubt that is mostly true if/when the target market is mostly comprised of buyers or renters indifferent to modest price differentials (e.g., $2.1M or $2.35M for a townhome in Aspen, no biggie). But in my experience, most projects developed with inclusionary housing requirements are only actually built because the subsidy becomes a hair-cut to the land value. Is this happening in Denver, or are land sellers holding out (in hopes that the policy goes away in 3-5 years, etc)?