Colorado has experienced explosive population growth in recent years, which requires some new thinking when it comes to the state’s transportation, housing strategy, and water supply.
In the second installment of a four-part series, Michael Best Strategies’ Alex Hayes examines the affordable housing issue.
As a mainstay on countless lists of best places to live, Colorado continues to attract new residents in droves. However, a chronic shortage of housing inventory has led to an affordable housing crisis, hitting particularly hard along the Front Range. Though the inventory shortfall for homes and apartments is expected to peak this year at about 32,000 units, home prices continue to skyrocket with little relief in sight for prospective home buyers.
Denver, which is top in the country for sparse inventory of homes for sale, is ground zero for the affordability crisis in Colorado. The average new home price in the Denver metro area is around $540,000, a number that is out of reach for most new home buyers. Moreover, the difference in cost between new and existing inventory is only 12%, far below the 30% that is characteristic of more healthy housing markets. Initiative 66, a ballot initiative (to be featured in part four) would limit new residential development, which has some in real estate concerned.
The impacts of lack of affordability are numerous. The lack of affordable housing options makes it difficult for some employers to attract employees. Chipotle, which is headquartered in Denver, launched a program to subsidize housing costs for employees. Other employers may soon follow suit.
The issue is top of mind with the Colorado General Assembly, where in 2017, after five years of failed attempts, it passed construction defects reform. The bill, HB 17-1279, coupled with the state Supreme Court’s approval of binding arbitration in Vallagio at Inverness Residential Condominium Association v. Metropolitan Homes, Inc. is expected to increase the number of condo developments in the Denver metro area. Condos are an important first step on the homeownership ladder for young people, as well as a downsizing option for retirees.
At least five bills have been introduced in the 2018 legislative session directly addressing affordable housing. However, these bills focus primarily on tax credits and other aid to affordable housing organizations, rather than the root causes of the inventory issue, such as construction labor shortages and burdensome permitting processes. In any event, if Colorado hopes to sustain the economic success of recent years, it must seek new and innovative solutions to the mounting affordable housing problem.
Watch for future installments regarding Colorado’s population growth and infrastructure considerations. Bookmark our website to stay up to date!