Demand For Denver Apartments Outstrips Supply

fromCPR

The housing crisis has stalled home building but apartment construction is undergoing a bit of a renaissance. There's now a huge pool of people forced to rent because they can't afford to buy a home, or they were a victim of foreclosure. In Denver, there aren't enough apartment vacancies.

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RENEE MONTAGNE, HOST:

In the construction sector of the economy, home building has still not recovered, but apartment construction is starting to move again. The recession created a new population of renters, and Denver is among the cities that don't have enough apartments. Here's Colorado Public Radio's Ben Markus.

BEN MARKUS, BYLINE: The first thing you notice about Lyn Mayo's apartment is her boyfriend's proudly displayed rock poster collection.

LYN MAYO: Most notable feature of the house.

MARKUS: This two-bedroom apartment in Denver's Congress Park neighborhood costs them more than $900 a month. A bargain, when you consider the costs of homeownership.

MAYO: Absolutely. They just found out that this place needs a new furnace - so, not my problem. And, you know, the toilet needs a new seal; not my problem. The roof needs to get replaced; not my problem.

MARKUS: Mayo did try, in 2009, to buy a home using the first-time homebuyer tax credit. But because of stricter lending standards, she couldn't close the deal - though these days she sees herself as lucky, having watched her friends struggle to keep their homes.

MAYO: And so I think the idea of a home being an investment is kind of a myth. And I just don't see the benefit, really.

MARKUS: Mayo, and thousands like her, have flooded Denver's rental market. Stricter loan standards, foreclosures, and a fast-growing population have pushed the city's apartment occupancy to a 10-year high.

(SOUNDBITE OF CONSTRUCTION)

MARKUS: And builders have noticed the trend.

DAVID ZUCKER: My name is David Zucker. I'm president of Zocolo Development in Denver.

MARKUS: Zucker stands next to his latest project - a poured-concrete building near downtown, crawling with men in hard hats. For the past few years, apartment construction - or any construction, for that matter - was at a standstill in Denver.

ZUCKER: And so the fact that we are in what might be considered a building boom today is truly remarkable.

MARKUS: This project was originally planned as condos. But when the housing market collapsed, Zucker went back to the drawing board. Eventually, his financers looked at all the renters entering the market, and they liked his new idea of retooling the project from 60 condos to more than 200 apartments.

ZUCKER: In 2010, they were not interested in new construction and today, they are. It was such a quick reversal. What was it that changed? It was the realization that multifamily is a relatively safe investment today.

MARKUS: Now, more than a dozen apartment buildings are going up in the Denver metro area, and dozens more are planned.

Greg Benjamin is with NorthMarq Capital, an investment brokerage firm. He says financing is available now because demand is outstripping supply, allowing landlords to charge higher rents.

GREG BENJAMIN: Which is now getting near the level that you can justify new construction, based on those types of rents, because now we have a reasonable return on cost.

MARKUS: And Denver's not the only place with that reasonable return on cost. Patrick Newport, an economist with IHS Global Insight, says builders are putting up apartments all across the country. And he thinks that this will be a lasting trend.

PATRICK NEWPORT: We're going to see more renting, less homeownership. And the recovery that we see in the housing market is going to be one that's characterized more by more apartment construction, and less by single-family construction.

MARKUS: Which is nearly the exact opposite from before the recession, when single-family homes dominated. But with all this buzz surrounding apartments, is it possible this could turn into an apartment-building bubble?

(SOUNDBITE OF CONSTRUCTION)

MARKUS: That brings us back to David Zucker and his half-built apartment project.

ZUCKER: It just would be nice if developers could muster some level of temperance.

MARKUS: But, he adds, there's not much history of that. For NPR News, I'm Ben Markus in Denver.

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