ECONOMY
Rent Report Shows Substantial Decrease In 4th Quarter Rent , While Vacancies Increase Overall
Last month , the Apartment Association of Metro Denver ( AAMD ) released the 2022 Fourth Quarter Vacancy & Rent Report for Metro Denver .
The average apartment rent went down $ 32 from the 3rd quarter , which amounts to an extra $ 384 of savings per year in the pockets of Denver area renters – at a time when basic costs of living in utilities , transportation , food , and other consumer goods are rapidly increasing .
“$ 32 is a lot considering singlequarter rents have dropped over $ 20 , which has only happened 3 times since 1981 .” explained Mark Williams , executive vice president of the Apartment Association of Metro Denver . “ Rents are clearly flattening in Denver and throughout the country . In the later months of 2022 , economic factors including more people moving out of Colorado , have impacted demand and will likely continue into 2023 .”
The report also shows an increase in vacancy rates , with the average 4th quarter rate at 5.6 %. This is the highest vacancy rate in nearly two years when compared to the 2nd quarter in 2022 which was 4.6 % vacancy- that calculates to approximately 4,000 more apartments available today than last summer . The fourth quarter has consistently proven to have the highest apartment vacancies compared to the rest of the year .
Even with falling rent rates and increasing vacancy , there is still a need for more housing in the metro area . “ This quarter ’ s data shouldn ’ t take away from efforts to increase housing supply ,” said Drew Hamrick , senior vice president for government affairs and general counsel for the Apartment Association of Metro Denver . “ The solution here is to continue to push for more housing . Rising vacancy has taken the pressure off rent growth , which slowed to only 6.5 % over the past 12 months .”
The overall data suggest that long-term demand for apartments will be high , but that the market is cooling off some . Rents will likely remain flat at the beginning of 2023 , especially with much-needed new housing units being delivered . There are over 40,000 new units under construction , with an estimated 20-30 % of those units scheduled to be available sometime this year .
“ The report shows 10,992 new apartments were added into the rental housing market in 2022 while only 6,933 additional apartments were occupied ( absorbed ) during 2022 ,” explained Cary Bruteig . “ This helped drive the increase in vacancy . More new units help drive the vacancy rate up which helps take pressure off rental rates . If vacancy rates continue to increase , and given the large construction pipeline they probably will , then rents are likely to either remain flat or continue to decrease .”
Denver ’ s new Affordable Housing Ordinance has unfortunately played a part in slowing the rental housing industry ' s growth . From the time the ordinance took effect in July 2022 , rental applications for new housing developments during the following quarter dropped 88.3 %. This alone generated a loss of 11,337 future apartment homes for the metro area . Unfortunately , this loss won ’ t solely affect those 11,337 families . The loss is exponential as those families will then drive up the rents in the existing inventory of rental housing . The solution to this is to continue to foster the development of new rental housing .
These numbers were compiled by Apartment Insights , which collected the data from 228,971 apartment homes .
32 | TRENDS FEBRUARY 2023 www . aamdhq . org