DEVELOPMENT
are getting ready to find their own places to live. Migration from around the country may also add to the demand.
Stacking Rental Rules Leads to Meaningful Supply Declines
If Colorado fails to continue adding enough places for its young adults and others moving here, the frenzy will resume – affecting not only the newcomers, but everyone in the rental market.
RISK & CAPITAL FLIGHT
Developers need to attract a staggering amount of capital- around $ 6 billion per year- to sustain the level of construction that has created the present renters’ market.
Contrary to the popular image of developers having endless cash, apartment builders can typically only supply around 5 % of the funds needed to build housing. For the remaining 95 % of the required funding, developers rely on global capital markets. Banks provide loans and outside investors provide equity capital.
The price at which lenders and investors make their capital available is directly tied to the perceived risk of the undertaking.
The riskier an investment, the higher the expected return investors and lenders require for the use of their capital. The higher the cost of capital, the higher market rents must be to pay for the construction of the new units.
If anticipated market rents cannot provide the required return on capital, the project does not just get more expensive, it gets cancelled. The cranes come down, and the supply of new homes dries up.
When the market is starved of new supply, bidding wars for existing
apartments break out. Only once average rents across the market rise to a level sufficient to pay for the increase in risk will new construction begin.
REGULATION-DRIVEN INCREASES IN HOUSING COSTS
Capital flight is not just a theory; examples from around the country and the world abound. When St. Paul, Minnesota, passed a strict rent control measure in 2021, the number of permits for new multifamily buildings
Source
Market
EHA Aff.
LIHTC
Quarterly Apartment Applications( City)
24 | TRENDS JANUARY 2026 www. aamdhq. org