Affordable rental vacancies tighten

John Rebchook, Rocky Mountain News

Tuesday, October 9, 2007

Demand for affordable rental housing in the state is being driven by record foreclosures and rising market-rate rents.

The statewide vacancy rate hit 4.7 percent in the second quarter, down from 6 percent in the first quarter, according to the the Affordable Housing Vacancy and Rent Survey, released on Monday by the Colorado Division of Housing and the Colorado Housing and Finance Authority.

The demand is increasing for affordable housing as new construction is slowing down, leading officials to fear a shortage of housing choices for people who can't afford market-rate rents.

"No. 1, the impact of foreclosures and short-selling (where the lender accepts less than the mortgage amount in lieu of foreclosure), means that more people are moving back into apartments," said Steve Wessler of Red Stone Agency Lending.

"The tightening of the market-rate units is pushing rents up, so people who previously could have had a choice are now being forced into subsidized, affordable housing," he said.

The tightest markets for rent-restricted housing were in Grand Junction, Pueblo, the Denver area and Colorado Springs, where vacancy rates were 1.7 percent, 4.1 percent, 4.3 percent and 5.1 percent, respectively, according to the report by Gordon Von Stroh, a business professor at the University of Denver.

The Boulder/Broomfield area reported the lowest vacancy rate in the metro area at 2.9 percent. Douglas County reported the highest vacancy rate in the metro area at 6.9 percent.

The highest vacancy rates were found in the northern Colorado communities of Greeley, Loveland and Fort Collins, where vacancy rates stood at 5.6 percent, 7.8 percent and 8.2 percent, respectively.

Von Stroh did not do the report in the second quarter of 2006, so his latest report doesn't have year-over-year numbers.

He said affordable housing tends to be more stable than market-rate rental, so it likely isn't as much affected by seasonal changes.

The state prefers to see new affordable housing mixed with market-rate rental communities, said Kathi Williams, director of the division of housing.

But she said there were enough vacancies in market-rate apartments in recent years that the state didn't want to increase the supply.

"Basically, we really slowed down on building any new units," Williams said. "But now, it looks as if the market-rate units can absorb more units," as vacancy rates have fallen.

However, it is often too expensive to subsidize new affordable units, she said. Also, municipalities typically want retail projects for the sales tax they generate instead of rental properties, she said. Retail developers also can pay more for land than apartment developers, she said, making it even tougher to build new apartments to meet the growing demand.

She said communities that have "strategic land policies" that include new affordable housing, are the most likely to receive funding from the state.

Communities, she said, must be willing to invest alongside the state to subsidize affordable housing.

Rates for metro counties

Adams   5.6 percent

Arapahoe   5.1 percent

Boulder/Broomfield   2.9 percent

Denver   3.5 percent

Douglas   6.9 percent

Jefferson   4.1 percentNote: Generally, Affordable Housing Refers To Households That Make 80 Percent Or Less Of The Area Median Income. In Denver, That Would Be $40,150 ...

rebchookj@RockyMountainNews.com or 303-954-5207