Denver’s historically tight subway apartment rents have broken the leash and are running higher and higher, like a dog running free on the trail of a deer.
Average Denver metro apartment rents rose 12.2% in the fourth quarter and 12.1% in the first quarter compared to the same quarters of 2014.
These back-to-back annual gains are the largest in the region since University of Denver professor Gordon von Stroh began studying rents in the early 1980s, according to an analysis by housing economist Ryan McMaken.
“Even in the late 1990s, during the tech boom, rent growth was not as strong as it is now,” McMaken said.
Rent increases exceed those seen in past periods of heavy immigration, exceed what inflation and income gains would dictate, and cannot be fully explained by the current vacancy rate.
The gains also pushed the average Denver subway apartment rent to $ 1,203 per month, also a record.
To appreciate how unusual these increases are, the last time average apartment rents managed to register a double-digit annual increase was in the third quarter of 1992 and, before that, in 1982, according to a survey by long term on rents from the Denver Subway Apartment Association.
And since 1981, rent increases have averaged about 4% per year.
Low vacancy rates are often blamed for large increases. While some suburbs have vacancy rates below 2 per cent, the metro average is 4.9 per cent.
It’s tight, but not that far from the vacancy rate of 6.2% on average since 1990 or the 34-year average of 7%.
And inflation cannot be blamed. If the average rent of $ 410 charged on the Denver subway in early 1991 matched the overall rate in the United States, then subway tenants would pay an average of $ 707 today.
But rents at the time were depressed after a long decline. The dot-com boom inflated rents to nearly $ 800 per month in early 2001. After adjusting for inflation, rents are expected to be about $ 150 lower than they are on average.
Patricia Silverstein, an economist at Development Research Partners in Littleton, said demographic shifts and the construction mix offer two explanations.
Metro Denver attracts large numbers of millennials, their 20s and more likely to rent, and sees retired baby boomers swapping single-family homes for luxury apartments and lofts downtown.
Both groups are willing to pay to live in the urban core or along transit lines, areas where most new apartments are being built.
Silverstein also said rents were being increased by new equipment-rich developments, unlike projects in recent decades.
Denver subway apartment dwellers, however, are not used to seeing rent increases eating into their wallets and have seen long periods of fixed rents.
The 1991 rents matched those of 1985, and between 2002 and 2010 rent increases averaged less than 1% per year.
Aldo Svaldi: 303-954-1410, [email protected] or twitter.com/aldosvaldi