According to numerous polls taken in Colorado, housing affordability is the largest issue facing Coloradans today. The affordable housing crisis is not just limited to Denver and other large cities, but is now a statewide problem.
In a recent survey, communities stated housing and real estate was their biggest issue, followed by the economy and then crime-drugs-violence. Throughout the state, in households earning less than $50,000 per year, 35% of their budget pays for housing creating an economic burden.
Before the Great Recession, there were more housing units for rent and for sale than there were households in Colorado. Since the recession, Colorado’s population has increased rapidly steadily adding households at such an alarming rate, the demand for housing has exceeded the supply.
The forecast in the demand for housing will continue to rise even though Colorado has record levels of building permit activity. The only relief will be an extreme and significant increase in building and housing supply to stabilize housing prices.
The wages in Colorado were in step with housing prices from 2001 to the onset of the Great Recession in 2008. When the state began to work itself out of the recession, housing costs soared while wages rose slightly. From 2011-2017, wages in Colorado only increased 11.4% while the rents in the seven-county Denver Metro area rose 46.2%. According to the Denver Case-Shiller Home Price Index, housing prices are up 48.7% at this time.
The housing construction industry has seen a marked decrease in available labor. Ironically, laborers are leaving Colorado because there isn’t affordable housing for their families. In the costs associated with home building, labor makes up the largest proportion at 29%, materials are 20% and land is 11%.
There is also a shortage of labor to subdivide and clear raw land. This shortage is holding down the demand for land in which to build new houses. Labor employment in the subfield of land subdivision is down more than 60% since 2001. Land prices have gone up, but not as much as they should have and is attributed to labor shortage. Land that has already been zoned for residential development is becoming scarce. Analysts say the Denver metro region has around five more years’ worth of available land for development. Once that supply is gone, converting more land for development will drive the costs up even further.
Another factor in the rising costs of affordable housing is the preference of home buyers wanting larger homes with premium finishes. The demand has lead to the inflation of building materials. Housing shortage is a multi-dimensional problem and there isn’t a simple solution.
The forecast for Colorado vacancy rates is projected to be somewhere in the 1.5% range, far below the 5% range that is considered healthy.
If you need help with a housing or real estate agent, contact our Denver Real Estate attorneys for immediate legal assistance. Gantenbein Law Firm's real estate attorney Keith Gantenbein is also a licensed Colorado Real Estate agent, and can also assist with buying or selling your home.
Gantenbein Law Firm's lawyers are widely-considered to be among the top attorneys in Colorado. In addition to Real Estate Law, their practice areas also include: Business Law, Tax Law, Probate Law, Estate Planning, Wills & Trusts, Elder Law, HOA Defense, Foreclosure Defense and Credit Repair & Credit Dispute. From their office in Denver, they serve clients throughout Colorado.
For more information, visit www.gantenbeinlaw.com or call 303-618-2122.
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