2006 Denver Housing Market Analysis

Transcription

1 2006 Denver Housing Market Analysis

2 Final Report October 23, Denver Housing Market Analysis Prepared for Denver Housing Plan Task Force City and County of Denver Enterprise Community Partners Prepared by BBC Research & Consulting 3773 Cherry Creek N. Drive, Suite 850 Denver, Colorado fax

3 Table of Contents Executive Summary I. Introduction Methodology... I 1 Geographic Level of Analysis... I 2 Acknowledgements... I 3 II. Socioeconomic Profile Summary... II 1 Profile of Denver Residents... II 2 Denver in the Regional Context... II 15 III. Denver and Metro Area Workforce Summary... III 1 Denver s Employment and Workforce... III 2 Employment and Workforce Outside of Denver... III 12 IV. Housing Profile and Cost Summary... IV 1 Housing Supply... IV 2 Housing Cost... IV 11 Regional Housing Market Comparison... IV 24 Regional Housing Costs... IV 33 New Housing Production... IV 46 V. Housing Affordability Analysis Summary... V 1 Methodology... V 2 Rental Affordability... V 3 Single-Family Affordability... V 9 Market Risks... V 14 BBC RESEARCH & CONSULTING i

4 EXECUTIVE SUMMARY

5 EXECUTIVE SUMMARY Denver Housing Market Analysis Background and Purpose of Study In 2006, BBC Research & Consulting was contracted by the City of Denver and Enterprise Community Partners to conduct a housing market study for the City. The primary purpose of the study was to identify the greatest housing needs in the City of Denver, quantify these needs and assist the City with prioritizing how to address existing and future housing needs. This Executive Summary presents the primary data and findings from the study. The study includes comparative data for the four metro-area counties of Adams, Arapahoe, Boulder and Jefferson. The size of these counties ensures that a wide variety of historical and current socioeconomic and housing data is available for each of them. Together, the counties of Arapahoe, Adams, Denver, Boulder and Jefferson make up 89 percent of the seven-county metro-area population (which includes the counties of Broomfield and Douglas in addition to the aforementioned counties). Housing data for Douglas and Broomfield Counties are included where available. The following people and organizations contributed data, information and consulting time towards completion of the study and deserve special acknowledgment: Wayde Jester of MetroStudy, Denver, Colorado; Dr. Gordon Von Stroh of the University of Denver and the Apartment Association of Metro Denver; Mike Rinner of the Genesis Group, Denver, Colorado; The Denver Board of Realtors; and Debra Coak, City and County of Denver. Denver s Residents The City of Denver is the largest municipality in the State of Colorado, with a July 2004 population estimate of 568,913. Denver County is also the largest county in the state, followed closely by El Paso County (population of 554,585 in 2004) and then the counties of Jefferson (532,723), Arapahoe (527,752), Adams (394,257) and Boulder (284,996). Who lives in Denver? Denver s residents are mostly single people: People living alone make up 41 percent of Denver s households. People who are married and do not have children make up 19 percent. About 14 percent of Denver s households are made up of married couples with children. The counties surrounding Denver have a very different household composition. For these counties, most of their households are married couples with and without children, as shown in Exhibit ES-1. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 1

6 Exhibit ES-1. Households by Type, Five-County Area, 2004 Denver County Adams County Arapahoe County Boulder County Jefferson County Family Households 49% 71% 62% 57% 64% Married-Couple Family 34% 55% 48% 49% 52% With Children 14% 28% 25% 24% 25% No Children 19% 27% 24% 25% 27% Male Householder, No Wife Present 5% 5% 4% 2% 4% With Children 1% 2% 1% 1% 3% No Children 4% 3% 2% 1% 2% Female Householder, No Husband Present 10% 11% 10% 7% 8% With Children 6% 8% 6% 4% 4% No Children 5% 3% 4% 3% 5% Nonfamily Households 51% 29% 38% 43% 36% Householder Living Alone 41% 21% 31% 31% 30% Seniors Living Alone 9% 5% 0% 0% 0% Householder Not Living Alone 10% 8% 7% 11% 6% Total, All Household Types 100% 100% 100% 100% 100% Note: Percentages may not add exactly due to rounding. American Community Survey, When did they move to Denver? Between 1995 and 2000, mobility was strong in Denver: 57 percent of Denver s residents moved within Denver or into Denver from somewhere else. Specifically, one-quarter of Denver s residents, or 126,000 people, moved within the City of Denver. Another 72,000 people came to Denver from another state and 65,000 moved into Denver from another city/town in Colorado. Finally, 34,000 people moved into Denver from a foreign country between 1995 and Since 2001, more people have moved out of Denver than have moved in however, the city s population has grown because the number of births by Denver residents has exceeded the deaths of Denver residents. What are the incomes of Denver residents and how do they compare with other counties? In 2004, the median income of families in Denver (not the metro area) was $53,616. This means that in 2004, exactly half of Denver s families earned less than $53,616 and exactly half earned more. The median household income in 2004 was a lower $43,777. In 2004, half of Denver s households earned less than $43,777; half earned more 1. In 2004, 15 percent of the population in Denver, or about 82,000 people, lived below the poverty threshold about $20,000 for a family of four persons. The poverty rate is the highest for Denver s 1 Median household income is usually lower than median family income, since median household income includes singleperson households and unrelated persons living together (e.g., students), where median family income does not. That is, the median family income category has a larger proportion of two-earner households, who usually have higher earnings than one-person households. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 2

7 youngest children: Almost one-third lived in poverty, or an equivalent of about 33,000 children in The poverty rate is lowest for the city s seniors. Renters in Denver have much lower incomes than residents who own their own homes. Forty-one percent of Denver s renters earned less than $20,000 in 2005, compared with 10 percent of owners. Exhibit ES-2 shows the estimated income distributions of owners and renters in Exhibit ES-2. Renters and Owners by Income Range American Community Survey, Colorado Department of Local Affairs and BBC Research & Consulting. Renters Owners $0 $9,999 19,387 19% 4,583 3% $10,000 $19,999 21,855 22% 9,839 7% $20,000 $29,999 13,775 14% 14,935 10% $30,000 $39,999 13,047 13% 16,106 11% $40,000 $49,999 11,002 11% 16,749 11% $50,000 $59,999 5,487 6% 13,269 9% $60,000 $69,999 5,487 6% 13,269 9% $70,000 $79,999 3,789 4% 10,446 7% $80,000 $89,999 2,093 2% 7,625 5% $90,000 $99,000 2,093 2% 7,625 5% $100,000 $124, % 9,583 7% $125,000 $149, % 9,583 7% $150, % 13,439 9% Total 99, % 147, % Compared to surrounding counties, Denver s residents have lower incomes, as shown in Exhibit ES-3 below. Exhibit ES-3. Median Household and Family Income, Five-County Area, 2004 American Community Survey, Median Household Income Median Family Income Denver County $43,777 $53,616 Adams County $51,107 $55,361 Arapahoe County $51,460 $70,502 Boulder County $58,684 $76,282 Jefferson County $57,958 $73,403 BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 3

8 Denver also has the highest percentage of people living in poverty in the five-county area, as shown in Exhibit ES-4. Exhibit ES-4. Likelihood of Being in Poverty by Age, Five-County Area, 2004 Age Denver County Adams County Arapahoe County Boulder County Jefferson County Under 5 Years 30% 21% 7% 6% 13% 5 to 17 Years 22% 21% 8% 24% 8% 18 to 24 20% 15% 17% 66% 11% 25 to 34 10% 14% 9% 39% 6% 35 to 44 15% 8% 5% 15% 5% 45 to 54 11% 1% 4% 14% 6% 55 to 64 10% 2% 4% 4% 3% 65 to 74 5% 5% 14% 3% 1% 75 and Over 7% 2% 0% 0% 5% Overall Poverty Rate 15% 12% 7% 11% 6% American Community Survey, Relative to the surrounding counties, Denver houses a disproportionate proportion of the five-county population of persons in poverty. There were 228,600 people living below the poverty line in the five-county area in Of these people living in poverty, 81,000, or 36 percent resided in Denver. This compares with 25 percent of the population overall that resides in Denver. Boulder County had the smallest share of persons in poverty, even with its relatively high student population. In addition, compared to other counties, Denver has a higher proportion of extremely low-income households (earning less than $20,000 per year) than other counties and a lower proportion of highincome households. Some of this difference can be explained by Denver s relatively high proportion of single-person households, who generally have lower incomes than two- or more-person households. What are the ages of Denver s residents? Exhibit ES-5 presents age distribution by county. One-fourth of Denver s population is made up of children (under age 18). Despite Denver s urban setting, the proportion of Denver s population who are children and youth is similar to the other counties. Denver is home to 23 percent of the fivecounty area population of children, which is similar to Denver s share of the population overall. The proportion of Denver s senior population is also similar to other counties. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 4

9 Exhibit ES-5. Age of Residents, Five-County Area, % 5% 14% 4% 13% 4% 14% 3% 14% 4% 17% 75 and Over 55 to 74 80% American Community Survey, % 29% 28% 32% 33% 33% 35 to 54 40% 27% 27% 24% 27% 21% 18 to 34 20% 25% 29% 27% 23% 25% 0 to 17 0% Denver Adams Arapahoe Boulder Jefferson Are Denver s residents racially and ethnically diverse? The majority of Denver s residents 71 percent are White. The next largest racial categories are Black/African American at 11 percent and Some Other Race at 12 percent 2. A little more than onethird of the city s population is of Hispanic descent. Overall, Denver is the most racially and ethnically diverse of the five counties. Denver has a higher proportion of African Americans, persons of Some Other Race and persons of Hispanic descent than most other counties, as shown in exhibit ES-6. Exhibit ES-6. Race and Ethnicity, Five-County Area, % 90% 86% 89% White Alone 80% 70% 60% 71% 74% 78% Black or African American Alone 50% 40% 35% 34% Hispanic/Latino 30% 20% 16% 16% 11% 12% 13% 12% 10% 10% 5% 6% 3% 4% 1% 1% 0% Denver Adams Arapahoe Boulder Jefferson American Community Survey, Some Other Race Alone 2 The Census considers Hispanic as an ethnic category rather than a racial category. The Some Other Race category includes people who did not indicate a race when completing the Census survey. This category often includes persons of Hispanic descent who do not consider themselves White. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 5

10 Denver is home to 44 percent of the entire African American population in the five-county area; Arapahoe County is home to another 40 percent. Less than 3 percent of the five-county African American population lives in Boulder County. For persons of Hispanic descent, Denver is home to 38 percent of the population residing in the five counties; Adams County, 26 percent; Arapahoe, 16 percent; Jefferson, 13 percent; and Boulder County, 7 percent. Do Denver s residents have special needs? In 2004, 65,000 people residing in Denver or 13 percent of the city s non-institutionalized population over 5 years of age had some type of a disability. Disabilities are most common for Denver s older residents, with 57 percent of seniors in the city having some type of disability. Homeless counts conducted in Denver by the Metro Denver Homeless Initiative estimate that the city s homeless population ranges between 4,500 and 4,700. Denver has a disproportionate percentage of persons who are homeless; 50 percent of the metro area population of persons who are homeless live in Denver. Denver also has a slightly disproportionate percentage of residents who are disabled: 30 percent of persons with disabilities in the five-county area call Denver home. By comparison, Denver houses 25 percent of the entire five-county population. Where do Denver s residents work? In 2005, there were an estimated 487,000 jobs in the City and County of Denver, consisting of 412,000 wage and salary jobs and 75,000 jobs in contract labor and self-employment. Eighty-four percent of the jobs in Denver were in the private sector; 16 percent were in the public sector. The largest employment industry in Denver was the Government sector, which provided 66,000 jobs in This industry was followed by Health Care/Social Assistance (40,000 jobs), Professional and Technical Services (35,500 jobs) and Accommodation and Food Services (also 35,500 jobs). Not all of these jobs were filled by Denver residents, but many were. In 2000, it was estimated that 41 percent of Denver s workers lived in Denver. The next most common area of residence was Aurora: 11 percent of people working in Denver in 2000 lived in Aurora. Housing Denver s Residents Denver residents have a variety of options to choose from when looking for housing, unless they are looking for a mobile home. In 2004, about 49 percent of Denver s housing units were single-family detached housing units and 37 percent were apartments. Approximately 9 percent of the units were single-family attached units (e.g., townhomes) and 5 percent were duplexes, triplexes and fourplexes. Less than one percent of Denver s units are manufactured/mobile homes. Compared to other counties, Denver s housing stock has proportionately more apartments and fewer single-family detached homes. Exhibit ES-7 shows housing units by type for the five-county area analyzed in this study. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 6

11 Exhibit ES-7. Type of Residential Units, Five-County Area, 2004 Single Single Duplex/ Family Family Triplex/ Mobile Total County Detached % Attached % Fourplex % Apartments % Homes % Total % Denver 130,136 49% 23,265 9% 13,240 5% 97,783 37% 677 0% 265, % Adams 94,874 64% 12,536 8% 5,609 4% 25,879 17% 10,491 7% 149, % Arapahoe 124,355 56% 21,871 10% 8,434 4% 62,311 28% 3,335 2% 220, % Boulder 76,133 64% 9,265 8% 5,123 4% 26,824 22% 2,544 2% 119, % Jefferson 146,647 66% 17,020 8% 9,993 4% 46,900 21% 1,518 1% 222, % American Community Survey, Another defining characteristic of Denver s housing stock is its age. Denver s housing stock is much older than the other counties. People looking to occupy housing built before 1950 are much more likely to find this type of housing in Denver than in any of the other counties: 70 percent of all housing stock in the five-county area built before 1950 is located in Denver. This also means that Denver has a higher risk of lead-based paint hazards than other areas. Housing affordability. Housing is affordable if no more than 30 percent of a household s monthly income is needed for rent, mortgage payments and utilities. When the proportion of household income needed to pay housing costs exceeds 30 percent, a household is considered cost burdened. Housing programs generally focus on assisting lower income populations. Federal and state governments divide low- and moderate-income households into categories based on their relationship to the area median income (AMI): extremely low-income (earning 30 percent or less of the AMI), very low-income (earning between 31 and 50 percent of the AMI), low-income (earning between 51 and 80 percent of the AMI) and moderate-income (earning between 81 and 95 percent of the AMI). In 2006, the AMI for the metro region was $71, Housing renters. As of first quarter 2006, the median rent for Denver apartments was $717/month that is, 50 percent of units rented for less than $717/month and 50 percent rented for more 4. Exhibit ES-8 shows median rents by unit type at the end of the first quarter in AMI is also commonly referred to particularly by the U.S. Department of Housing & Urban Development (HUD) as median family income or MFI. 4 Medians are usually a better measure of actual cost than averages, because averages are affected by extreme highs and lows, where medians are not. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 7

12 Exhibit ES-8. Median Rent by Type, Denver, First Quarter of 2006 $1,400 $1, Apartment Association of Metro Denver. $1,200 $1,000 $ $ $800 $ $ $600 $ $400 Efficiency 1-Bed 2-Bed 1-Bath 2-Bed 2-Bath 3-Bed All Exhibit ES-9 shows the proportions of renters who could afford the median-priced rental unit in the first quarter of Forty-seven percent of Denver s renters could afford the average rental unit in Exhibit ES-9. Affordability of Rental Units by Size, Denver, First Quarter of 2006 Apartment Type Median Rent Percent of Renters Who Can Afford Unit Size Apartment Association of Metro Denver and BBC Research & Consulting. Efficiency 1 Bed 2-Bed,1-Bath 2-Bed, 2-Bath 3-Bed All $499 59% $642 51% $795 42% $923 36% $1,037 30% $717 47% How many renters can t afford Denver s rental costs? Two exercises are commonly used to understand how many renters are in need of affordable housing: Compare the supply of housing at various levels of affordability to households by income level, a gaps analysis ; and Determine how many households are paying more than 30 percent of their incomes toward housing costs. These households are called cost burdened households. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 8

13 Exhibit ES-10. Rental Gaps Analysis, 2005/1Q Income Ranges Maximum Affordable Rent Renters Rental Units, 1Q06 Rental Gap Number Percent Number Percent $0-$9,999 $210 19,387 19% 5,450 5% $10,000-$19,999 $460 21,855 22% 10,144 9% $20,000-$29,999 $700 13,775 14% 44,024 38% $30,000-$39,999 $950 13,047 13% 33,372 29% $40,000-$49,999 $1,200 11,002 11% 13,151 11% $50,000-$59,999 $1,440 5,487 6% 5,094 4% $60,000-$69,999 $1,680 5,487 6% 1,424 1% $70,000-$79,999 $1,920 3,789 4% 1,136 1% $80,000-$89,999 $2,160 2,093 2% 891 1% $90,000-$99,000 $2,410 2,093 2% 486 0% $100,000-$124,999 $3, % - 0% $125,000-$149,999 $3, % - 0% $150,000+ $3, % - 0% (13,936) (11,711) 30,249 20,325 2,149 (393) (4,063) (2,654) (1,202) (3,340) Total 99, % 115, % BBC Research & Consulting. Exhibit ES-10 compares the supply of rental units to the number of renter households in each category. The Rental Gap column identifies the shortages and excesses in the market the rental unit mismatch. The gaps analysis shows the following: In 2005, about 19,400 renter households about one-fifth of all renter households in Denver earned less than $10,000. These households could afford only to pay a maximum of $210 per month in rent without being cost burdened. Denver has approximately 5,450 units affordable to these renters and rental assistance vouchers leaving a gap of 13,900 underserved households. Another 21,900 renter households 22 percent need apartments with rents of less than $460 to avoid being cost burdened. These households earn between $10,000 and $20,000 per year. In 2005, these renters had approximately 10,100 affordable units and vouchers available to them, leaving a gap of 11,700 underserved households. Renter households earning less than $20,000 are not served by the private market. Based on rental data for first quarter 2006, about 4 percent of multifamily units were affordable to renters earning less than $20,000 per year. This compares to 41 percent of households in this income category. In addition, the units that are affordable to the City s lowest-income renters are limited to very small units (efficiencies) and are largely located in Denver s East Central and Northwest areas. In contrast, renter households earning at least $20,000 per year have plenty of affordable units available to them. And households earning more than $50,000 per year could afford to pay higher rents than what the market offers. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 9

14 In 2004, the Census Bureau estimated that 80 percent of renter households in Denver earning less than $10,000 per year paid more than 30 percent of their monthly income toward rent and utilities, meaning they were cost burdened. This is equivalent to 15,500 households. Another 20,500 renter households earning between $10,000 and $20,000 per year were also cost burdened in In all, the Census estimated that about 36,000 renter households in 2004 paid more for their rent than what they could afford. The gaps analysis and Census Bureau estimates place the range of renter households who need some type of rental assistance at between 25,000 and 36,000. Because these households have such low incomes, they are not candidates for homeownership, unless they have accumulated wealth in some way. Opportunities for homeownership. The median price of attached units (condos, townhomes) sold or on the market in Denver in 2005 was $182,000. The median price of detached single-family units sold or on the market was $226,500. An estimated 10 percent of Denver s renters (9,700 households) could afford to purchase the medianpriced, single-family detached home without being cost burdened. Approximately 18 percent of Denver s renters (17,900 households) could afford to purchase the median-priced, single-family attached home without being cost burdened. Exhibit ES-11 summarizes these data. Exhibit ES-11. Affordability of Single- Family Housing Stock, Denver, 2005 BBC Research & Consulting and The Genesis Group Affordability Single-family Detached Single-family Attached Median Price, 2005 $226,500 $182,000 Number of renters who could afford to buy 9,700 17,900 Percent of renters who could afford to buy 10% 18% Exhibit ES-12 shows how the renter population matches up with prices of all units in Denver s owner-occupied housing market 5. As demonstrated by the exhibit, the distribution of Denver s home values in 2005 is misaligned with the renter income distribution. Renters earning less than $30,000 find homeownership largely unattainable in Denver s market, while most renters find much of Denver s market to be too expensive for them. Indeed, renters must earn at least $60,000 per year before more than half of detached units become affordable to them. Just 15 percent of Denver renters earned $60,000 or more in This assumes the for-sale market in 2005 was representative of the overall price distribution of owner-occupied housing. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 10

15 Exhibit ES-12. Comparison of Renters Incomes to Affordable Ownership Housing, ,000 22,000 20,000 Owners Affordable Owner-Occupied Housing 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 $10,000 $19,999 $20,000 $29,999 $30,000 $39,999 $40,000 $49,999 $50,000 $59,999 $60,000 $69,999 $70,000 $79,999 $80,000 $89,999 $90,000 $99,999 $125,000 $149,999 $100,000 $124,999 $0 $9,999 $150,000+ BBC Research & Consulting and The Genesis Group. Note: Affordable owner-occupied housing represents the price distribution of all owner-occupied units if these units were to be available for sale to renters Exhibit ES-13 compares the number of renter households in each income category in 2005 with the number and proportion of homes affordable to them. Exhibit ES-13. Affordability of For-sale Market to Denver s Renters, Income Ranges Maximum Affordable Home Price Renters Affordable Detached Homes Affordable Attached Homes Cumulative Cumulative Number Percent Number Percent Percent Number Percent Percent $0-$9,999 $28,398 19,387 19% - 0% 16 0% $10,000-$19,999 $62,209 21,855 22% 11 0% 0% 235 2% 3% $20,000-$29,999 $94,668 13,775 14% 160 1% 1% % 12% $30,000-$39,999 $128,479 13,047 13% 661 5% 6% 1,446 14% 27% $40,000-$49,999 $162,290 11,002 11% 1,881 13% 19% 1,576 16% 42% $50,000-$59,999 $194,749 5,487 6% 2,399 17% 37% 1,160 12% 54% $60,000-$69,999 $227,207 5,487 6% 1,894 14% 50% 782 8% 62% $70,000-$79,999 $259,666 3,789 4% 1,343 10% 60% 618 6% 68% $80,000-$89,999 $292,125 2,093 2% 1,154 8% 68% 619 6% 74% $90,000-$99,000 $325,936 2,093 2% 906 6% 75% 471 5% 79% $100,000-$124,999 $409, % 1,353 10% 84% 754 8% 86% $125,000-$149,999 $493, % 648 5% 89% 398 4% 90% $150,000+ $493, % 1,549 11% 100% % 100% Total 99, % 2, % 5, % Note: Shaded areas indicate the highest proportions in the columns. BBC Research & Consulting. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 11

16 In 2005, 44 percent of Denver s detached, single-family homes for sale were priced between $162,000 and $227,000. This compares with 23 percent of renters in this affordability category. Attached homes were more affordable in 2005, with 42 percent priced between $128,000 and $195,000, compared with 30 percent of renters in this category. Renters earning less than $30,000 per year more than half of Denver s renter population could afford to buy only 1 percent of the detached units for sale and 15 percent of the attached units for sale in Denver. Renters earning $60,000 per year could afford to buy 37 percent of detached homes and 54 percent of attached homes. Homes that are affordable to renters earning less than $60,000 per year average around 1,100 square feet, were built in the 1950s and 1960s, have 2 to 3 bedrooms and 1 to 2 bathrooms. Detached units at this affordability level are largely located in various neighborhoods on the West side of Denver and in the Northeast part of the City. Attached units are predominantly located in Southeast Denver, with some units in the Northeast and Southwest areas. Maintaining homeownership. Another important exercise when assessing housing needs is to examine how easily current owners could move within Denver. In markets with rapid appreciation, some owners find themselves in a situation where they could not afford to buy the house they are living in. Although this usually means owners have built equity, it can also mean that it is costprohibitive for current owners to move within a market. Exhibit ES-14 shows how Denver s owner population matches up with prices of all units in Denver s owner-occupied housing market. Except for the lowest-income homeowners, Denver s owneroccupied market is fairly balanced, with some disproportionate alignment on the high end. Exhibit ES-14. Comparison of Owners Incomes to Affordable Ownership Housing, ,000 22,000 20,000 Owners Affordable Owner-Occupied Housing 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 $0-$9,999 $10,000-$19,999 $20,000-$29,999 $30,000-$39,999 $40,000-$49,999 $50,000-$59,999 $60,000-$69,999 $70,000-$79,999 $80,000-$89,999 $90,000-$99,999 $125,000-$149,999 $100,000-$124,999 $150,000+ BBC Research & Consulting and The Genesis Group. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 12

17 In addition, in 2004, 35 percent of Denver s households who own their own homes were cost burdened. This is equivalent to 49,000 households. Cost burden is very high among Denver s lowestincome homeowners 95 percent of owners earning less than $20,000 per year who have a mortgage were cost burdened in 2004 (5,900 households) and 92 percent of homeowners earning between $20,000 and $35,000 were cost burdened (13,500 households). In addition, 3,000 owner households earning less than $35,000 and who do not have a mortgage were cost burdened. 6 Households earning more than $75,000 are very unlikely to be cost burdened in Denver s market. Housing Residents in the Region The City of Denver exists within a regional housing market. People working and living in the metro area choose their housing based on affordability, location, housing types, schools, amenities and tolerance for a commute. Some households are more limited in choices than others, with household incomes being a significant factor in limiting housing choice based on affordability. This section compares housing cost in Denver with surrounding counties. It also examines how affordable housing is shared proportionately among the five comparative counties in the region. 6 This can occur because of utility payments, hazard insurance and property taxes. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 13

18 Renters. Denver s median rent as of first quarter 2006 (1Q06) was the lowest in the fivecounty area, as shown in Exhibit ES-15. As of 1Q06, one-bedroom rentals were less expensive in Denver and two- and three-bedroom rentals were on par with costs in other areas. Exhibit ES-15. Median Rents for All Rental Units by County, Five-County Area, First Quarter of 2006 Denver Metro Apartment Vacancy & Rent Survey, First Quarter BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 14

19 On average, rents have been consistently lower in Denver and highest in Douglas County since 2001, as shown in Exhibit ES-16. Exhibit ES-16. Trends in Average Rents, Six-County Area, 2001 through First Quarter of 2006 $1,200 Denver County $1,100 Adams County $1,000 Arapahoe County $900 $800 Boulder/ Broomfield $700 Douglas County $600 Q1 01 Q3 01 Q1 02 Q3 02 Q1 03 Q3 03 Q1 04 Q3 04 Q1 05 Q3 05 Q1 06 Jefferson County Apartment Association of Metro Denver and BBC Research & Consulting. Denver has also had the highest rental vacancy rates in the region. Exhibit ES-17 compares the 12- month average of rental vacancy rates for the first quarter 2006 with the first quarter Denver s 1Q06 12-month average rate is the highest and the only rate exceeding 8 percent. This compares to 2000, when Denver had the second lowest vacancy rate. Denver s vacancy rate has also fluctuated the most between 1Q00 and 1Q06: Denver s 1Q06 rate was more than double what it was in 1Q00. Exhibit ES-17. Rental Vacancy Rates by County, Six-County Area, First Quarter of 2000 and Q Q Denver County Adams County Arapahoe County Boulder/ Broomfield Douglas County Jefferson County Metro Average Denver Metro Apartment Vacancy & Rent Survey, Apartment Association of Metro Denver 1Q06. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 15

20 Owners. Exhibit ES-18 compares the median price of detached and attached housing for sale or sold in Denver had the third highest-priced attached housing stock (Broomfield was highest) and the second lowest-priced detached housing stock (Adams was lowest). Exhibit ES-18. Median Prices, 2005 Attached Detached Denver $182,000 $226,500 Adams $153,000 $207,900 Arapahoe $146,900 $238,000 Boulder $200,000 $362,450 Broomfield $206,054 $282,250 Douglas $194,900 $324,900 Jefferson $159,900 $273,000 BBC Research & Consulting and The Genesis Group. Exhibits ES-19 and ES-20 show the characteristics of detached and attached units for sale and affordable to households earning less than 50 percent of AMI ($35,650) and between 51 and 95 percent of AMI ($35,651 and $67,735). In general, affordable units are smaller and older in Denver than in surrounding areas. Exhibit ES-19. Square Footage and Year Built, Affordable Detached Units, Five-County Area, 2005 Extremely and very low-income (<50% MFI or <$35,650) Average Square Footage Average Year Built Low- to moderate- income (51 95% MFI or $35,651 to $67,735) Average Square Footage Average Year Built BBC Research & Consulting and The Genesis Group. Denver , Adams , Arapahoe , Boulder , Jefferson , Exhibit ES-20. Square Footage and Year Built, Affordable Attached Units, Five-County Area, 2005 Extremely and very low-income (<50% MFI or <$35,650) Average Square Footage Average Year Built Low- to moderate-income (51 95% MFI or $35,651 to $67,735) Average Square Footage Average Year Built BBC Research & Consulting and The Genesis Group. Denver , Adams 1, , Arapahoe , Boulder , Jefferson , BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 16

21 An examination of affordable for-sale housing by location showed that most of the affordable housing is clustered within West and Central Denver or around its immediate periphery. Exhibits ES-21 and ES-22 show the location of for-sale housing that was on the market and affordable to low- and moderate-income households in The maps are separated by detached and attached units. Exhibit ES-21. Location of Detached Units Affordable to 51% to 95% AMI ($35,650 to $67,735) Note: Units are $113,775 to $219,552. BBC Research & Consulting and The Genesis Group. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 17

22 Exhibit ES-22. Location of Attached Units Affordable to 51% to 95% AMI ($35,650 to $67,735) Note: Units are $113,775 to $219,552. BBC Research & Consulting and The Genesis Group. Are the housing markets balanced? While it is important that cities provide adequate affordable housing for their residents and workers, it is also essential that housing markets are balanced that is, markets should provide adequate housing for renters and owners across the income spectrum. In addition, in regional markets, housing should ideally be balanced among the cities within a region. In this way, the costs and benefits of providing different housing types are shared equitably. In 2004, Denver contained an estimated 27 percent of all of the housing units in the five-county area examined in this study. Denver contained 33 percent of all occupied rental units in the five-county area and 23 percent of owner-occupied units. This means that Denver housed disproportionately more renters and fewer owners than other counties, although the differences are modest, at about 5 6 percentage points. However, Denver does provide proportionately more affordable rental and for-sale housing than surrounding counties. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 18

23 Exhibit ES-23 shows the distribution of affordable rental housing among six counties as of first quarter For example, of all the units affordable to households earning less than 30 percent of the 2006 AMI (about $20,000), 35 percent were located in Denver, 13 percent in Adams County, 33 percent in Arapahoe, 9 percent in Boulder/Broomfield, none in Douglas and 11 percent in Jefferson County. Denver and Arapahoe Counties have the most affordable housing stock for lower income populations relative to other counties in the six-county area 7. Exhibit ES-23. Proportion of All Rental Units Affordable, Six-County Area, First Quarter of 2006 Denver 35% 28% 25% Adams 13% 12% 12% Arapahoe 33% 29% 30% Boulder/Broomfield 9% 8% 8% Douglas 0% 5% 8% Jefferson 11% 18% 17% Total Proportion of All Proportion of All Proportion of All Units Affordable Units Affordable Units Affordable to <30% of AMI to <50% of AMI to <80% of AMI $21,390 $35,650 $57, % 100% 100% Note: Sample sizes for proportions are 11,264 units for <30% AMI, 69,920 units for <50% AMI and 100,247 units for <80% AMI. Apartment Association of Metro Denver, 1Q06 and BBC Research & Consulting. The distribution of affordable for-sale housing among the counties shows similar trends. Exhibit ES- 24 shows the distribution of all for-sale units by affordability for the five-county area. For example, of all the units affordable to households earning less than 30 percent of the 2006 AMI (about $20,000), 40 percent were located in Denver, 12 percent in Adams County, 43 percent in Arapahoe, 1 percent in Boulder, 6 percent in Jefferson County and none in Broomfield or Douglas Counties. Like rental stock, Denver and Arapahoe Counties have the most affordable housing stock for lower income populations relative to other counties in the seven-county area 8. 7 The sample sizes for the percentages in Exhibit ES-23 are: 11,264 units for <30% AMI, 69,920 units for <50% AMI and 100,247 units for <80% AMI. 8 The sample sizes for the percentages in Exhibit ES-24 are: 937 units for <30% AMI, 6,154 units for <50% AMI and 28,987 units for <80% AMI. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 19

24 Exhibit ES-24. Proportion of All For-Sale Units Affordable, Seven-County Area, 2005 Proportion of All Proportion of All Proportion of All Units Affordable Units Affordable Units Affordable to <30% of AMI to <50% of AMI to <80% of AMI $21,390 $35,650 $57,040 Denver 40% 38% 31% Adams 12% 14% 20% Arapahoe 43% 34% 27% Boulder 1% 3% 6% Broomfield 0% 0% 1% Douglas 0% 1% 2% Jefferson 6% 11% 14% Total 100% 100% 100% Note: Sample sizes for proportions are 937 units for <30% AMI, 6,154 units for <50% AMI and 28,987 units for <80% AMI. BBC Research & Consulting and The Genesis Group. Summary and Denver s Future In 2005, the City and County of Denver was home to 572,000 residents and 250,000 households, and provided an estimated 487,000 jobs. As described above, Denver s current residential profile is, not surprisingly, more urban than in surrounding counties. Denver has more single-headed households and fewer married-couple families than other counties. Denver also houses a much higher percentage of persons in poverty, persons with disabilities, persons who are homeless and lowest-income residents than surrounding areas. Denver s housing stock is less oriented to traditional family structures than the stock in surrounding areas. Denver s housing is smaller, older and more likely to be multifamily units. Denver also has more affordable rentals and housing units for sale relative to surrounding areas. In 2005, the region s most affordable for-sale units were clustered in Western and Central Denver and along the immediate periphery of the city. In its current role, Denver is the primary provider of employment to the metropolitan area and houses about 41 percent of its workforce. The rest of Denver s workers mostly drive to Aurora, Lakewood and into south Denver (Greenwood Village, Englewood and Centennial) to their places of work. In 2005, about one-third of the jobs in Denver had an average wage of less than $40,000 per year (8 percent had an average wage of less than $20,000 and 25 percent had an average wage of between $20,000 and $40,000). About 40 percent had average wages of between $40,000 and $60,000 and 28 percent had average wages of $60,000 and more. The primary industries in which job growth is expected to occur in the next 25 years will produce low- to moderate-wage jobs. The Denver Regional Council of Governments projects that Denver will continue to be the largest provider of jobs in the metro area in At this point in time, Denver will have lost its status as the state s most populous county, with Arapahoe County surpassing Denver s population level and Adams County not far behind. In-commuting from these and other counties is likely to increase, as Denver continues to lose its ability to house its workforce competitively based on volume of housing BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 20

25 units and housing type. However, Denver is likely to draw residents into the city who value urban amenities coupled with strong neighborhoods and unique housing stock. Housing challenges. Denver faces several competing needs in meeting current and future housing demand: The city s poorest households (earning less than $20,000 per year) cannot find affordable rental housing and cannot purchase a home in Denver s market. This is true even as Denver provides housing to a disproportionate percentage of the five-county area s lowest-income renters. Denver s renters earning less than $60,000 per year have a hard time finding affordable detached or attached single-family housing to purchase, since less than half of the units in the market are affordable to them. The locations and characteristics of these units are limited, with most having around 1,100 square feet, 2 3 bedrooms and 1 2 baths, built in the 1950s and 1960s and being predominantly located in West and Northeast Denver. In addition, Denver s current homeowners earning less than $40,000 would find it difficult to move within the city if they needed or desired to because of the increases in housing prices. They also may have difficulty maintaining their current homes. Denver will continue to be the top provider of employment to the metro area over the next 25 years. However, Denver has a limited ability to produce housing to keep pace with job growth. Denver is landlocked and cannot produce the volume or type of housing that Adams, Arapahoe and Douglas counties can more easily develop. Future demand for housing particularly for single-family detached housing is likely to be met by these counties. Of all the single-family units planned for development, Denver represents just 4 percent. Denver s share of the condominiums planned in the future is 24 percent. If current trends continue, Denver s role will primarily be in meeting the demand for smaller and denser attached units and higher-end, single-family infill redevelopment. Denver s primary housing needs are quantitatively summarized in the Exhibit ES-25. These needs are organized around the following household types: Extremely low-income renters; Extremely low-and very low-income owners; and Renters who desire to be homeowners. BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 21

26 Exhibit ES-25. Primary Housing Needs, Denver Household Type Maximum Affordable Rent Maximum Affordable Home Price Primary Needs Number of Households with Needs Renters Earning < $10,000 $210 $ 28,398 Rental assistance. Homeownership not attainable. Renters Earning $10,000 to $19,999 $460 $ 62,209 Rental assistance. Homeownership not attainable. Owners Earning < $35,000 Potential assistance with home maintenance costs and mortgage payment. Difficulty moving within Denver if needed. 13,936 renters 11,711 renters 22,500 cost burdened owners Renters Wanting to Buy Low-Income Renters (earning $21,391 to $35,650) Moderate-Income Renters (earning $35,651 to $57,040) BBC Research & Consulting. $113,774 Finding available stock. Potential downpayment assistance. $219,552 Finding available stock. Potential downpayment assistance. 19,233 renters v. 2,400 affordable units for sale in ,540 renters v. 10,160 affordable units for sale in BBC RESEARCH & CONSULTING EXECUTIVE SUMMARY, PAGE 22

27 SECTION I. Introduction

28 SECTION I. Introduction In 2006, BBC Research & Consulting was contracted by the City of Denver and Enterprise Community Partners to conduct a housing market study for the city. The primary purpose of the study was to identify the greatest housing needs in the City of Denver, quantify these needs and assist the City with prioritizing how to address existing and future housing needs. Methodology This study includes an analysis of data on household characteristics, income, education, employment of Denver residents; an examination of current and projected employment levels and projected wage rates of workers employed in high growth industries; an analysis of past and projected housing production and price points; and a modeling effort that compares housing supply with demand, as defined by household income levels. The primary data and information sources used in the analysis include the following: Population and household projections from the Colorado Department of Local Affairs (DOLA); Social and economic information from the 2004 American Community Survey (ACS) and 2000 Census 1 ; Employment data from the Colorado Department of Labor and Employment and the Denver Regional Council of Governments (DRCOG); The Apartment Association of Metro Denver first quarter 2006 Vacancy and Rent Survey; Data on subsidized rental units from the Denver Housing Authority (DHA) and the City of Denver; Data on new construction from the consulting firm MetroStudy; and Data on home resales from The Genesis Group, a consulting firm that maintains Metrolist data. 1 The American Community Survey is conducted by the U.S. Census Bureau annually of residents in cities of a certain size. As with all surveys, the ACS data are based on a sample of households and, as such, are subject to a margin of error. BBC RESEARCH & CONSULTING SECTION I, PAGE 1

29 Geographic Level of Analysis This report includes comparative data for the four metro-area counties of Adams, Arapahoe, Boulder and Jefferson. The size of these counties ensures that a wide variety of historical and current socioeconomic and housing data is available for each of them. Together, the counties of Arapahoe, Adams, Denver, Boulder and Jefferson make up 89 percent of the seven-county metro-area population (which includes the counties of Broomfield and Douglas in addition to the aforementioned counties). Data on Douglas and Broomfield Counties are included in the market analysis where available. Exhibit I-1 shows a map of the metropolitan counties included in this analysis. Exhibit I-1. Denver and Surrounding Counties, 2006 BBC Research & Consulting. BBC RESEARCH & CONSULTING SECTION I, PAGE 2

30 Acknowledgements BBC would like to thank the following generous contributors to the study, who provided data, information and consulting time toward completion of the study: Wayde Jester of MetroStudy, Denver, Colorado; Dr. Gordon Von Stroh of the University of Denver and the Apartment Association of Metro Denver; Mike Rinner of the Genesis Group, Denver, Colorado; The Denver Board of Realtors; and Debra Coak, City and County of Denver. BBC RESEARCH & CONSULTING SECTION I, PAGE 3

31 SECTION II. Socioeconomic Profile

32 SECTION II. Socioeconomic Profile Summary This section provides a comprehensive overview of Denver s population and household characteristics, compared with Adams, Arapahoe, Boulder and Jefferson Counties. In 2004, Denver was the largest municipality and county in the State of Colorado, with an estimated population of 568, percent of the population in the five-county area used in this analysis. Since 2001, more people have moved out of Denver than have moved in; however, Denver s population has grown because births have exceeded deaths. This is a change from the mid- to late 1990s, where Denver s growth was largely due to people moving into the city, many from outside of the United States. Compared to Adams, Arapahoe, Boulder and Jefferson Counties, residents of Denver are: More likely to be living alone or married without children. People living alone make up 41 percent of Denver s households; married couples without children make up another 19 percent. Married couples with children comprise 14 percent of Denver s households. In other counties, this percentage ranges from 24 to 28 percent. However, Denver s proportion of children and youth (25 percent) is similar to the other counties. More likely to be poor. Fifteen percent of Denver s population lives below the poverty line, roughly an income of less than $20,000 for a family of four. The poverty rate in Denver is more than twice as high as the rates in Arapahoe and Jefferson Counties and about 25 percent higher than Adams and Boulder Counties rates. Denver also has a much higher incidence rate of poverty among its youngest children: 30 percent of children under age 5 in Denver live in poverty. More likely to have special needs. Denver has a disproportionate percentage of persons who are homeless 50 percent of the metro area population of persons who are homeless live in Denver. The city also has a disproportionate percentage of residents who are disabled: 30 percent of persons with disabilities in the five-county area call Denver home. Diverse racially and ethnically. Denver has a lower proportion of its population that is White (71 percent) and a higher population that is of Hispanic descent (35 percent) than in the comparative counties. Similarly educated. Overall, Denver residents have attained similar educational levels as in surrounding counties, with the exception of Boulder which is more highly educated. However, Denver has a higher percentage of residents without high school diplomas compared to other counties. BBC RESEARCH & CONSULTING SECTION II, PAGE 1

33 Profile of Denver Residents This section presents information on growth, age, household type, race and ethnicity, income and poverty levels and educational attainment of Denver s population. Most of the data are presented for 2004 the latest year for which the most comprehensive estimates on social and economic characteristics are available. Comparative information for other counties is presented in the following section. Population. The City of Denver is the largest municipality in the State of Colorado, with a July 2004 population estimate of 568,913. Denver County is also the largest county in the State, followed closely by El Paso County (population of 554,585 in 2004), and then the counties of Jefferson (532,723), Arapahoe (527,752), Adams (394,257) and Boulder (284,996). 1 Growth & projections. Exhibit II-1 shows Denver s historical population growth since In numbers, Denver s highest population growth has occurred since Denver s strongest years for population growth were during 1992, 1993, 1996, 1999 and Growth has slowed since Between 1990 and 2000, Denver added the equivalent of 8,700 people to the city each year. This compares to an average of 3,570 people per year between 2000 and Exhibit II-1. Historical Population Growth, Denver, 1890 to , , , , , , , , , , , Colorado Department of Local Affairs. 1 Population estimates are for 2004, from the U.S. Census Bureau. BBC RESEARCH & CONSULTING SECTION II, PAGE 2

34 Exhibit II-2 shows population growth by average annual percentage change. Denver s population growth has averaged 1.5 percent per year over the past 20 years. Exhibit II-2. Historical Population Change, Denver, 1890 to % 5% 4% 3% 2% 1% 0% N/A -1% Note: 1890 is the starting point for the population change; hence, the percent change is not reported for this year. Colorado Department of Local Affairs. The Department of Local Affairs projects that Denver s population will increase by about 150,000 people between 2005 and 2030, as shown in Exhibit II-3. This level of growth is equivalent to annual average growth rates of between 0.6 and 1.1 percent a lower level of growth than the city has experienced in the past 20 years. Exhibit II-3. Projected Population Growth, Denver, 2005 to 2030 Colorado Department of Local Affairs. Year Projected Population Level Projected Average Annual Growth Rate , % , % , % , % , % , % BBC RESEARCH & CONSULTING SECTION II, PAGE 3