Denver’s Housing Crunch Could Threaten Its Popularity With Millennials

Condo construction in the city has essentially halted, and that’s driving up the cost of homes, as well as apartments in the trendy downtown neighborhood.

Downtown Denver is seeing a boom in apartment buildings thanks to a renovation of the Union Station rail hub. But they are too pricey for many millennials. Photo by Fawn Johnson/National Journal.
National Journal
Sept. 24, 2014, 8:22 a.m.

This art­icle is part of a Next Eco­nomy series on Den­ver and its grow­ing mil­len­ni­al pop­u­la­tion.

DEN­VER—Four years ago, Ry­an Oes­treich set up an RSS feed on Craigslist so that he could be the very first per­son to con­tact a land­lord when an apart­ment be­came avail­able. “Oh my God, that was a tri­al in it­self. If you wer­en’t the first per­son to see the apart­ment with a check­book, you wer­en’t very likely to get the apart­ment,” he says.

Oes­treich, 30, and his then-girl­friend (now wife) ren­ted for three years while she fin­ished her mas­ter’s de­gree in med­ic­al an­thro­po­logy. They were liv­ing on his non­profit salary at the Den­ver Film So­ci­ety, so they needed a rent­al place for less than $700 a month. That’s pos­sible in Den­ver, he says, but not in the de­sir­able down­town high-rises or the trendy LoHi dis­tricts packed with brewpubs. It also means there is lots of com­pet­i­tion for the cheap­er places.

“Land­lords could do whatever they hell they wanted to,” Oes­treich says. “We had people who wouldn’t call us back.” And po­ten­tial oc­cu­pants had to be ready to sign a lease im­me­di­ately. Buy­ing a house was ac­tu­ally less trau­mat­ic for the couple.

Once Oes­treich’s wife gradu­ated and got a job, they had two mod­est salar­ies and could af­ford their small house in cent­ral Den­ver. They’re pleased to be in the city rather than in a sub­urb where they could have a big­ger home. “We don’t need much space,” he says. “We like Den­ver. We like the city.”

The renter-to-homeown­er tra­ject­ory is one many young adults still hope to fol­low, and it’s one reas­on mil­len­ni­als are at­trac­ted to a city like Den­ver, where the rent­al and home-buy­ing mar­kets are some­what reas­on­able. But even here, it’s get­ting harder to af­ford that big step of set­tling down in the com­munity. Single-fam­ily homes in Den­ver gen­er­ally run around $300,000, and cheap­er con­domin­i­ums are hard to come by be­cause of a build­ing short­age.

Re­altyTrac re­cently put Den­ver on the top 10 list of least af­ford­able counties for mil­len­ni­als who want to buy homes. Den­ver’s me­di­an home price in April was $270,000, ac­cord­ing to the real es­tate site. That’s a far cry from the $950,000 me­di­an in San Fran­cisco or $455,000 in Wash­ing­ton—oth­er pop­u­lar des­tin­a­tions for mil­len­ni­als—but it’s still a lot of dough for people early in their ca­reers.

“It is something that we’re as­pir­ing to. Just not yet,” says Sara Stevens, a 27-year-old aide to Col­or­ado’s ju­ni­or sen­at­or, Demo­crat Mi­chael Ben­net.

Na­tion­ally, young people are twice as likely to be un­em­ployed as the gen­er­al pop­u­la­tion, and 60 per­cent of those who went to col­lege are burdened with stu­dent debt. Get­ting mil­len­ni­als on the path to home own­er­ship starts with get­ting young people out of their par­ents’ houses, says eco­nom­ist Mark Zandi of Moody’s Ana­lyt­ics. “There are 4.5 mil­lion more twentyso­methings liv­ing with their par­ents today than in 2007,” he said at a re­cent hous­ing con­fer­ence sponsored by the Bi­par­tis­an Policy Cen­ter. “If you don’t get in­to an apart­ment, you’re not go­ing to get in­to a home.”

With its act­ive life­styles, re­laxed vibe, and re­l­at­ively af­ford­able cost of liv­ing, it’s no sur­prise that Den­ver is one of the most at­tract­ive cit­ies for mil­len­ni­als. But the city may not be able to re­tain the young pro­fes­sion­als who have flocked here if it can’t provide more op­por­tun­it­ies for them to be­come homeown­ers. Den­ver is suf­fer­ing from a crush­ing short­age of avail­able con­domin­i­ums, a cheap­er op­tion that of­ten forms a bridge for young people between apart­ment rent­ing and buy­ing a stand-alone home.

Condo con­struc­tion in Den­ver has plunged since the state Le­gis­lature passed a bill in 2010 mak­ing it easi­er for condo own­ers to sue their build­ers. Law­makers were re­act­ing to a spate of hor­ror stor­ies about shod­dily-built condo build­ings when they passed the law, which al­lows homeown­er as­so­ci­ations to file class-ac­tion law­suits against build­ers if two or more units in their build­ing have de­fects.

Since then, condo con­struc­tion in Den­ver has ba­sic­ally stopped. In 2006 and 2007, con­dos and town­houses made up about one-fourth of newly built homes. In 2012, they made up 2 per­cent, the mar­ket re­search firm Met­rostudy told the Le­gis­lature last year.

Den­ver’s elec­ted of­fi­cials don’t like the condo li­ab­il­ity law, es­pe­cially when they proudly tout their mil­len­ni­al pop­ular­ity as a selling point for the re­gion. “The mil­len­ni­als who come to Col­or­ado and who want to buy product can’t buy product. And since that is the biggest seg­ment of the pop­u­la­tion com­ing to Col­or­ado, why are we dis­en­fran­chising them from home own­er­ship?” groused Doug Tis­dale, may­or of the Den­ver sub­urb Cherry Hills Vil­lage at a re­cent meet­ing of metro-area may­ors.

“We went around and talked to these big na­tion­al build­ers and said, ‘How many con­dos did you build last year? None. How many did you build this year? None. How many are you go­ing to build next year? None,” says Tom Clark, CEO of the Metro Den­ver Eco­nom­ic De­vel­op­ment Corp. “Well, if you’re try­ing to draw mil­len­ni­als, that dens­er urb­an ex­per­i­ence is a cru­cial part of their rite of pas­sage.”

The Den­ver-area may­ors are team­ing up with the loc­al busi­ness com­munity to roll back some of the pro­vi­sions of the law, but in­siders privately ac­know­ledge that they will have little trac­tion in the Le­gis­lature be­cause power­ful mem­bers have squelched sim­il­ar ef­forts in the past two years.

“I hear people say mil­len­ni­als don’t want to buy. That’s so not true,” says Amy Cesario, a Den­ver real-es­tate agent with the Berkshire Group who spe­cial­izes in selling homes to young adults and people over 55. “I just sold a 26-year-old a $350,000 half du­plex.”

Cesario says young adults are dif­fer­ent than her older cli­ents. They are sav­vi­er. And many of them want to be in the city, where “we don’t have a lot of in­vent­ory un­der $300,000.” The more af­flu­ent young people, gen­er­ally in high-tech or en­ergy jobs, have a hard time find­ing condo units down­town. That’s close to their work, the ma­jor sports aren­as (im­port­ant in an NFL-ob­sessed town like Den­ver), and the bars and brewpubs.

Mean­while, many Den­ver mil­len­ni­als are wait­ing for their chance to move along in the hous­ing pipeline. Kinsy Lewis, 27, lives with her par­ents after break­ing off an en­gage­ment a few years ago. She might move in with her boy­friend, Jonath­an Adams, 26, but they aren’t there yet. And Adams wants to move in­to the down­town LoHi neigh­bor­hood, but rents are steep enough there that he would have to have sev­er­al room­mates to make ends meet.

These two are a long way from con­sid­er­ing their own mort­gages, but Den­ver lead­ers know that they are the fu­ture of the city. It’s a mar­ket that can’t be ig­nored for long.

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