Rent prices are consistently high as home buying becomes increasingly difficult. The influx of renters has caused the market to cater more toward landlords than renters.
Photo by PHILIP B. POSTON/Sentinel Colorado

By the end of the year, it’s expected that 2022 will have been one of the best years for apartment construction since the early ’70s. Paired with steadying rental prices, the market is looking slightly less bleak than it has over the last several years for renters, but experts are cautiously optimistic and expect possibly more normalcy in the market next year.

New apartment construction across the country will top 420,000 new units by the end of the year, according to estimates by RentCafe, which tracks the market. In the Denver metroplex, this year came with a projection of 10,570 new apartments. For places like Aurora, where rent increases have been climbing, more on the market may be a signal that rent hikes won’t be as drastic. 

Christopher Mayer, professor of real estate at Columbia Business School, said people looking for an apartment now might have a better experience than they did in May or June.

“We’re not seeing rents go up as quickly, the rental market is softening a little bit,” he said.

Despite relatively good news for renters, anyone looking for rents to slide backward are most likely going to be disappointed.

The national median asking rent was up 14% in July over July the previous year, the smallest annual increase since November 2021, according to a new report from Redfin. While that percentage is still high, it has decreased from 15% in June and 16% in May.

Mark Williams, executive vice president of the Apartment Association of Metro Denver, said that the average rental price of all units combined in Aurora is $1,687.

The average for a one bedroom apartment in the city is $1,490, and a two-bedroom, one bath goes for $1,804. That’s according to data from the most recent rental report in late July. Since then, Williams said prices have probably fallen slightly since the highest quarter of the year is almost always when rents are steepest.

After “skyrocketing” previously, Williams said that the market on single family homes is starting to soften. However, “that also is putting additional demand on the apartment market.”

“I don’t see apartment rents slowing down because of that and other factors,” he said.

One of those factors is inflation, which he said is increasing the expenses on apartment managers for construction and other upkeep.

Williams said that a shortage of housing units is also helping to keep prices high. He cited a recent study he saw which claimed that by 2035, 4.3 million new apartment homes will need to be built to keep up with supply. It’s a national issue that is being felt particularly acutely in the booming Denver metro market, where he said rental rates have doubled in the last 12 years.

“I think it’s more dramatic in Denver because Colorado is such an attractive place to work and live,” he said. “It’s more acute here, but it’s not purely a local issue.”

The certainty is uncertainty

Experts say the market could slow further toward the end of the year, but there’s still a lot of uncertainty.

“I would not be surprised if we get to 2023 before things really get back to normal,” said Brian Carberry, senior managing editor of Rent.com, an apartment search website owned by Redfin.

Much depends on where you live. Cities in Florida such as Boca Raton and West Palm Beach have seen rents decrease -0.1% and -0.5% respectively compared to last month. But according to Apartment List, rents in California coastal cities such as San Diego have continued to increase over the past year.

Rent prices are consistently high as home buying becomes increasingly difficult. The influx of renters has caused the market to cater more toward landlords than renters.
Photo by PHILIP B. POSTON/Sentinel Colorado

In Rochester, New York, rent was up 15.3% in August over the same month the previous year, according to data from Apartment List. An average two-bedroom apartment in the Rochester area was $1,318 in August, compared with $1,116 a year ago.

And while more stock is being added across the country and here in A-Town, the vacancy rate is lower than it was seven years ago. A study from HelpAdvisor.com this month found that only 4% of rental units in Colorado are vacant. In 2015, 5.7% of all units were unoccupied.

Bank of America CEO Brian Moynihan said high rents are a concern because they can account for a big chunk of a household’s take-home pay.

“Gas prices are coming back down, but rents are going up 10, 12, 15%. And rent can end up taking 40% of these households’ income,” Moynihan said in a recent Associated Press interview.

While things are looking a bit better for renters than a few months ago, it’s still a landlords’ market, Mayer said.

If your lease is up, staying put and negotiating with your landlord might be a better option than trying to move, at least until the rental market slows down further, said Paula Munger, assistant vice president for industry research and analysis at the National Apartment Association.

“When you renew your lease, you’re definitely not paying the same as someone new moving in,” Munger said. “If you can, stay in your apartment.”

A major reason for rent spikes has been increasing demand from people priced out of a booming housing market. That market is starting to slow, which could mean more people can afford to buy and won’t need to rent, but with interest rates rising, some may not want to take on mortgages.

In Aurora, housing stock for buyers is up from where it was last year, according to the Colorado Association of Realtors. But so are prices. The organization estimates that buying a house in Aurora right now will be 10% more expensive than it was just one year ago. 

“With inflation now all throughout the market, there’s not enough supply so the prices are going up,” Munger said. “That’s the downside for people, just not having enough options and choices for what they would like in a housing unit.”

That was the experience of Erika Tascon, a 22-year-old Los Angeles resident who was living with roommates but wanted to find an apartment with her boyfriend.

After visiting more than 10 units, the couple picked a 500-square-foot one-bedroom apartment in Beverly Hills where they pay $2,750 per month. The median rent for a one-bedroom in the area is $2,773, up 14% from last year, according to data from Zumper.

“I think landlords are taking advantage of tenants right now,” said Tascon, who is paying $200 more per month than for her previous apartment.

In Britni Eseller’s case, the high demand meant that she had to rush to fill out her application to beat the other 10 people who toured the apartment she wanted.

“Because everyone is in scarcity mode, you’re willing to find a place that might be somewhat affordable and you’re unfortunately okay with overlooking chipped floors or a broken appliance,” said Eseller, who lives in North Park, a neighborhood of San Diego.

Krystal Guerra, 32, poses for a picture outside her apartment, which she has to leave after her new landlord gave her less than a month’s notice that her rent would go up by 26%, Saturday, Feb. 12, 2022, in the Coral Way neighborhood of Miami. Guerra, who works in marketing while also pursuing a degree part-time, had already been spending nearly 50% of her monthly income on rent prior to the increase. Unable to afford a comparable apartment in the area as rents throughout the city have risen dramatically, Guerra is putting many of her belongings into storage and moving in with her boyfriend and his daughter for the time being. (AP Photo/Rebecca Blackwell)

Building boom still isn’t enough

Developers have ramped up construction of apartment buildings this year, which could eventually help to ease the crunch. But it’s likely to take a while before that’s reflected in the market.

Meanwhile, high rents are disproportionately hurting low-income residents across the country, said Ben Martin, research director of Texas Housers, a non-profit organization that works on housing justice.

In May, rental prices in Dallas and Fort Worth were up 21.6% from last year, according to Redfin data. In Austin they were up 48.4%. One major reason is that high-income people from coastal areas like California and New York moved to Texas during the coronavirus pandemic, when they realized they could work remotely and live more cheaply. In December of last year, for example, Tesla moved its headquarters from Silicon Valley to Austin.

“People who make the lowest incomes are paying more of their total pie of money,” Martin said. “Which means that they don’t have money for anything else: school supplies, groceries, gas, clothing, all of the essential stuff that you need to live.”

Renters in Aurora and beyond struggling with the fallout of the COVID-19 pandemic have been buoyed by federal efforts like Emergency Rental Assistance — tens of billions of dollars were set aside by Congress in 2020 and 2021 to prevent evictions and keep mortgages from lapsing.

A nationwide moratorium on evictions was introduced by the Centers for Disease Control and Prevention but ended in August 2021. Aurora and overlapping counties have overseen the distribution of some ERA funds, though the city and Arapahoe County both said they are holding off on accepting new applications, as federal aid dollars dwindle.

What hasn’t dwindled, though, is the price of housing — websites like ApartmentList,com, Rent and Zumper show that the average cost of an apartment in the Denver metro area in September 2022 is comparable to or higher than the average in September 2021.

At a policy committee meeting earlier this month, City Council members asked staffers what it would mean when the city’s ERA funds are used up.

“There’s still the ongoing affordability crisis that we have in the city,” Councilmember Juan Marcano said. “I’m just kind of concerned that we are literally going to be leaving people out in the cold here over the next few months.”

Alicia Montoya, the city’s housing and community development manager, said Aurora was talking with counties and the state about the distribution of about $40 million in leftover ERA funding controlled by the Department of Local Affairs.

Director of housing and community services Jessica Prosser mentioned marijuana tax dollars as another source of rent assistance. Montoya said $300,000 in marijuana taxes had been disbursed as rent assistance since the start of the pandemic, along with more than $1.8 million from the CARES Act and other sources besides ERA.

Montoya said that, as of Sept. 1, the city had processed close to 2,000 applications for help through ERA and was tasked with managing more than $14 million in aid. Besides running out of money, other reasons for closing applications for ERA included the threat of fraud and a rise in applicants seeking help for reasons other than the COVID-19 pandemic.

​​“We have some concerns about the program’s integrity, because we are seeing a spike in applications that are fraudulent, or we are getting documents that are just fake documents,” Montoya said. “We’re trying to protect the integrity of the program and make sure that the funds are placed in the hands of the people that actually need it.”

Eligibility has been limited to those making no more than 80% of the average median income and the reasons for the request for assistance must have been related to COVID, she said.

Separately, she said the city was awarded $1.75 million through the state’s Emergency Mortgage Assistance Program, which may be used to stave off foreclosures and help homeowners behind on mortgages, property taxes and utility bills.

“This would be focusing on another area in the community that is very vulnerable,” Montoya said. “We’re trying to prevent foreclosures, really, with this program.”

She said the city hoped to train employees on administering the program by mid-October.

Protestors dressed as the Grim Reaper lined the sidewalk along Lincoln Avenue in front of the Colorado State Capitol building, May 26, 2020, protesting possible evictions amid the COVID-19 pandemic. Photo by Philip B. Poston/Sentinel Colorado

Arapahoe County spokesman Luc Hatlestad said the county’s moratorium on new applications for ERA aid went into effect Sept. 1. A week after that date, he said the county had received the first two-thirds of its second load of ERA funding, worth about $9.64 million in total, and had spent roughly half of its allocation. As of July, the county said it had helped 2,703 households with rental and utilities through ERA. 

“Requests for assistance have stayed consistent since its inception, though requests in 2022 are much more likely to be secondary requests for assistance,” Hatlestad wrote in an email. “Only people who are already in the court system (via an eviction notice) can currently apply. Once the current applications are processed, the County will evaluate how much funding, if any, is remaining for additional applications.”

Nicole Samson, the Adams County staffer overseeing that jurisdiction’s Emergency Rental Assistance funds, said their application is still open, although Aurora residents aren’t eligible to apply.

“We’re recommending people go through the state if they live in Aurora,” she said.

Hatlestad also said that the county’s Eviction Clinic Pilot Program is still open and offering free legal help to families facing eviction.

The clinic began in May in partnership with Colorado Legal Services, and is modeled off a similar program in Adams County.

Megan O’Byrne, the attorney heading the program, told The Sentinel in July that most people seeking help are facing eviction proceedings because they fell behind on ent.

“Low-income families are still bearing the brunt of the effects of the pandemic,” she said.

In addition to cutting basic expenses, renters are also cramming more people into apartments, Martin said.

Increasingly, people can’t afford their homes at all and are now facing eviction. Governments have ended eviction moratoriums and rental assistance programs that allowed people to stay in their homes during the pandemic.

The Eviction Lab, a research organization at Princeton University, is seeing record numbers of evictions that have surpassed pre-pandemic levels.

In Houston, where the eviction moratorium ended in July 2021, there were 7,242 eviction filings in July of this year, 51% above average, according to The Eviction Lab. Other cities such as Los Angeles have extended eviction moratoriums until the end of this year.

Tenants who can’t afford rent increases but also can’t afford to move are often forced to choose between paying rent and covering basic necessities. An eviction stays on a renter’s record, making it harder to find housing in the future.

“The threat of eviction is the looming problem,” said Nick Graetz, a postdoctoral research associate at The Eviction Lab. “Part of the reason renters sacrifice so many other things to try to pay unreasonable high rents every month is because of the constant threat of being evicted from their home.”

— The Associated Press contributed to this story.

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