We recently discussed our concerns that the cost of housing in Denver was threatening to put the Rocky Mountain lifestyle out of reach for someone with a typical middle-class income. And while there are no easy fixes, we wanted to talk a little more about the market forces and potential outcomes that will bring the market back closer to an equilibrium point. Put a different way, nobody in real estate or economics thinks that double-digit percent growth in home values is sustainable. Yes, wages have been going up in the Denver jobs market, but they’re not going up nearly this fast. Something is going to have to give. The question is what, when, and how.
Even with the obstacles that the local housing market continues to face, there are moderating forces that suggest Denver’s blazing-hot, ultra-tight market may have reached an inflection a point. Unfortunately, the biggest moderating force isn’t a positive one. The Denver Post reports that people are starting to leave Colorado in greater numbers, citing traffic congestion and home values as part of their reason for the move. Now, there are still more people coming into Colorado than leaving the state, and the jobs market is still going plenty strong. And while many housing market experts expected 2018 to bring a middling increase in home values, the first half of the year continued to see strong growth in residential property values.
Should these moderating forces fail to make a tangible impact for a sustained period of time, the odds of a severe downturn go up. Over these longer time periods, major changes can also occur in where people can—and want to—live. If electric and other eco-friendly vehicles become more affordable and if the city continues to build out its roads and infrastructure, new housing construction will become attractive in areas further away from the city center. One way or another, duilding our way out of the problem has to be a big part of the answer. Otherwise, wealth inequality will manifest itself in even starker ways of wholesale gentrified neighborhoods, families who are house-poor by necessity rather than choice, and even more people who fall through the cracks and end up homeless.
Yes, we need to keep building, but we need to find more efficient ways to build affordable housing on a large-scale, while managing sprawl and wholesale changes to the character of beloved Denver neighborhoods. Whether it’s rent-control policies, financial incentives for affordable housing projects, or rules that require developers to build a certain percentage of affordable housing units, you’ve probably heard about affordable housing programs. Certainly, there are affordable housing programs that are more or less effective, but the positive influence of these programs are often underestimated and undersold to the public. It’s not just the affordable housing these programs create. When people can afford to live in the same neighborhoods where they work, it’s easier for businesses to hire employees, it’s better for traffic congestion, and it’s better for the overall cost of living in Denver. As a city, we need to continue to devote more resources to the Office of Economic Development and affordable housing programs specifically.