Denver may have overcorrected a little bit. In 2014, there were more renter households in Denver than there were homeowners. Just four years earlier, homeowners held a strong majority over renters. Builders took notice of this trend and sprang into action. But it looks like they may have been a little overzealous, as rental growth has begun to cool off while there is still a multitude of multifamily units set to come on line in the next few years.
While multifamily building is surging, single-family building has not yet fully recovered from the recession. At the height of the boom, Denver-area builders were pulling permits for almost 15,500 single-family homes per year, according to Zillow. Since the housing crisis, however, that number has dropped to less than 6,000.
Multifamily housing, on the other hand, has seen permits for more than 31,000 new units in the past four years. But since it takes a while to go from permitting to completion, many of these units haven’t even hit the market yet. But with demand for multifamily housing already slowing, will all of these new units end up hurting Denver as they open up in the coming years?
Year-over-year growth rate for rental growth has dropped from a high of 14 percent in July 2015 to 7.2 percent in February 2016. In addition, rental vacancy rates rose to 6.8 percent in the last quarter of 2015 and the vacancy rate in downtown Denver rising above 11 percent.
Since there are still tens of thousands of rental units that are set to come online within the next few years, Denver may no longer be able to lay claim to the title of one of the hottest rental markets in the country.