APARTMENT PHOTO

Colorado Springs-area apartment rents averaged just over $1,230 a month during the third quarter, a record high, according to a new report. GAZETTE FILE PHOTO

Area rents soar to record

{child_byline}By Rich Laden

rich.laden@gazette.com

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The cost of renting a Colorado Springs-area apartment climbed to another record high in the third quarter.

Renters paid an average $1,231.24 a month in the July-August-September period of this year, surpassing the record of $1,215.67 set during the second quarter, according to a report released on behalf of the Colorado Division of Housing and Apartment Association of Southern Colorado.

Rents have reached record highs during each quarter of 2019; the third-quarter rent also is up nearly $75 a month from the same period last year, the report shows.

Area rents have risen steadily over the last five to six years — and set several quarterly records along the way — partly because the local economy has rebounded from the Great Recession, employment has increased and the demand for apartments has soared, industry experts have said.

Millennials who don’t want to buy a house or are saddled with student debt and can’t afford one, along with empty-nesters who prefer maintenance-free living, are among the groups who are driving the demand for multifamily living, the experts have said.

But it’s not just the increased demand that’s driven up rents.

Most Colorado Springs-area apartment projects built in recent years have been upscale, amenity-filled communities that command top dollar for rents, said Laura Nelson, the Apartment Association’s executive director.

“The only supply we’re adding is high end,” she said. “So when you add high-end units, then it pulls your average up. That doesn’t necessarily mean than everything is going up that high. But when that’s all that you’re adding in, it throws off the average.”

Though several apartment projects have been built in recent years, the overall supply might not be keeping up with demand.

In the third quarter, only about 2,600 of the area’s supply of 51,142 apartments were available for rent — a 5 percent vacancy rate that was the lowest in three years, the Housing Division and Apartment Association report shows.

Nearly 750 units have been added to the area’s supply in the first three quarters of the year, which is about the same number as during the same period in 2018, according to the report. Even so, an additional 1,178 apartments have been occupied since the start of the year.

“We’re definitely going to need more,” Nelson said of the apartment supply.

Adding affordable apartments, however, isn’t easy, she said.

The cost to plan, design and build affordable units is the same as developing higher-end projects, Nelson said. As a result, developers need financial incentives — grants, tax credits or cheaper land — to help them build lower-cost housing.

“They tell me it costs the same to build high-end as it does affordable,” Nelson said. “So there’s a rub there. Where do you make the numbers match if there’s not free land or property taxes waived or something? … The tax credit programs are great, but they’re very highly competitive. There’s a limited amount of money handed out for that.

“I do think the city is going to get a task force together and work on some of this,” she said. “I think anything they can do to ‘incentivize’ and cut costs is for the better. Unfortunately right now, the only projects that make sense are high-end projects.”

The Housing Division and Apartment Association report was conducted by the University of Denver’s Daniels College of Business and Colorado Economic & Management Associates, a Denver firm. It’s based on an online survey of Springs-area apartments; the third-quarter report included information on 22,566 units.

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Highlights of a third-quarter report on Colorado Springs’ apartment market:

• Rents rose to an average of $1,231.24 a month, a third consecutive quarterly record. Rents were up $15.57 from the second quarter and almost $75 from the third quarter of last year.

• Third-quarter rents were highest on Colorado Springs’ northwest side — averaging $1,362.33 a month. Rents were lowest on the city’s southeast side, where they averaged $1,098.75.

• Apartments built after 2010 — newer, trendier and filled with amenities — were the most expensive, averaging $1,493.98 a month. Apartments built in the 1970s were the least expensive at an average of $999.58.

• The area’s third quarter vacancy rate of 5% was down from 5.4% in the second quarter and 5.2% in the third quarter of last year. The latest vacancy rate was the lowest since 4% in the third quarter of 2016.

Source: Colorado Division of Housing and Apartment Association of Southern Colorado

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