The state is on track for roughly 27,500 multifamily housing permits this year versus 25,700 permits for single-family
Developers in Colorado are on track to pull more construction permits this year for multifamily homes than for single-family homes, something that hasn’t happened before. But condos are largely missing in that record surge and with them an opportunity to provide more affordable housing options for first-time buyers.
Because of higher mortgage rates, a household at the median income in Denver could afford a home that cost $487,111 in 2021. In November, what the typical household could afford dropped to $350,037 because of higher monthly payments, according to aIn Denver, only 13% of homes listed were affordable to someone earning the median household income, while in Aurora that ratio is an even lower 8%, according to the Point2 study.
When interest rates were very low, multifamily rentals provided a way to earn a higher yield, making them attractive to investors. Walsh acknowledges the cash flow as one motivation for building apartments and holding onto them. And the tax benefits are better as well. Selling a condo triggers a short-term capital gain, which comes with a much higher tax rate. But hold an apartment building for more than a year and its sale will be taxed as a long-term capital gain.
He attributes that to Colorado’s reputation for elevated levels of construction defects litigation. Despite two decades to address the issues contributing to those higher premiums, both legislatively and through the courts, insurers still do not appear to be comfortable.
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