Homebuyers in metro Denver are getting stretched by high home prices and rising interest rates, but the situation isn’t as bad for renters in market-rate and professionally managed apartment buildings, the kind that dominates in places like central Denver, the Denver Tech Center and Boulder.
Renters in those units, which make up under half the total apartments out there, are paying on average 21.8% of their household incomes in metro Denver toward the rent, according to a new affordability study from RealPage.
That is below the U.S. average burden of 23.2% and comparable to regional rivals such as Dallas and Phoenix. It is also well below the 30% of income that housing advocates recommend people try to stay below to avoid becoming financially burdened.
“Some of the income levels in Denver have increased over the past two years because you are capturing residents who have lived in higher cost areas,” said Carl Whitaker, director of research and analysis at RealPage. “They are maintaining their San Francisco salaries but applying it to Denver rent. That does influence some of the numbers.”
Whitaker said Denver is part of a group of cities known as the “NERDS” markets, and unlike in high school, the term isn’t meant to be a derogatory one. That acronym refers to cities with burgeoning tech economies — Nashville, the East Bay of northern California, Raleigh, Denver and Seattle.
Rents are on the rise, and sharply in some places. But the study found that the incomes of renters of market-rate apartments have also risen as well since the pandemic, keeping rent-to-income ratios much lower than commonly assumed. Soaring inflation rates are pushing those affordability ratios up, but not enough to “meaningfully change the story on apartment affordability.”
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Of course, the study reflects a certain degree of self-selection. If someone doesn’t have enough income, landlords in market-rate apartments aren’t going to accept them as tenants. Renters in federally designated affordable apartments spend a higher share of their incomes on the rent, and those units weren’t included. Nor were units run by smaller investors.
The study, however, looked at 7 million leases, comparing the rents charged with the actual incomes listed for specific units. In that way, it is more precise than studies that rely on rent and income estimates the U.S. Census Bureau provides through its surveys.
Whitaker said the study found that renters aren’t boosting affordability by doubling up. Nor is it necessarily a case where renters priced out by rising home prices are staying put. That would show in a higher average age, something the study didn’t find. And while many of the renters have incomes high enough to buy, they aren’t.
“For some reason, they are electing to rent,” he said. “Home purchases are as much of a life stage decision as they are an economic one.”
