It’s not just housing permits that are dramatically down in the Denver-area, as I reported in an earlier blog.
Only 438 permits for apartments were issued in the first nine months, an 84.8 percent drop from the 2,885 permits issued in the first nine months of 2008, according to the most recent data from the Home Builders Association of Metro Denver.
Indeed, the percentage drop for apartments is almost twice the 44 percent drop for single-family homes.
But unlike housing, this is not a record-low number of permits issued for apartments. That occurred in 1991, when a mere 208 permits were issued for the entire year. And in 2005, only 406 permits were issued for the entire year.
Roger Reinhardt, executive vice president of the HBA of Metro Denver, noted that more than 23,000 permits were issued from 2000 to 2002,.
“Clearly, apartment became over-built during the cycle, so it is not unusual for apartment construction to drop way back after that happens,” Reinhardt said.
One of the reasons developers pulled so many permits during that era was that they feared that voters would approve an anti-growth Constitutional Amendment that would erect a giant legal roadblock to construction, and they wanted to get their permits pulled in advance. Amendment 24, the anti-growth measure, failed in 2000, leaving too many apartments being built for the demand.
Steven Rahe, an apartment broker who is a senior vice president at Grubb & Ellis, is thrilled that building permits are at such a low level this year.
“If you had told me at the beginning of the year that we would see 1,000 or fewer permits pulled for apartment units in all of 2009, I would have been impressed and delighted,” Rahe said. “It is a good thing for the market and existing landlords.”
The HBA data shows that permits were pulled for 168 permits in Denver, down from 1,906 during the first nine months of 2008; 166 units in Littleton; 96 units in Lafayette and eight units in Boulder.
Rahe said the numbers are so small they are probably all affordable and tax-credit deals. It’s also almost impossible to get financing for market-rate units in this lending environment.
Ryan McMaken, spokesman for the Colorado Division of Housing, said the low number of permits being pulled is not surprising.
“But I keep thinking about the 35,000 households being created each year,” McMaken said. “At some point, we are going to have a shortage of apartment units, especially affordable units. There clearly is going to be a need for more affordable units going forward.”
Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.