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Contents:
About the Author 2
About Common Sense Institute. 2
Teams & Fellows Statement 2.
Key Findings. 4
Declining Affordability as Measured by the Homebuyer Misery Index. 6
Potential for Future Home Price Appreciation. 7
Home Prices 9
Hours of Work Needed to Afford a Home Mortgage. 10
Colorado Property Owners Are Set for an Historic Property Tax Increase in 2024. 12
Methodology. 15
Hours of Work per Year to Pay Residential Property Taxes 16
Housing Supply Shortage. 17
Building Permits and the Housing Supply Deficit 19
Types of Permits Issued. 21
Going Forward. 22
Appendix A. 23
Appendix B. 29
Colorado’s Housing Affordability Report: The Impact of Home Prices, Interest Rates, and Property Taxes
The cost of housing in Colorado has made it a more expensive place to live. Significant fluctuations in demand during the pandemic, coupled with a growing supply shortage due to lagging development, have created the conditions for a tight housing market. As a result, home prices have increased dramatically. Coupled with higher home prices is large increases in property taxes beginning in 2023 (payable in 2024). There are diverging views on the direction of mortgage rates going forward as the Federal Reserve tackles inflation. Higher/lower mortgage rates would raise/lower the cost of new home purchases, undoubtedly impacting demand for housing. While this may provide some relief in terms of availability, permitting for new housing units is tapering off and actual home completions will likely decline as builders gauge the impact of a slowing economy on housing demand. For Colorado to remain competitive with other states by improving housing affordability, the supply of homes must increase to both close the existing housing shortfall and meet future demand.
This report analyzes trends in housing affordability in seven counties in the Denver Metro area and five other large counties in Colorado. This study encompasses the period 2000 to 2023. Data sources used and most recent availability include: the American Community Survey (2021), the National Association of Homebuilders (2020), U.S. Department of Housing and Urban Development (March 2023), Zillow (November 2022), the Wall Street Journal/Realtor.com Emerging Housing Markets Index, and the Colorado State Demography Office (2022). The housing deficit/surplus in 2022 is estimated using forecasts of population and average household sizes. It is important to note that the housing unit deficit/surplus estimates will change with each new U.S. Census data release.
Key Findings
- Due to elevated housing prices and rising interest rates, the affordability of purchasing a home in the Denver Metro area remains near record lows. In just the past 11 years the cost (purchase price plus mortgage interest) of purchasing an average priced home has increased by 112%, with a large part of that increase occurring over the last three years. (Figure 1 & 2).
- Since 2013, affordability has decreased by:
- 126% in Adams County
- 113% in Arapahoe County
- 110% in Boulder County
- 100% in Broomfield County
- 127% in Denver County
- 99% in Douglas County
- 114% in Jefferson County
- 108% in El Paso County
- 112% in Larimer County
- 102% in Mesa County
- 127% in Pueblo County
- 141% in Weld County.
- Household incomes have not kept pace with rising housing costs. Between January 2013 and February 2023, the average hourly wage increased 38%, from $26.04 to $59. However, due to the rapidly increasing cost of housing, the number of hours of work required to cover the median mortgage payment increased from 46 hours to 98 hours, a 113% increase. The number of required hours of work jumped 25 hours, or 34% alone, from Feb 2022 to Feb 2023. (Figure 7)
- Increased 2023 property taxes (paid in 2024) for Colorado’s most populous counties will increase 35% on average and require an additional 26 hours per year on average to pay for the increase for a total of 99 hours per year. For Colorado’s most populous counties the total number of hours required to pay for residential property taxes in 2024 (at 2023 average wage rates) are as follows:
- Adams – 109 hours, a 34% increase
- Arapahoe – 102 hours, a 38% increase
- Boulder – 128 hours, a 31% increase
- Denver – 84 hours, a 31% increase
- Douglas – 150 hours, a 44% increase
- Jefferson – 104 hours, a 33% increase
- El Paso – 76 hours, a 40% increase
- Larimer – 107 hours, a 36% increase
- Mesa – 63 hours, a 35% increase
- Pueblo – 66 hours, a 33% increase
- Weld – 98 hours, a 33% increase.
- Based on permit data through March 2023, the Denver Metro area is not on track to issue enough housing permits to close the supply gap and meet projected demand by 2028. The region is currently on track to issue 21,120 permits in 2023, below the needed annual range of 26,000 to 37,600. Permitting for new housing in 2022 started off well but tapered off as home builders reassess the demand for housing in a higher interest rate environment. To avoid a similar collapse in new home building that followed the last recession, permitting must remain at elevated levels for the next several years.
- While the Denver Metro area is not on track to issue enough permits in 2023, two counties within the Metro are. Five of the seven counties are not on track to issue enough permits in 2023 including Adams, Arapahoe, Boulder, Broomfield, and Jefferson County. Denver and Douglas counties are currently projected to issue enough permits.
- The Denver Metro area issues the majority of housing unit permits for multi-family structures. In 2022, 41.8% of housing unit permits were for single-family homes and 58.2% were for multi-family. In 2023 through March, 38.7% of housing permits are for single family homes and 61.3% are for multi-family homes.
- Homebuilder confidence has declined 44.4% since a recent high in November 2020. The National Association of Home Builders/Wells Fargo Housing Market Index for the Western Region is now 41 having rebounded beginning in January 2023 after falling for 9 straight months. Lower homebuilder confidence is indicating a decrease in the rate of new housing creation going forward and is likely to result in insufficient new housing to close the deficit and meet new demand.
Declining Affordability as Measured by the Homebuyer Misery Index
The “Homebuyer Misery Index”, as developed by Common Sense Institute[i], captures the impact of housing prices and mortgage rates on the affordability of purchasing a new home, see Figure 1. The Homebuyer Misery indices are based on 30-year mortgage rates and the Zillow home prices.
The mortgage rates are converted into an index with 2000 as its base year. The mortgage rate index is then added to the Zillow price index and normalized. The following graph shows the Denver Homebuyer Index, the Colorado Homebuyers Misery Index, and the U.S. Homebuyers Misery Index. The Denver Homebuyer Misery Index is lower than the Colorado Homebuyer Misery Index after 2013 and above the U.S. Homebuyer Misery Index after 2019. The substantial increase from 2012 to the end of 2020 was primarily a function of home prices increasing. Beginning in 2021, home prices in Denver went up dramatically and mortgage rates more than doubled by November 2022, consequently the cost to purchase an average priced home went up by 142% from 2012 to 2022. Since November 2022, the misery indices have declined as home prices and mortgage rates have fallen.
Figure 1
In the counties under consideration, home affordability has declined since January 2013. Figure 2 shows the decline in affordability for each county for 11 years starting in January 2013 to March 2023. Weld County has experienced the largest decrease in affordability with a 141% decrease since January 2103. Denver and Pueblo are tied for the second largest decrease in affordability with a 127% decrease over the same time period. Douglas County saw the lowest decrease in affordability with a 99% increase since January 2013.
Figure 2
| Percent Change in Housing Unaffordability |
| % Change as of March 2023 Since: |
13-Jan |
14-Jan |
15-Jan |
16-Jan |
17-Jan |
18-Jan |
19-Jan |
20-Jan |
21-Jan |
22-Jan |
23-Jan |
| Adams |
126% |
96% |
88% |
67% |
52% |
44% |
35% |
35% |
31% |
14% |
0% |
| Arapahoe |
113% |
85% |
81% |
60% |
48% |
41% |
33% |
35% |
30% |
15% |
1% |
| Boulder |
110% |
85% |
81% |
62% |
47% |
40% |
34% |
34% |
31% |
14% |
1% |
| Broomfield |
100% |
77% |
74% |
58% |
45% |
40% |
32% |
33% |
30% |
13% |
0% |
| Denver |
127% |
95% |
87% |
63% |
50% |
43% |
34% |
35% |
29% |
13% |
1% |
| Douglas |
99% |
72% |
70% |
55% |
45% |
40% |
32% |
33% |
30% |
14% |
1% |
| El Paso |
108% |
88% |
91% |
78% |
64% |
55% |
41% |
39% |
33% |
13% |
0% |
| Jefferson |
114% |
87% |
82% |
62% |
49% |
42% |
33% |
33% |
27% |
13% |
1% |
| Larimer |
112% |
89% |
85% |
66% |
52% |
45% |
36% |
37% |
34% |
15% |
1% |
| Mesa |
102% |
82% |
88% |
77% |
67% |
59% |
45% |
42% |
37% |
17% |
1% |
| Pueblo |
127% |
107% |
112% |
96% |
78% |
67% |
52% |
48% |
37% |
17% |
1% |
| Weld |
141% |
109% |
97% |
76% |
61% |
51% |
40% |
40% |
34% |
15% |
1% |
Potential for Future Home Price Appreciation
The Wall Street Journal and Realtors.com began producing their Emerging Housing Markets Index in spring 2021 and has now published 6 quarterly estimates. The index identifies the top metro areas for home buyers seeking an appreciating housing market, strong local economies, and appealing lifestyle amenities. Three hundred of the most populous core-based statistical areas as measured by the U.S. Census Bureau are evaluated using two main areas: real-estate markets (50%) and economic health (50%). It utilizes 11 key indicators that are weighted and summed to create a single measure: real-estate supply (16.6%), real-estate demand (16.6%), medium home listing price trend (16.6%), unemployment (6.25%), wages (6.25%), regional price parities (6.25%), amenities (6.25%), small businesses (6.25%), and property taxes (6.25%).[ii]
Figure 3 shows the rankings of the Denver core-based statistical areas relative to all three hundred most populous areas included in the index. The Denver MSA is in the top third (ranked 100 or higher) of all metro areas in terms future home price appreciation. However, it has fallen 37 places. This index provides some perspective that while housing affordability is near record lows, as of the latest data, Winter 2023, Denver is generally ranked in the upper 25% of the 299 other MSA’s that are in the Emerging Housing Market Index and is viewed as moderately attractive given the potential for prices to continue to rise and for other quality of life amenities and economic factors.
Figure 3
| Wall Street Journal/Realtor.com Emerging Housing Markets Index, Ranked Relative to 300 Metropolitan Statistical Areas in Future Housing Appreciation |
|
Spring 2021 |
Summer 2021 |
Fall 2021 |
Spring 2022 |
Summer 2022 |
Fall 2022 |
Fall 2022 |
| Colorado Springs |
32 |
14 |
11 |
25 |
20 |
14 |
56 |
| Boulder |
31 |
46 |
20 |
6 |
14 |
33 |
43 |
| Denver-Aurora-Lakewood |
115 |
88 |
59 |
52 |
66 |
38 |
75 |
| Grand Junction |
60 |
39 |
90 |
126 |
50 |
43 |
39 |
| Fort Collins |
96 |
68 |
24 |
8 |
11 |
47 |
25 |
| Pueblo |
86 |
55 |
83 |
102 |
78 |
98 |
164 |
| Greeley |
153 |
140 |
93 |
108 |
113 |
168 |
137 |
| This table is ranked by comparison to 300 of the most populous metro areas in the U.S. Colorado metro areas that were ranked in the top ten in any given year are highlighted in orange. The index identifies the top metro areas for home buyers seeking an appreciating housing market, a strong local economy and appealing lifestyle amenities. |
Figure 4 shows the relative rank of other major MSA’s in Colorado. Though prices in Denver are historically high, among the other MSA’s in Colorado, it is still considered to have some potential for future home appreciation. Fort Collins is considered to have the most potential for future home price appreciation among the 7 MSA’s tracked in Colorado.
Figure 4
| Wall Street Journal/Realtor.com Emerging Housing Markets Index, Ranked Relative to Colorado Metropolitan Statistical Areas for Future Appreciation |
|
Spring 2021 |
Summer 2021 |
Fall 2021 |
Spring 2022 |
Summer 2022 |
Fall 2022 |
Winter 2023 |
| Colorado Springs |
2 |
1 |
1 |
3 |
3 |
1 |
4 |
| Boulder |
1 |
3 |
2 |
1 |
2 |
2 |
3 |
| Denver-Aurora-Lakewood |
6 |
6 |
4 |
4 |
5 |
3 |
5 |
| Grand Junction |
3 |
2 |
6 |
7 |
4 |
4 |
2 |
| Fort Collins |
5 |
5 |
3 |
2 |
1 |
5 |
1 |
| Pueblo |
4 |
4 |
5 |
5 |
6 |
6 |
7 |
| Greeley |
7 |
7 |
7 |
6 |
7 |
7 |
6 |
| This table is ranked by comparison to 7 of the most populous metro areas in Colorado. The index identifies the top metro areas for home buyers seeking an appreciating housing market, a strong local economy and appealing lifestyle amenities. |
Home Prices
Figure 5 shows home price indices for the counties in the Denver Metro area and El Paso, Larimer, Mesa, Pueblo, and Weld County. Home prices in the Denver Metro area have increased by a range of 100.7% to 139.4% since 2013. Since mid-2022, home prices in the Denver Metro have begun to taper off but are still near historic highs.
Figure 5
As shown in figure 6, since 2013, home prices have increased the most in Adams County (139.4%), and the least in Douglas County(100.7%).
Figure 6
| Percent Change in Housing Prices |
| % Change as of
Feb. 2023 Since: |
Adams |
Arapahoe |
Boulder |
Broomfield |
Denver |
Douglas |
Jefferson |
El Paso |
Larimer |
Mesa |
Pueblo |
Weld |
| Jan-13 |
139.4% |
120.4% |
115.1% |
103.7% |
136.8% |
100.7% |
103.7% |
114.2% |
118.2% |
104.1% |
140.3% |
158.0% |
| Jan-14 |
117.2% |
100.0% |
97.4% |
88.0% |
111.4% |
81.1% |
88.0% |
104.4% |
104.7% |
95.0% |
136.0% |
135.7% |
| Jan-15 |
91.2% |
81.5% |
81.9% |
73.4% |
88.4% |
67.8% |
73.4% |
95.3% |
87.0% |
90.1% |
125.0% |
102.2% |
| Jan-16 |
66.3% |
58.3% |
59.8% |
55.3% |
61.6% |
51.6% |
55.3% |
81.5% |
64.6% |
78.5% |
105.3% |
77.4% |
| Jan-17 |
50.7% |
45.1% |
44.0% |
42.4% |
48.1% |
42.2% |
42.4% |
66.7% |
49.5% |
69.6% |
85.9% |
61.2% |
| Jan-18 |
39.1% |
35.9% |
35.8% |
34.4% |
39.2% |
34.5% |
34.4% |
53.0% |
39.9% |
56.8% |
69.1% |
46.8% |
| Jan-19 |
31.6% |
30.1% |
30.9% |
28.6% |
30.6% |
28.6% |
28.6% |
40.1% |
33.1% |
44.5% |
53.1% |
37.7% |
| Jan-20 |
26.2% |
25.3% |
26.2% |
23.9% |
26.3% |
24.0% |
23.9% |
30.9% |
27.6% |
33.5% |
40.5% |
30.9% |
| Jan-21 |
15.4% |
15.0% |
17.0% |
14.9% |
15.8% |
15.7% |
14.9% |
18.0% |
19.4% |
21.6% |
21.4% |
19.1% |
| Jan-22 |
1.8% |
2.6% |
2.9% |
0.9% |
2.4% |
2.3% |
0.9% |
1.2% |
3.4% |
4.4% |
5.3% |
3.3% |
Hours of Work Needed to Afford a Home Mortgage
To measure the impact on the average homeowner in Denver, Common Sense Institute calculated the number of hours that one would have to work while earning the average hourly wage in November of each year from 2013 to 2023 to cover the monthly mortgage payments shown in figure 7. Over just the last 14 months, driven primarily by the increase in mortgage rates, an additional 25 hours of work per month is necessary to cover the mortgage on a newly purchased average priced home. These mortgage payments do not include escrow for insurance and property tax.
Figure 7
| Denver Metro Area Home Prices, Mortgage Rates, Monthly Payment, Wage Rates, and Hours Required to Cover Monthly Mortgage Payment |
| Date |
Average Home Price |
30-Year Mortgage Rate |
Mortgage Payment |
Average Wage Rate |
Hours of Work at the Average Wage Rate Required to Cover Mortgage Payment |
% Annual Change in Hours of Work Required |
| Jan-13 |
$218,976 |
3.41% |
$1,237 |
$27.03 |
46 |
|
| Jan-14 |
$241,001 |
4.43% |
$1,543 |
$28.03 |
55 |
20.26% |
| Jan-15 |
$266,794 |
3.67% |
$1,550 |
$28.35 |
55 |
-0.69% |
| Jan-16 |
$306,188 |
3.87% |
$1,810 |
$28.98 |
62 |
14.23% |
| Jan-17 |
$336,312 |
4.15% |
$2,043 |
$28.56 |
72 |
14.55% |
| Jan-18 |
$359,474 |
4.03% |
$2,148 |
$29.76 |
72 |
0.92% |
| Jan-19 |
$377,617 |
4.46% |
$2,374 |
$31.93 |
74 |
2.98% |
| Jan-20 |
$392,990 |
3.62% |
$2,231 |
$32.83 |
68 |
-8.59% |
| Jan-21 |
$428,669 |
2.74% |
$2,167 |
$33.37 |
65 |
-4.44% |
| Jan-22 |
$482,378 |
3.45% |
$2,672 |
$36.60 |
73 |
12.42% |
| Feb-23 |
$493,298 |
6.26% |
$3,776 |
$38.59 |
98 |
34.01% |
Freddie Mac, 30-Year Fixed Rate Mortgage Average in the United States [MORTGAGE30US], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MORTGAGE30US,
Colorado - May 2021 OEWS State Occupational Employment and Wage Estimates (bls.gov).
Figure 8 shows the evolution of monthly mortgage payments on an average price home and the required hours of work necessary to cover the payment. Required hours fluctuated around 60 from January 2007 until the summer of 2020, after which, they increased dramatically as home prices increased. Beginning in the spring of 2022, mortgage rates have increased as the Federal Reserve addresses inflation, having a dramatic impact on the cost of purchasing a home.
Since the start of the pandemic the hours of work required to afford a mortgage on an average priced home increased 44 percent from 68 hours to 98 hours.
Figure 8
Colorado Property Owners Are Set for an Historic Property Tax Increase in 2024
Property values in Colorado have increased dramatically in recent years, particularly for the years 2020 to 2022, which include the July 2020 to June 2022 assessment period for county property taxes. The subsequent increases in assessed property values have produced much higher residential property tax obligations. These higher property tax bills are problematic for many reasons. So much so that Governor Jared Polis and members of the State Legislature announced a plan (SB23-303) on May 1st to reduce the growth rate in property taxes from current law. These reductions would be coupled with reductions in TABOR refunds and spending increases to education.[iii]
Colorado homeowners and commercial property owners have started to receive their updated property assessments, showing they face increases anywhere from 30-65%. This new value will set the basis for how much property tax they will pay annually for the next two years, see Figure 9.
Prior to the repeal of the Gallagher Amendment in 2020 that established a formula for determining property tax increases, the recent surge in home prices would have resulted in a reduction in the tax rate, thereby softening the tax blow to homeowners. However, without the Gallagher formula, and the expiration of several temporary legislative fixes in 2021 and 2022, homeowners face property tax increases proportional to the increase in the value of their homes. Recent data released by several county assessors shows that the pending property tax increases will likely be larger than initially expected. And given home prices have declined nearly 5% since the end of the prior assessment period, some homeowners face paying taxes on an assessed value above their current home price.
Figure 9
| 2024 Colorado Property Tax Increase Estimates ($Billion) |
|
2022 Statewide Property Assessed Value |
2023 Estimated Increase in Assessed Value |
2024 Tax Increase |
|
|
Legislative Council December Forecast |
Estimate Based on Recent Assessor Data |
Based on CO Leg Council Dec Forecast |
Estimate Based on Recent Assessor Data |
| Total |
$150.166 |
23% |
35% |
$2.831 |
$4.404 |
| Residential |
$70.180 |
30% |
40% |
$1.764 |
$2.352 |
- Recent estimates released by county assessors of the increase in property values indicate that property taxes are set to increase by between $2.8 billion to $4.4 billion in 2024 (between 23% and 35%). Residential property taxes alone will increase by between $1.7 billion and $2.3 billion statewide. Revised estimates will be possible when the state Division of Property Taxation releases its next annual report.
- Property taxes primarily fund local governments and services, including County governments, schools, and fire districts. Though local governments face budget increases due to inflation, a 35% increase in property taxes is 2.5 times larger than the rate of inflation (14%) over the assessment period.
- See Figure 10. The median-priced home in four Denver Metro counties including Adams, Arapahoe, Douglas, and Boulder, faces a property tax increase of more than $1,000. Douglas County's projected increase is the highest at over $1,759, over $146 a month. Though these tax bills officially must be paid in 2024, property owners with a mortgage may already experience increases in their monthly payments in 2023 as mortgage companies request additional escrow funds to cover higher taxes and homeowner insurance premiums.
- This forthcoming property tax increase will compound with the impact of high inflation, which has already cost the average Colorado household $14,800 since 2020.
- The recently introduced property tax reform bill, SB23-303 proposes to reduce the projected increase in property taxes, coupled with reductions in future TABOR refunds. The additional revenue to the state would be use to “backfill” local governments for losses in property tax revenue and to increase spending for education. The following bullets provide several takeaways from the bill fiscal note. These are preliminary estimates given they rely on forecasts from Legislative Council Staff’s December 2022 projections, rather than the actual property values recently disclosed by county assessors.[iv]
- The growth rate in total property assessed value would change from 22.5% to 19.8% in FY23. Based on the most recent effective tax rate, this would reduce property tax revenue between FY23 and FY25 from $48.6 billion to $46.1 billion, or a difference of $2.5 billion.
- The increase in the TABOR cap growth rate of an additional 1% is projected to reduce TABOR refunds by $525 million between FY24 and FY25. This increase in the state spending limit is estimated to grow to $2.2 billion in FY2032, significantly reducing or even eliminating future TABOR.
- Revenue retained under the increased TABOR growth cap that is not used to backfill local governments, would transfer to the State Education Fund to increase spending on education through the school finance formula. It is estimated to increase state spending on education by a growing amount annually increasing from $94 million in FY23 to $330.4 million by FY26.
The Colorado Division of Property Taxation within the Department of Local Affairs will release full county-level data as part of its annual report in the next several months. As more information becomes available, CSI will update property tax related estimates with new values.
Figure 10
Methodology
To calculate the increase in property tax by county, CSI used Zillow monthly home price data, historical residential assessment rates, and 2021 average mill totals to estimate the median property tax payment in each county over time. CSI then applied ranges of local property value increases during the 2020–2022 assessment period released by county assessors[v] to their respective counties' median Zillow home prices, calculated an effective 2023 residential assessment rate based upon the temporary changes imposed by SB21-293, and held the latest available mill levies constant. The results, which are presented throughout this report's tables and findings, are CSI's projections of median property tax payments by county in 2024. See Figure 11.
Figure 11
| Change in Median Residential Property Tax Payment by County |
|
2023-24 Median Property Tax Increase |
2023-24 Median Tax Payment Increase |
| Douglas County |
43% |
$1,720 |
| Boulder County |
31% |
$1,168 |
| Arapahoe County |
38% |
$1,077 |
| Adams County |
34% |
$1,064 |
| Larimer County |
36% |
$989 |
| Jefferson County |
32% |
$986 |
| Denver County |
29% |
$717 |
| Weld County |
34% |
$698 |
| Mesa County |
41% |
$534 |
| El Paso County |
31% |
$515 |
| Pueblo County |
31% |
$401 |
Hours of Work per Year to Pay Residential Property Taxes
Figure 12 shows the hours of work required to pay annual residential property taxes earning the average hourly wage in each county. The largest increase occurs in Douglas County with an increase of 45 hours between 2023 and 2024.
Figure 12
| Hours of Work per Year Required to Pay Residential Property Taxes
(Based on Median Home Assessments and Average Wage Rates) |
|
Denver |
El Paso |
Arapahoe |
Jefferson |
Adams |
Larimer |
Douglas |
Boulder |
Weld |
Pueblo |
Mesa |
Average |
| 2007 |
61 |
45 |
81 |
79 |
92 |
76 |
103 |
94 |
69 |
56 |
43 |
73 |
| 2008 |
61 |
49 |
79 |
79 |
89 |
82 |
105 |
93 |
69 |
59 |
47 |
74 |
| 2009 |
60 |
50 |
79 |
79 |
89 |
86 |
104 |
93 |
71 |
59 |
47 |
74 |
| 2010 |
60 |
54 |
76 |
79 |
83 |
88 |
106 |
94 |
67 |
61 |
61 |
75 |
| 2011 |
59 |
55 |
75 |
77 |
82 |
91 |
104 |
93 |
66 |
63 |
62 |
75 |
| 2012 |
53 |
53 |
67 |
73 |
69 |
85 |
97 |
90 |
59 |
55 |
60 |
69 |
| 2013 |
52 |
53 |
65 |
71 |
67 |
78 |
93 |
87 |
53 |
50 |
57 |
66 |
| 2014 |
48 |
49 |
60 |
67 |
63 |
77 |
93 |
83 |
45 |
46 |
44 |
61 |
| 2015 |
48 |
47 |
60 |
66 |
63 |
72 |
93 |
83 |
46 |
46 |
42 |
61 |
| 2016 |
54 |
49 |
66 |
70 |
68 |
73 |
102 |
90 |
53 |
47 |
43 |
65 |
| 2017 |
54 |
47 |
67 |
70 |
68 |
71 |
103 |
91 |
49 |
44 |
44 |
64 |
| 2018 |
66 |
48 |
79 |
82 |
83 |
84 |
117 |
104 |
59 |
50 |
47 |
75 |
| 2019 |
62 |
46 |
74 |
77 |
78 |
85 |
110 |
98 |
54 |
47 |
47 |
71 |
| 2020 |
67 |
49 |
78 |
82 |
85 |
89 |
112 |
105 |
58 |
48 |
48 |
75 |
| 2021 |
64 |
48 |
75 |
79 |
82 |
84 |
108 |
101 |
60 |
44 |
47 |
72 |
| 2022 |
67 |
54 |
77 |
82 |
85 |
81 |
109 |
102 |
71 |
50 |
47 |
75 |
| 2023 |
64 |
54 |
74 |
79 |
81 |
79 |
105 |
98 |
74 |
49 |
46 |
73 |
| 2024* |
84 |
76 |
102 |
104 |
109 |
107 |
150 |
128 |
98 |
66 |
63 |
99 |
| % Chg. 2023 – 2024 |
31% |
40% |
38% |
33% |
34% |
36% |
44% |
31% |
33% |
33% |
35% |
35% |
| *2024 wage rates are assumed to be the same as 2023 wage rates |
Housing Supply Shortage
The Denver Metro area has failed to build enough housing to keep pace with demand. Standard housing market reports like those developed by the National Association of REALTORS® track inventory based on homes listed for sale. What those reports do not capture is the total stock of homes needed to maintain a healthy housing market.
CSI estimates the number of homes needed in the Denver Metro area to achieve a healthy housing market under two scenarios. Each scenario is intended to measure the difference between the actual number of homes in a county relative to the number of homes needed to maintain a more stable market for the local population. The first scenario averages the values of a housing deficit or surplus based on the low estimate of homes held off the market for purchase by the local population. The second scenario averages the values of a housing deficit or surplus based on the high estimate of homes held off the market for purchase by the local population.
Housing units and households – Each scenario uses both the estimate of housing units and households from U.S. Census Bureau’s American Community Survey (ACS) and the Colorado State Demography Office. We adjust the housing units by removing those that are considered uninhabitable by virtue of having no kitchen or lacking plumbing facilities.
Homes held off the market – Total homes held off the market reflect existing housing units not available for purchase by the local population. The estimate includes a range of second homes at the county level released by the National Association of Homebuilders,[vi] along with an estimate of uninhabitable homes from ACS.
Desired ratio of total units to local population – To estimate the target number of housing units, the value of 1.1 housing units per household was used to represent a healthy market. This value is derived from the historic average ratio of vacancy rates for the U.S. and was the basis for a housing supply report done for the state of Oregon.[vii] Figure 13 shows the forecasted change in population and the number of households in 2028. Population is forecasted to increase by 202,645 by 2028, resulting in another 81,661 households.
Figure 13
| Population, Households, Housing Units |
| Region |
Population |
Households |
| 2022 |
2028 |
Change |
2022 |
2028 |
Change |
| Denver Metro |
3,274,384 |
3,477,029 |
202,645 |
1,332,660 |
1,414,321 |
81,661 |
| Adams |
528,353 |
567,213 |
38,860 |
186,040 |
199,723 |
13,683 |
| Arapahoe |
661,724 |
704,187 |
42,463 |
254,509 |
270,841 |
16,332 |
| Boulder |
330,652 |
337,386 |
6,734 |
141,304 |
144,182 |
2,878 |
| Broomfield |
77,224 |
89,666 |
12,442 |
31,139 |
36,156 |
5,017 |
| Denver |
719,481 |
769,522 |
50,041 |
336,206 |
359,590 |
23,384 |
| Douglas |
373,864 |
404,492 |
30,628 |
138,468 |
149,812 |
11,344 |
| Jefferson |
583,086 |
604,563 |
21,477 |
244,994 |
254,018 |
9,024 |
|
|
|
|
|
|
|
| El Paso |
746,686 |
801,843 |
55,157 |
293,971 |
315,686 |
21,715 |
| Larimer |
367,097 |
395,713 |
28,616 |
157,552 |
169,834 |
12,282 |
| Mesa |
158,680 |
166,991 |
8,312 |
66,116 |
69,580 |
3,463 |
| Pueblo |
170,248 |
174,055 |
3,807 |
71,234 |
72,827 |
1,593 |
| Weld |
347,878 |
398,878 |
51,000 |
124,242 |
142,456 |
18,214 |
Using the scenarios discussed above, the deficit in housing units in the Denver Metro area in 2022 is estimated to have been between 66,105 and 135,956 units. Figure 14 presents summary results for counties considered in this study. CSI will continue to monitor new data as it becomes available and will amend the estimates and methodology as required.
Figure 14
| Housing Deficit/Surplus in Select Counties at the End of 2022 |
| Region |
Housing Stock 2022 |
Housing Deficit/Surplus in 2022 |
Deficit/Surplus as a Percent of 2022 Existing Stock of Housing Units |
| Scenario 1 |
Scenario 2 |
Scenario 1 |
Scenario 2 |
| Denver Metro |
1,399,821 |
(66,105) |
(135,956) |
4.7% |
9.7% |
| Adams |
194,194 |
(10,450) |
(20,140) |
5.4% |
10.4% |
| Arapahoe |
270,269 |
(9,691) |
(23,178) |
3.6% |
8.6% |
| Boulder |
144,766 |
(10,669) |
(17,893) |
7.4% |
12.4% |
| Broomfield |
32,338 |
(1,915) |
(3,528) |
5.9% |
10.9% |
| Denver |
360,125 |
(9,702) |
(27,672) |
2.7% |
7.7% |
| Douglas |
145,007 |
(7,308) |
(14,544) |
5.0% |
10.0% |
| Jefferson |
253,122 |
(16,371) |
(29,002) |
6.5% |
11.5% |
|
|
|
|
|
|
| El Paso |
303,974 |
(19,394) |
(34,562) |
6.4% |
11.4% |
| Larimer |
164,655 |
(8,653) |
(16,869) |
5.3% |
10.2% |
| Mesa |
69,626 |
(3,102) |
(6,576) |
4.5% |
9.4% |
| Pueblo |
73,480 |
(4,877) |
(8,544) |
6.6% |
11.6% |
| Weld |
131,051 |
(5,615) |
(12,155) |
4.3% |
9.3% |
To cover the 2022 deficit and new demands for housing due to population growth by 2028, between 155,932 and 225,784 new housing units need to be built. New housing demand will occur in counties with deficits and some with surpluses, so merely adding the 2022 housing deficit with new demand for housing does not accurately depict the number of new housing units required to be built. In counties with surpluses a portion of the surplus homes will be occupied by the new demand.
Building Permits and the Housing Supply Deficit
To erase the estimated deficit and meet new population-driven demand for housing in the Denver Metro area by 2028, an additional 25,989 to 37,631 permits per year are needed, see Figure 15. CSI is tracking building unit permits by county on a quarterly basis to evaluate whether the level of permit issuance is sufficient to close the existing housing deficit and meet new demand for housing as the population grows. Currently, in the Denver Metro area, there is a projected deficit of 4,869 to 16,511 permits for 2023. Among the other counties we are following, Mesa County is issuing more permits than required to close the housing deficit.
Figure 15
| Permits Required to Close the 2022 Deficit and New Housing Demand in 2028 |
| Region |
Number of Permits Required to Close the Deficit Plus New Demand for Housing in Deficit Counties by 2028 |
Number of Permits Required to Close the Deficit Plus New Demand for Housing in Deficit Counties per Year by 2028 |
Permits Issued in 2022 Actual |
Permits Issued per Year 2023 Projected |
Deficit/Surplus in Permitted Units Issued in Deficit Counties in 2023 Projected |
| Scenario 1 |
Scenario 2 |
Scenario 1 |
Scenario 2 |
Scenario 1 |
Scenario 2 |
| Denver Metro |
(155,932) |
(225,784) |
(25,989) |
(37,631) |
24,568 |
21,120 |
(4,869) |
(16,511) |
| Adams |
(25,501) |
(35,191) |
(4,250) |
(5,865) |
2,811 |
2,276 |
(1,974) |
(3,589) |
| Arapahoe |
(27,656) |
(41,143) |
(4,609) |
(6,857) |
4,329 |
3,332 |
(1,277) |
(3,525) |
| Boulder |
(13,834) |
(21,058) |
(2,306) |
(3,510) |
1,621 |
1,732 |
(574) |
(1,778) |
| Broomfield |
(7,433) |
(9,047) |
(1,239) |
(1,508) |
538 |
212 |
(1,027) |
(1,296) |
| Denver |
(35,424) |
(53,394) |
(5,904) |
(8,899) |
8,296 |
8,404 |
2,500 |
(495) |
| Douglas |
(19,786) |
(27,022) |
(3,298) |
(4,504) |
4,767 |
3,848 |
550 |
(656) |
| Jefferson |
(26,298) |
(38,929) |
(4,383) |
(6,488) |
2,206 |
1,316 |
(3,067) |
(5,172) |
|
|
|
|
|
|
|
|
|
| El Paso |
(43,281) |
(58,449) |
(7,213) |
(9,741) |
8,683 |
5,432 |
(1,781) |
(4,309) |
| Larimer |
(22,162) |
(30,379) |
(3,694) |
(5,063) |
2,597 |
3,484 |
(210) |
(1,579) |
| Mesa |
(6,912) |
(10,386) |
(1,152) |
(1,731) |
969 |
2,560 |
1,408 |
829 |
| Pueblo |
(6,629) |
(10,296) |
(1,105) |
(1,716) |
497 |
296 |
(809) |
(1,420) |
| Weld |
(25,651) |
(32,190) |
(4,275) |
(5,365) |
6,137 |
4,844 |
569 |
(521) |
Figure 16 shows the number of needed housing unit permits in the Denver Metro area to close the deficit by 2028 for 2 scenarios, and the number of permits issued monthly from January 2022 through February 2023. The red line shows the average monthly required permits to close the 2022 deficit and meet new housing demand by 2028 for scenario 1. The blue line is for scenario 2. In scenario 1, enough permits were issued on average from January 2022 through September to cover the housing deficit and meet new demand for housing by 2028. However, in the last few months of 2022 and the first few months of 2023, permitting has dropped off and will not be sufficient to cover the housing deficit and meet new demand for housing by 2028. In scenario 2, enough permits have been issued in only 1 month out of the last 14 to cover the housing deficit and new housing demand by 2028. Similar graphs for all counties in this study are provided in Appendix A.
Figure 16
Types of Permits Issued
Figure 17 shows the number of housing unit permits issued in total, and the percentage of each type, issued from 2012 through November 2022. Annual permitted units issued have increased from 5578 in 2012 by 41 percent to 7,839 in 2022. The percentage share of permitted units issued in 2022 was 41.8 percent single-family and 58.2 percent multi-family in 2022. In 2023, through March, 38.7% are for single-family and 61.3% are for multi-family. In Appendix B, figure 17 is reproduced for all counties individually.
Figure 17
| Denver Metro Area Permits by Percentage of Type Issued |
|
Total 2022 |
% Share in 2022 |
Total YTD 2023 |
% Share in 2023 |
2023 Annualized |
% Share in 2023 |
| Denver Metro Total Units |
24,568 |
NA |
5,280 |
NA |
21,120 |
NA |
| Denver Metro Single-Family Units |
10,263 |
41.8% |
1,178 |
38.7% |
8,176 |
38.7% |
| Denver Metro Multi-Family Units |
14,305 |
58.2% |
2,920 |
61.3% |
12,944 |
61.3% |
Going Forward
As shown in
figure 18, many home builders are re-evaluating their plans for new housing. The NAHB/Wells Fargo Housing Market Index (HMI) (blue line) reflects builder confidence in the market for newly built single-family homes, which fell 63.3% from November 2020 to November 2022 before rebounding 43% from January 2023 to March 2023.
[viii] Despite the recent increase in the HMI, it is still 44.4% below November 2020.
The housing deficit remains and if builders reduce annual production, which looks increasingly likely based on the HMI, the deficit will not decrease. If population growth continues as forecasted, absent sufficient new housing units, the deficit will grow. Developers might consider changes to the mixture of housing they build, perhaps transition to building higher density and less expensive housing so that the deficit can be erased even in a high interest rate environment.
Increased property taxes are increasing the cost of owning a home in Colorado and making housing less affordable. For those on a fixed income (retirees for example) these increases could prove to have crucial impacts on their budgets. Property taxes are often cited as the reason people find a state attractive or unattractive and influences their decisions for relocation or staying put.
Figure 18
Appendix A
Figure 19
Figure 20
Figure 21
Figure 22
Figure 23
Figure 24
Figure 25
Figure 26
Figure 27
Figure 28
Figure 29
Figure 30
Figure 31
Appendix B
| Denver Metro Area Permits by Percentage of Type Issued |
|
Total 2022 |
% Share in 2022 |
Total YTD 2023 |
% Share in 2023 |
2023 Annualized |
% Share in 2023 |
| Adams Total Units |
2811 |
|
569 |
|
2,276 |
|
| Adams - Units in Single-Family Structures |
2046 |
72.8% |
341 |
59.9% |
1,364 |
59.9% |
| Adams - Units in All Multi-Family Structures |
765 |
27.2% |
228 |
40.1% |
912 |
40.1% |
| Arapahoe - Total Units |
4329 |
|
833 |
|
3,332 |
|
| Arapahoe - Units in Single-Family Structures |
1774 |
41.0% |
332 |
39.9% |
1,328 |
39.9% |
| Arapahoe - Units in All Multi-Family Structures |
2555 |
59.0% |
501 |
60.1% |
2,004 |
60.1% |
| Boulder - Total Units |
1621 |
|
433 |
|
1,732 |
|
| Boulder - Units in Single-Family Structures |
648 |
40.0% |
234 |
54.0% |
936 |
54.0% |
| Boulder - Units in All Multi-Family Structures |
973 |
60.0% |
199 |
46.0% |
796 |
46.0% |
| Broomfield - Total Units |
538 |
|
53 |
|
212 |
|
| Broomfield - Units in Single-Family Structures |
179 |
33.3% |
8 |
15.1% |
32 |
15.1% |
| Broomfield - Units in All Multi-Family Structures |
359 |
66.7% |
45 |
84.9% |
180 |
84.9% |
| Denver - Total Units |
8296 |
|
2,101 |
|
8,404 |
|
| Denver - Units in Single-Family Structures |
1323 |
15.9% |
362 |
17.2% |
1,448 |
17.2% |
| Denver - Units in All Multi-Family Structures |
6973 |
84.1% |
1,739 |
82.8% |
6,956 |
82.8% |
| Douglas - Total Units |
4767 |
|
962 |
|
3,848 |
|
| Douglas - Units in Single-Family Structures |
3219 |
67.5% |
507 |
52.7% |
2,028 |
52.7% |
| Douglas - Units in All Multi-Family Structures |
1548 |
32.5% |
455 |
47.3% |
1,820 |
47.3% |
| Jefferson - Total Units |
2206 |
|
329 |
|
1,316 |
|
| Jefferson - Units in Single-Family Structures |
1074 |
48.7% |
260 |
79.0% |
1,040 |
79.0% |
| Jefferson - Units in All Multi-Family Structures |
1132 |
51.3% |
69 |
21.0% |
276 |
21.0% |
| Table cont’d– Denver Metro Area Permits by Percentage of Type Issued |
|
Total 2022 |
% Share in 2022 |
Total YTD 2023 |
% Share in 2023 |
2023 Annualized |
% Share in 2023 |
| El Paso - Total Units |
8683 |
|
1,358 |
|
5,432 |
|
| El Paso - Units in Single-Family Structures |
3499 |
40.3% |
546 |
40.2% |
2,184 |
40.2% |
| El Paso - Units in All Multi-Family Structures |
5184 |
59.7% |
812 |
59.8% |
3,248 |
59.8% |
| Larimer - Total Units |
2597 |
|
871 |
|
3,484 |
|
| Larimer -Units in Single-Family Structures |
1395 |
53.7% |
303 |
34.8% |
1,212 |
34.8% |
| Larimer - Units in All Multi-Family Structures |
1202 |
46.3% |
568 |
65.2% |
2,272 |
65.2% |
| Mesa - Total Units |
969 |
|
640 |
|
2,560 |
|
| Mesa - Units in Single-Family Structures |
668 |
68.9% |
120 |
18.8% |
480 |
18.8% |
| Mesa - Units in All Multi-Family Structures |
301 |
31.1% |
520 |
81.2% |
2,080 |
81.2% |
| Pueblo - Total Units |
497 |
|
74 |
|
296 |
|
| Pueblo - Units in Single-Family Structures |
497 |
100% |
74 |
100% |
296 |
100% |
| Pueblo - Units in All Multi-Family Structures |
0 |
0.0% |
0 |
0% |
0 |
0% |
| Weld - Total Units |
6137 |
|
1,211 |
|
4,844 |
|
| Weld - Units in Single-Family Structures |
3319 |
54.1% |
585 |
48.3% |
2,340 |
48.3% |
| Weld - Units in All Multi-Family Structures |
2818 |
45.9% |
626 |
51.7% |
2,505 |
51.7% |
[i] https://commonsenseinstituteco.org/
[ii] https://www.wsj.com/articles/see-the-full-rankings-for-wsj-realtor-coms-summer-emerging-housing-markets-index-11658779946?mod=article_relatedinline
[iii] https://www.cohousedems.com/news/gov.-polis%2C-legislative-leaders-announce-plan-to-cut-property-taxes%2C-saving-coloradans-money
[iv] https://leg.colorado.gov/sites/default/files/documents/2023A/bills/fn/2023a_sb303_00.pdf
[v] https://www.9news.com/article/money/markets/real-estate/metro-denver-property-value-increase-2023/73-3a3f538a-5ead-4dcd-9d67-27949fef6df4
[vi] The Nation’s Stock of Second Homes, Zhao, Na., May 2013, National Association of Home Builders
[vii] Implementing a Regional Housing Needs Methodology in Oregon: Approach, Results, and Initial Recommendations. August 2020. ECONorthwest.
[viii] https://www.nahb.org/news-and-economics/press-releases/2022/07/builder-confidence-plunges-as-affordability-woes-mount