Apartment market held its ground
Predictions of mass delinquencies, rising evictions didn’t happen
The pandemic struck metro Denver’s apartment market with gale-force winds last year, flattening rent gains but not causing a surge in vacancies or leaving large numbers of tenants and landlords exposed to the elements.
“In terms of rent growth, 2020 was the slowest in 12 years,” said
Mark Williams, executive vice president of Apartment Association of Metro Denver, during a news call Wednesday to discuss the findings of the quarterly Denver Metro Area Apartment Vacancy and Rent Survey.
Metro Denver’s average apartment rent rose 0.5% to $1,510 a month in the fourth quarter, up from $1,503 a year earlier. Median rents slipped a little, coming in at $1,449 vs. $1,457 in late 2019. The last time rents were this soft in metro Denver was during the Great Recession in 2008-09, according to the survey, which was conducted by the University of
Denver’s Daniels College of Business and Colorado Economic Management Associates.
The pandemic disproportionately booted young service workers from their jobs, precisely the type of individuals more likely to rent an apartment than own a home. Colorado’s unemployment system also got logjammed last spring, delaying benefits for many. And although missed rent payments did rise last year, it wasn’t nearly as much as some predictions had called for.
Colorado’s rent collection rate remains stable at 94% in December and, as of Jan. 20, about 93.5% of January rents were collected, according to data from RealPage. Williams said rent collections ran about 2 percentage points behind the rates seen in similar months in 2019 in metro Denver.
Another reason rents didn’t fall more is counterintuitive. Builders added more than 11,000 new units in metro Denver last year, many of them luxury urban apartments that commanded a higher rent.
“In every building age category — buildings built in the 1950s, ’60s, ’70s, ’80s, ’90s, 2000s and 2010s — rents went down,” Williams said. But enough new inventory hit the market to drive the overall average rent up. Increased demand for larger apartments in the suburbs, the kind that offered tenants more room to spread out, also helped support rents.
Less than 5% of survey respondents said their tenants were not paying and not evicted. The new round of federal stimulus, which allocates $385 million for rental assistance to Colorado, should help out in that situation this year. Federal and state orders limited the ability of landlords to evict tenants during the pandemic. Even with a loosening of those restrictions in 2021, eviction filings
are running only at onetenth of the level seen in January 2020.
“A further erosion of rent payment next quarter would indicate that job loss, reduced work or other COVID-19 effects may be reaching a decision point for economic recovery. Likewise, a flattening of rent nonpayment would indicate an economic recovery may be starting,” said Ron Throupe, associate professor of real estate at Daniels College, in a separate release
Of the more than 11,000 new apartments added last year, 5,811 landed in the fourth quarter, reflecting supply constraints and construction delays during the pandemic. Tenants took on an additional 8,195 units last year, and the ability of the market to absorb the overhang will prove an early test in 2021.
But the market doesn’t appear glutted, outside a few now-out-of-favor areas such as downtown Denver. The apartment vacancy rate rose from 5.3% in late 2019 to 5.8% in late 2020, working out to an additional 21,000 available apartments.