Rents are spiking at double-digit rates across metro Denver, and while the gains aren’t as extreme as the rise in home prices, they are leaving tenants facing them feeling financially depleted and trapped in a predicament they can’t easily escape.
Sarah Wadsworth and her fiance were happy with their apartment at Infinity LoHi in northwest Denver. The rent of $1,900 a month, plus another $175 a month for two parking spots, was higher than the $1,700 they previously paid to live in Capitol Hill. Wadsworth said the trade-off was worth it to avoid break-ins and to keep her dog safe from the heroin needles on the sidewalk.
That sense of having made the right move all changed when it came time to re-sign the lease this spring.
“Then the sticker shock comes — they say we are raising your rent by $400 a month,” Wadsworth said. “I was freaking out. Two of our closest friends in the same building got increased by $500. They had a city view, but identical units otherwise.”
She tried to get the front office to explain what was going on. The staff understood the financial bind they were putting tenants in, she said, but the attitude was, “Yes this sucks for you, but we have somebody else waiting. We can make more money with someone else.”
Efforts to waive fees, like the $30 a month trash valet fee to have someone dump their bags down a chute right across the hall from their door, were rejected. Rents throughout the neighborhood were also going up. Unable to find something similar in size at a lower price, and with a wedding just two months away, the pair, in their mid-20s, decided to stay put. They will take the financial hit for another year but aren’t happy about it.
“I really feel like they have tried to squeeze everything out of us that they could. A year from now, I doubt we will be able to justify staying,” she said.
Average annual apartment rents in metro Denver rose 14.4% year-over-year in the first quarter solidly ahead of the 9.1% gain in overall consumer inflation measured in March, according to a survey from the University of Denver and the Apartment Association of Metro Denver. Average apartment rents are now at $1,765 a month, and higher in the more popular neighborhoods.
Apartment List puts annual apartment rent inflation at 15% in April in metro Denver. And a rent index from Zillow, which includes rental homes and apartments, is also tracking a 15% increase.
“That increase is an average over individual apartments in the market, so there are certainly a large number of units renting at an even-higher annual price jump,” said Rob Warnock, a senior research associate with the apartment search engine.
Hidden within the average are people getting hit with hikes so large and unexpected that they can blow apart budgets, derail life plans and crimp spending on a host of other items. Wadsworth’s increase was 21%. Adam Novinska, a Denver tech worker, faced a 26% increase on his Congress Park area apartment. Rents there shot up from $1,650 a month to $2,077 a month.
Pleas to property management that he had never been a day late on rent, never generated a noise complaint and only requested maintenance when absolutely necessary all fell on deaf ears, he said. Nor did the big rent hike come in exchange for anything of added value. His place is dated and average, hardly new, trendy or hip. The only justification he received was that his current rent payment was “under-market.”
“I basically had to swallow it because every other place I looked was as expensive — if not more — for a similarly-sized unit. I cut out a bunch of expenses and am still working to trim where I can to afford this,” he said.
Although big rent hikes are hitting young adults hard, they also impact retirees and others on a fixed income, individuals who have fewer options to make extra income or move away. Chicago native Beth Menzer moved to Denver in 1970, part of the influx of baby boomers who moved to Colorado in the 1970s, a transplanted “hippie” as she describes herself.
Her kids were born and raised here, and then she moved away to Milwaukee. After that marriage fell apart, she decided to move back in 2014 to be closer to family. But the Denver she once knew had changed drastically. Housing was way more expensive. She put her name on a list for affordable housing and in 2018 landed her current one-bedroom, 550-square-foot apartment in south Denver for $787 a month.
In February, she learned her rent would go up $70 a month, not big in the grand scheme of things. But it pushed her rent up to $914 a month, consuming about half of her Social Security and other retirement income. She also learned that her rent could go up to a limit of $1,065 next year, claiming more than 60% of her monthly income. Even affordable isn’t affordable anymore.
Driven away by the rising cost of living, Menzer’s son is moving out of metro Denver to Woodland Park, while her daughter has relocated to Anchorage. Menzer, 71, said it is only a matter of time before the market will become too costly for her to remain, but she doesn’t know where she will go.
“I love Colorado, but I am sad about what happened to it,” she said. “The American Dream is gone. Something has to change.”
Why the rise?
Many sources of inflation in the economy are linked to the pandemic, from supply-chain disruptions to the $4.6 trillion in fiscal support the federal government pumped into the economy. Consumers, unable to spend money on services, shifted more spending to goods. Manufacturing and supply-chain issues resulted in shortages for a range of consumer goods, from toilet paper at the start of the pandemic to most recently, baby formula. Chip shortages caused auto prices, both new and used, to surge. And energy costs, which rose during the pandemic rebound and again after Russia’s invasion of Ukraine, are a key driver.
But apartment living fell out of favor during the pandemic as young adults returned home and remote workers sought more space to stretch out. If they could avoid it, people didn’t want to have to deal with faulty and virus-spreading ventilation systems, white knuckle elevator rides and crowded common areas filled with coughing strangers. It took a full year for the Zillow Rent Index for Denver to get back to just where it was in March 2020. That lull likely created a false sense of security regarding what was to come.
Warnock offers a few theories on why rents have spiked, and they all circle back to an undersupplied housing market, which was so damaged in the housing crash of the 2000s that all these years later it can’t provide enough homes and apartments. Home prices in metro Denver are up 24% year-over-year, according to the local Case-Shiller index, outstripping rent gains. Add to that a surge in interest rates as the Federal Reserve tries to combat inflation.
Between higher mortgage rates and higher home prices, a renter looking to buy a typical home in metro Denver at the end of March faced a payment that was 21% higher than at the start of the year, and 42% higher than in March 2021, according to an analysis by Zillow. Those costs only went higher in April, leaving would-be buyers like Novinska, who thought at the start of the year that he could be in his own place within 12 months, despairing.
Another discouraging thing about the rent hike for Novinska, who is turning 38, is that it leaves him with less disposable income to put aside for a down payment on a house.
“It’s less money I can save each month to try and come up with a down payment for a home, which becomes even more unaffordable the longer I rent,” he said. “I’m stuck in a place where I feel I’ll be perpetually renting as housing prices explode, where rent increases, and where saving is impossible.”
Renters who are stuck renting also contribute to the lack of enough apartments to meet demand, keeping vacancy rates low and allowing for price increases.
“It does create some shift among people who may have been wanting to get a home but no longer can. That does prop up the demand for apartment units, which is the next choice because that is what you can do,” said Ron Throupe, associate professor of real estate at the University of Denver’s Daniels College of Business and author of a monthly report on the local apartment market.
The rental market is also in a much different spot than it was during the housing boom in the ’00s. With credit easy to obtain, many renters became homeowners, pushing up home prices but leaving an excess supply of apartments behind. When the housing market collapsed, those facing foreclosure had the safety net of more restrained rents to fall back to. Now both home prices and rents are rising, and wages will be hard-pressed to keep pace.
High demand has pushed the apartment vacancy rate down to a tight 4.3% in metro Denver, according to the apartment association. The U.S. Census Bureau pegs Colorado’s rental vacancy rate at 3.4% in the first quarter, which is the fifth-lowest rate of any state. Nationwide rental vacancies are at a 37-year low, while the vacancy rate for owned homes is at a 42-year low.
So supply remains tight, and landlords know they can lift rents and not have a unit go empty.
Warnock offers a third explanation. Denver is joining the ranks of “high-turnover” metros — places like San Francisco, Austin, and Nashville — that receive a high volume of inbound as well as outbound apartment searches. Higher rents are pushing current residents to look at more affordable options elsewhere, but the area remains popular with newcomers, who on average have a budget that is 8% higher than that of current residents.
With the inventory tight, landlords can capitalize on that gap, effectively renting to higher-income tenants moving in, even if it means pricing out existing residents, no matter how good they have been.
“This constant flow of renters in and out creates some liquidity in the market and showcases how Denver is both a popular destination for newcomers as well as an expensive metro that exports renters to other parts of the country,” he said.
Tenants who reached out to The Denver Post to discuss the big rent increases they faced described a feeling of being caught in a trap. Some mentioned that they would move to more affordable markets. Increasingly, metro Denver could become more like San Francisco and New York, places where young people come for a season, but move elsewhere because they can’t afford to stay.
Even those who watch the market closely argue such large rent increases aren’t sustainable, and moderation is coming.
“I expect everything to start slowing down by mid-summer on — home prices, rent escalations, you name it. It will slowly seep in here after the spring surge is done,” Throupe predicts.
But accepting that things will ease requires a degree of faith which is hard to come by with prices rising in so many areas — uncertainty reigns and the vice of higher costs feels strangling.
“I do feel pressure. I don’t want to move again and I don’t want to fight over these monster increases. What I am going to do next year?” Novinska asked.
