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How Denver pushed rents down citywide

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The simple solution may surprise you, but it didn’t help make home prices more accessible

The new Botanica Eastbridge Apartments in the Stapleton neighborhood of Denver

Communities across the country are facing a debilitating housing shortage: Too many residents, not enough apartments.

This shortage is creating an affordability crisis for many cities, especially in the West. But at least one U.S. city is finally starting to see rents go down after embarking upon a radical strategy: Building more housing.

According to the new Denver Metro Area Apartment Vacancy and Rent Survey, published by the Apartment Association of Metro Denver, the city’s average apartment rent fell from $1,371 in the third quarter to $1,347 in the fourth quarter. It was the largest quarterly drop in the 36 years that the study has been conducted.

In addition, vacancy rates—which show the number of available apartments and can help illustrate affordability—increased from 5.1 percent to 6.2 percent, which is a more “healthy” percentage.

How did Denver do it? A total of 9,962 new apartment units were built in the city during 2016, a record-breaking number.

“In 2010, only 498 new apartment units were built in the entire city. Fast forward to 2016 and we’re seeing that same number being delivered every three weeks in Denver,” said Teo Nicolais, a real estate expert and Harvard University professor quoted in the study. “That’s the most apartments we’ve built during one year in Denver’s entire history.”

And more affordable units are on the way: In September of 2016, the city council approved a $150 million affordable housing fund that will be paid for with property taxes and development fees.

But according to the Denver Post, even the rents for luxury apartments have gone down as the flood of new units brought competition to the market:

Developers, however, have focused heavily on building luxury units in the urban core since the recession. The need to lease units in the new buildings and satisfy investors and lenders provides landlords with a strong incentive to offer discounts to tenants, putting downward pressure on rents.

It’s not the same story for home prices, however. During 2016, the Denver Metro Association of Realtors says the median price of single family homes in Denver increased by 8.5 percent to $337,450. That’s due to a historically low supply of housing stock that’s helping to drive prices up. So, more people who might have bought homes this year will likely continue to rent instead. Which means Denver will need to keep building even more apartments to house those would-be homebuyers.