Front Range Rents Are Spiking. Here's How That Hurts The Economy
Rent prices in the Denver area are going up faster than rents in San Francisco. The situation isn't any better in Fort Collins and Greeley. Each community experienced double digit growth in rental prices in 2014, and the trend is not showing signs of slowing down.
But maybe your rent is affordable. Or you bought your house decades ago. So why should you care if your neighbor down the street is paying a ton for her crappy apartment?
"So really, we should all care about this and here's the reason why," said Phyllis Resnick, the lead economist at Colorado State University's Colorado Futures Center.
"Perhaps you own a store [in a community where lots of people spend more than 30 percent of their income on housing]," said Resnick. "Then you don't have as much of a market for your goods and it's going to play back on you that way."
Or maybe you work in the service industry. People spend less on services when they are spending a lot on housing, said Resnick.
"So really we all have a stake in making sure we have a housing stock that matches the demand."
Resnick recently added up all the money residents in Adams County, just north of Denver, were not spending because more than 30 percent of their income was going to housing. It was a lot: $170 million.
Local businesses miss that cash. So do governments that rely on sales taxes to do things like repair local roads and maintain parks.
One of those not spending much these days is renter Mary Carroll. Her one bedroom apartment is part of a big complex of older buildings in the Denver suburb of Westminster.
Her dark one-bedroom apartment is stuffed with furniture, from when she owned a home. Carroll got foreclosed on in 2009. She had never missed a payment, but she had a balloon mortgage and was denied refinancing because she was self-employed.
So the graphic designer, now 62, was thrust into the rental market. First she lived in Broomfield. There she paid $750 but soon her rent rose by $300, pushing her to move. In 2012, she arrived at the place she lives now, paying $850 a month.
She had interviewed the owners about rent increases, and they said any increases were typically minimal. Then the complex was sold, and the new owners started hiking the rent. After the latest increase, her rent is $1,200, a 40 percent increase in three years.
"Which is now 70 percent of my income," said Carroll.
Like many who are on a tight budget, Mary Carroll has calculated her expenses down to the last dollar. After paying her utilities, car payment, insurance, and things like gas and groceries, she has roughly $73 to spare. She's saving wherever she can, using a "smart phone that's not smart" and cutting the cable cord too. One of the last things to go might be the black tea she loves. She used to buy it at a specialty shop in Boulder.
"It's kind of expensive so I won't be able to have that next year," she said
It's this kind of cutting back that hurts the local economy, and ultimately could slow Front Range growth. That's not all, though. High rents and home prices could also make it harder to attract new workers in the future.
Carol Cochran is a long-time resident of Fort Collins and the co-owner of the new Horse and Dragon brewery. The tall, dark-haired businesswoman is passionate about her business and her workers. They're all renters, and she wants to keep them around. She worries that when people start weighing the costs of living here, they are either not going to come, or if they come, they aren't going to stick around. That hurts the creative economy.
"Especially when you're in a business like we are where you are trying to draw, creative, dynamic people who do have other options in other states or other communities," Cochran said.
Economist Phyllis Resnick said the problem probably will not fix itself. It takes policy solutions.
Front Range cities seem to realize this, although the pace of action is slow.
Denver Mayor Michael Hancock recently announced a new fund to support affordable multifamily developments. Fort Collins is working on a five-year plan to increase affordable housing. Longmont and Boulder have been holding forums on the issue. Boulder also recently approved a linkage fee whose funds will go toward building more affordable housing.
At the state level, though, efforts to create a statewide fund for affordable housing failed.
As cities like Seattle, San Francisco, and Boston have seen, the tide of rising prices is hard to stop.
In the meantime, renters like Mary Carroll hope for a pay raise, or something that helps cover the rising costs of living in Colorado's Front Range.