A new study was released by real estate web site Trulia showing that Denver has seen the fourth highest increase in home rental prices in the country. Denver, with a 9% year-over-year increase in rents, is out-paced only by Houston (16.8%), Oakland, Calif. (11.6%), and Miami (10.8%). Additionally, Denver has experienced a 12.4% jump in the prices landlords are asking for properties, which may be in part attributed to the property taxes passed by voters this past November.
In fact, a recent article in the Denver Business Journal showed that property owners in Denver are facing an 18% property tax hike due to the passage of the referendums on the November ballot. While CNNMoney.com attributes the jump to “construction of apartments [not keeping] up with demand”. This out of whack (depending on who you ask, we suppose) supply and demand situation in Denver creates the perfect opportunity for landlords to pass property taxes onto renters.
And, really, why would landlords simply absorb the cost when they have their choice of renters? There are far more renters looking for housing, and and the cost is passed on to the cornucopia of eager renters. But, why so many renters?
The “Great Recession”, fueled by Clinton-era housing policies, produced many new renters. Many homeowners found themselves significantly underwater when housing prices plummeted. Some were able to ride out the storm, but some homeowners were unable to hang onto their houses, particularly if they lost their jobs. Finally, some homeowners chose to walk away from underwater homes in what’s now called a “strategic default”. For those whose homes went into foreclosure or for those who took advantage of the short sale process (strategic default or not), their ability to secure a new home loan has been greatly diminished, a condition that is helping to fuel the current supply/demand imbalance in the Denver apartment market.
Further, there are people for whom the rent vs. buy question is a no-brainer – they’d rather rent. Studies have shown that the next generation of homeowners isn’t all that confident that buying a house is the best choice for them. And, who could blame them, after seeing the chaos during the Great Recession?
Once again, like the TBD efforts to regulate and tax the “highest growth businesses”, Denver’s ability to hinder prosperity, particularly for the middle class, is almost unmatched nationwide.