According to the report, there are 43 affordable rental units for every 100 households earning $15,000 or less per year, and 53 units for every 100 households at an income of $10,000 or less. However, for households making $40,000 per year, there are 102 rental units for every 100 households.

Poor people face challenges

 “The greatest challenges in affordable housing are at the lowest income levels,” said Pat Coyle, Director of the Colorado Division of Housing. “The market is doing well at housing families with moderate incomes, but a large number of families with very low incomes in Colorado are paying much more than they can afford for housing.”

 Units are considered affordable if the household pays 30 percent or less of monthly income to rent.

 The availability of affordable rental units varied across the state. In the metro Denver area, there were 42 units affordable to every 100 households earning $10,000 or less, and 38 units affordable to households earning $20,000 or less. Affordable rentals were more accessible in the Mesa County area where there were 58 units affordable to households earning $10,000 or less, and 46 units affordable to households earning $20,000 or less.

 For households earning $35,000 in all areas except the Mesa County region, there were at least 100 units affordable to every 100 households. In the Mesa County region there were 84 units for every household earning $35,000.

Mismatch at low-end

 “We see such a mismatch at the low end of the income scale because it’s really not feasible for developers to construct market rate rental housing that can serve households making $15,000 per year. The cost of construction and land is too high.” said Ryan McMaken, spokesman with the Division of Housing. “The subsidized housing produced and owned by non-profits and housing authorities closes the gap somewhat, but there simply aren’t very many units available to very low-income households.”

 The report also listed rent burden statistics for 25 counties in Colorado. Households are rent burdened when paying more than 30 percent of income toward housing. Some counties showed large numbers of renter households paying more than 50 percent of income toward housing. In Teller County, 35.5 percent of renters were paying more than 50 percent of income toward rent, while in Eagle County, almost 31 percent of renters were paying more than 50 percent. Counties on the eastern plains showed the lowest rent burdens with Morgan County and Logan County with only 10 percent and 7 percent of renters paying more than 50 percent of income toward rent, respectively.

 The Housing Mismatch and Rent Burden Report is available at this  Division of Housing blog.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865

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The good news is that completed foreclosure sales in Colorado during 2009 fell 4 percent from 2008’s totals, and have fallen 18 percent since 2007, shows a state report released today. However, foreclosure filings were up 18 percent in 2009 from 2008, rising to a record 46,394.

According to the  report released  by the Department of Local Affairs’ Division of Housing, there were 20,437 completed foreclosures in the state during 2009, falling from 2008’s total of 21,306. In 2007, completed foreclosures reached 25,056.

While completed foreclosures fell, new foreclosure filings, which begin the foreclosure process for borrowers, rose from 39,333 in 2008.

Foreclosure alternatives rising

However, since 2007, in spite of increasing totals in new foreclosure filings, the total proportion of filings that ended in a solution other than foreclosure increased by 51 percent. In 2007, 37 percent of foreclosure filings ended in a result other than foreclosure such as short sale, loan modification, refinance or other solution. By 2009, this total had increased to 56 percent. The result has been fewer completed foreclosures even as new foreclosure filings have increased.

The falling totals in completed foreclosures were driven by significant declines in foreclosure activity in the Denver metro area. In Denver County, foreclosures fell 28 percent, and they fell 20 percent and 16 percent in Adams and Arapahoe Counties respectively. The only county in the Denver area to report increases in completed foreclosures during 2009 was Boulder County where they increased 6 percent.

“We’re cautiously optimistic that we won’t be seeing the sorts of increases in foreclosures that we saw during 2006 and 2007,” said Pat Coyle, a spokesperson with the Colorado Division of Housing. “Colorado’s Foreclosure Hotline and its network of housing counseling agencies have helped over 16,000 households avoid foreclosure since 2006, and we see that reflected in these numbers.”

As completed foreclosures fell quickly in the Denver area, foreclosure activity in other areas of the state increased. Completed foreclosures increased 11 percent in El Paso County and 4 percent in Weld County. Among metropolitan counties, Mesa County reported the largest increase with completed foreclosures growing 223 percent year-over-year to a total of 359.

Totals reported are county-wide totals, and individual neighborhoods may still be experiencing increases and decreases in foreclosure activity that are quite different from what is seen at the county level.

The report noted that while foreclosures were limited to Colorado’s Front Range in earlier years, Colorado’s smaller and more rural counties have become increasingly affected by foreclosures. Teller County, Park County, Morgan County, and Fremont County all reported increases of 30 percent or more in completed foreclosures. On the Western Slope, completed foreclosure totals in Mesa County and nearby counties such as Delta, Montrose, Moffat and Rio Blanco Counties have all increased since 2008.

Economy foreclosure driving force

“These changes in the geography of foreclosures shows that the problem has moved beyond overbuilding and adjustable rate mortgages, said Stephanie Riggi, manager of the Colorado Foreclosure Hotline call center. “We’re seeing unemployment and falling wages as much more of a driving factor behind foreclosures, and it’s not just the Front Range that’s affected.”

Completed foreclosures are opened foreclosures that have proceeded to foreclosure sale at auction. Filings denote the beginning of the foreclosure process, and once a foreclosure is filed, the borrower has approximately four months to work with the lender to avoid a completed foreclosure. It is during this period that borrowers work with lenders and housing counselors to work out loan modifications, short sales, or other ways of curing the foreclosure. According to the report, since the second quarter of 2009, the number of foreclosures cured in Colorado has increased 50 percent.

The full report is available on the Division of Housing at this link.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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Following an unexpected drop in the third quarter, metro Denver apartment vacancy rates rose during 2009’s fourth quarter to 7.7 percent, about a 4 percent increase from the 7.4 percent vacancy rate in the third quarter. Average rents also rose.

Still, last quarter’s vacancy rate was about a 2.5 percent  drop from 7.9 percent at the end of 2008, according to a report released today by the Apartment Association of Metro Denver and the Department of Local Affairs’ Division of Housing.

“In general, we expect to see vacancy rates rise from the third quarter to the fourth due to seasonal factors, said Gordon Von Stroh, professor of business at the University of Denver and the report’s author. “But at 7.7 percent, we still see softness in the market.”

However, an analysis by InsideRealEstateNews.com shows that the third-quarter-t0-fourth-quarter increase was the smallest percentage increase since 2005. it was the lowest fourth-quarter vacancy rate since it stood at 6.1 percent in 2007.

Apartment market mending

And Von Stroh and other experts say that there are reasons to believe that Denver’s apartment market, considered one of the healthiest in the country, will show signs of getting even better. Rising unemployment, however, could put the brakes on the apartment market,

“Unemployment went up in the fourth quarter and when you overlay the apartment vacancies with the unemployment rate, there is a pretty strong correlation,” Von Stroh said. (See chart below.)

Still, he said demand will increase for multi-family units because of immigration, “natural population growth,  and because rents are not high enough to justify construction of new apartment communities, he said.

“It’s simple supply and demand,” Von Stroh said. “My only concern is a lack of job growth and rising unemployment. Otherwise, I am quite bullish.”

Unemployment, slow wage growth, concerns

Pat Coyle, head of the Colorado Division of Housing, agrees. “In December, unemployment in the Denver area rose for the first time since August,” and personal income growth has been less than 1 percent, Coyle said.  “This means that many renters will be doubling up and looking for ways to cut costs.”

Also, last year showed a positive absorption of 4,069 units, compared to negative absorption of 3,554 units in 2008. That means, in short, that more units were rented than vacated last year.

Absorption rate key

Terrance Hunt, an apartment broker with Apartment Realty Advisors, said the absorption number in some ways speaks more to the market than the vacancy rate.

“I think the absorption rate is extremely important,” Hunt said. “It shows that last year was a good, solid year, despite the tough economy.”

And much like the housing market, the Denver-area apartment market never became as over-built like other markets, such as Phoenix and Las Vegas, he noted. “One reason is that we never fully recovered from the tech-wreck in 2001,” said Lauren Brockman, principal of Orion Real Estate Services.

Rents steady

The average monthly rental rate was $875.39 in the fourth quarter, down from $888.81 a year earlier and down from $880.99. Brockman said rates typically need to rise about 25 percent before justifying new construction. The highest average rent was reported in Douglas County at $1027.15, and the lowest was reported inArapahoe County at $847.95. Average rents for all counties were: Adams, $809.39; Arapahoe, $847.95; Boulder/Broomfield, $943.23; Denver, $902.66; Douglas, $1027.15; and Jefferson, $848.75. When compared to the fourth quarter of 2008, only Douglas County and Jefferson County reported increases in overall average rents. Adams, Arapahoe, Boulder/Broomfield, and Denver counties all reported decreases in overall average rents.

“I think the public needs to know that they are really getting a good deal, as far as apartment rental rates,” Brockman said. “I think renters sometimes think they are paying too much.” But the reality, he said, is today’s market rates are very close to what you would pay for subsidized, government-backed housing, based on incomes and rents.

Foreclosures not helping apartments

Something else that might surprise many people is that rising home foreclosures are not helping the traditional apartment market. Von Stroh noted that if a family loses their home in a foreclosure, instead of leasing an apartment in a building, they will rent another home. “They need room for their kids and their dog,” he said.

Not only that, they don’t move far from the house that they lost, which Brockman argues is good for society, even if it doesn’t help fill vacant units in apartment buildings.

“The truth is, what happens after a single-family home foreclosure, is the family moves into a rental house down the street,” Brockman said. “That is good for society, because their children can stay in the same school.”

The irony is that they may be moving into a home that itself was a foreclosure, and now is owned by an investor.

Greg Bacheller, franchise  owner of Real Property Management Colorado, manages about 1,000 rental properties in the Denver area. About 50 percent of them are single-family homes.

Reluctant landlords abound

Typically, they are “reluctant landlords,” who can’t sell their home. Rather than take a $2,000 loss each month on their mortgage, they rent it out, absorbing a loss of a couple hundred dollars each month. “None of these people bought their homes with the idea of renting them out,” Bacheller said.

Other homes are foreclosures purchased by investors. “They can’t fix and flip anymore, so they fix and rent,” Bacheller said. However, as more homes are foreclosed, it will increase the size of the pool of home rentals, making it more difficult to raise rents. “The supply of (home) rentals will be increased by foreclosures,” he said. “But I do think that 2010 will be the year that supply and demand become very close to being balanced.”

Hunt said that the other thing to consider is that even with the extension of the federal tax credit until April 30 for first-time home buyers, it is harder to quality than ever, which means that home-buying will not rocket. That means that not only will more people be forced to rent, but fewer renters will become buyers.

“A couple of years ago, during the subprime craze, the main reason people left apartments was to buy a home,” Hunt said. “Now my mortgage broker friends tell me, “We have these federal tax credits and great interest rates, but no one can qualify.”

The highest vacancy rates were found in Denver County where rates rose year-over-year to 8.8 percent, and were lowest in Douglas County where vacancies fell year-over-year to 5.5 percent. During the same period, vacancy rates rose in Denver and Arapahoe Counties, and fell in Adams County, Douglas County, and in the Boulder/Broomfield area. Jefferson County reported no change.  Fourth quarter vacancy rates by county were Adams, 6.3; Arapahoe, 8.6; Boulder/Broomfield, 5.8; Denver, 8.8; Douglas, 5.5; Jefferson, 7.3.

In general, a vacancy rate of 5 percent is considered the “equilibrium” rate. Rates below 5 percent indicate tight markets.

DU Professor Gordon Von Stroh notes that unemployment and apartment vacancy rates

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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Ron Sims, the No. 2 executive at HUD, addresses an affordable housing conference on Wednesday in Breckenridge.

BRECKENRIDGE In the past, major federal departments such as the U.S. Department of Housing and Urban Development, the Federal Transit Administration, and the Environmental Protection Agency, were separate “silos” that kept to their knitting, focusing on the mandates of their respective agency.

But under the Obama Administration, that has changed, top officials at HUD, the FTA and the EPA told more than 500 affordable housing leaders who gathered at the Beaver Run resort in this mountain community on Wednesday for the 21st Housing Colorado NOW! conference called Pathways to Progress. People from as far away as Nigeria attended, as well as Denver City Council member Rick Garcia.

Sims a keynote speaker

One of the keynote speakers was Ron Sims, deputy director of HUD, the No. 2 official at the agency with a $40 billion annual budget and 8,500 employees.  Suns us the former executive for King County, Washington, the 13th largest county in the U.S.,  Sims helped fund 5,632 affordable housing units during a 12-year period.

Sims, at a luncheon on Wednesday, was joined by Terry Rosapep, regional administrator for Region 8 for the Federal Transit Authority, and Carol Rushin, acting regional administrator for Region 8 for the EPA. Region 8 includes Colorado. (A new HUD regional administrator could be named by the  end of the year, several people told me during the housing conference.)

Sims began meeting individual groups at 7 a.m. on Wednesday, discussing a wide-variety of housing issues, including rural, urban, resorts, and “everything in between.”

HUD a community builder

Over and over again, Sims emphasized that HUD is “no longer a housing agency, but is a community building agency.”

And to to that, he wants people to be wiling to “roll up their sleeves,” and get to work,. He said if you are comfortable with the way things are, he said you are probably not up to the task. And what happens in Washington, D.C., pales compared to what happens at the local level.

“All extraordinary things happen from the bottom up, not from the top down,” he said at one point.

And that means working with other agencies, no longer creating “silos” for groups that don’t go beyond their own agency missions.

Rosapep, who described Sims as “wickedly smart and a nice guy,” agreed.

Agencies working together

Although the headquarters for HUD and the Department of Transportation are near each other in Washington, D.C, he said the two agencies did little together in the past.

That has all changed, he said.

At first blush, it might not seem like the transportation department does not have much to do with housing, he admitted.

“Our top priority is safety issues,” he said. “It’s also economic, livability and sustainability.”

He said one goal is to keep the cost of transportation as low as possible to help make the U.S. less dependent on foreign oil. But transportation is way to meet an end, not an end in itself, he said.

If consumers can spend less on transportation, they will have more money for things such as housing, he noted. (After the luncheon forum, Sims noted that is especially true in resort towns such as Summit County and the Vail Valley. He said people who work for the rich in these communities might be commuting to work for more than two hours each day and spending 30 percent or more of their gross income on transportation, leaving less money for housing and health. He said he will bring that to the attention of the Federal Housing Administration when he returns to Washington, D.C.)

Rosapep said that the “livability” is the “umbrella” that breaks down the silos between agencies, making them more integrated. For example, he said increasingly the transportation department wants to work with HUD to “integrate planning” on public-private partnerships such as transit oriented developments. Dozens of TODs, for example, could be built around FasTracks light rail stops.

Rushin, of the EPA, said this was the first housing conference she had attended.

Smart-growth sought

But there are many synergies between the EPA and housing, she said.

“We look at smart-growth patterns,” she said. “At the federal level, we don’t want to subsidize sprawl, even though that might be the easier route.”

She said for “25 years the mission of EPA,” has been to fight for “cleaner water, cleaner air and cleaner land,” she said. But now, it is looking to see what it can do to help the environment inside of housing, as well as outside.

“This is a new era for us,” she said.

One example: She is looking at efforts to reduce radon in homes, at the same time it is weatherizing them.

Pat Coyle, recently named the executive director of the Colorado Division of Housing, moderated the said that almost everyone attending the conference, speaks more than one language, evne if they don’t realize it.

“I speak housing,” he said, and urged audience members to become increasingly conversant in the various aspects of housing – especially now with money flowing from Washington to the local level. Following the lunch, Coyle told me he doesn’t think most people realize the huge impact housing has on the economy.

Spiritual side of Sims

David Zucker, who heads Zocalo Community Development in Denver, following the luncheon said that Sims had almost a “spiritual” aspect to his talk, and he indeed he did. Sims didn’t spend much time on specific programs, but told of telling his brother that he was going to die of cancer, and how he once danced with a young girl in a housing project in Seattle, who told her dream was to be a ballet dancer. Years later, she introduced herself after he gave a speech, and she let him know she had realized her dream.

“I like the whole idea of taking down the silos separating the agencies, and having them work together,” Zucker said. “I don’t think has ever happened before. This is the first time I have ever heard of it. It seems like they can overlap and help each others in a lot of ways. It’s very motivating and energizing to hear this.  Of course, it’s not enough to just talk a good game – they also have to accomplish things.  For that, we have to wait and see.”

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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