This is outdoor pool in the common area of the Union Denver apartments on June 22, 2017, in Denver. Union Denver is a 580-unit high-end apartment complex in the heart of LoDo behind Union Station.
A common misconception about renters is that they rent because they don’t have any other option. Given enough time and a high enough income, they will eventually buy a home or condo. But in metro Denver, it appears that isn’t the case for a growing number of people.
Metro Denver had the largest percentage increase the past decade of any major metro in the number of households who rented and made $100,000 or more a year, according to a new study from Apartment List.
The number of renter households in metro Denver who clear that kind of income, which should be enough to buy a home or condo, shot up 146 percent between 2008-17. Nationally, the increase was 48 percent.
“I do believe the American Dream is evolving. It no longer is about owning the single-family home with a white-picket fence. It is about flexibility and being able to pick up and move,” said Nancy Burke, vice president of government affairs with the Apartment Association of Metro Denver.
A study last month from Zillow found that a little more than half the households buying a home in metro Denver earned an income of $100,000 or more. That kind of earning power should be enough to obtain a home, so why are so many people still handing over money to a landlord every month?
Much of the new housing supply this decade has come in multi-family and much of that has come in denser urban neighborhoods where millennials, and increasingly retiring Baby Boomers, are gravitating toward, said Igor Popov, chief economist with Apartment List.
“There is more rental supply for high earners today, especially in places like Denver,” he said. “People with higher incomes are clustering more in city centers than they used to. They are preferring to be closer to the action. We are seeing higher earners locating in downtowns.”
And it isn’t just young people who see value in renting to be closer to the action. Burke said some older adults who don’t want to deal with yard work or home maintenance see value in leasing. Many are sitting on huge equity gains that will allow them to cover the rent payments for a long, long time.
She also said that developers in Denver have gotten into amenity wars, offering everything from goat yoga to lazy rivers. Although the rent may look high, a lot of extras are built into that monthly payment that homeowners don’t get.
What about the argument that millennials, once they start having kids, will want to buy a home?
Popov said so many investors swept in to buy homes and convert them to rentals during the real estate crash that it has limited the supply. Builders have also built few entry-level homes. That has pushed more families to rent homes, not just apartments.
And there is the elephant in the room — student loan debt. A college graduate who moved to Denver may be pulling down a big paycheck. But he or she probably is also carrying around a pile of student loan debt. Until that gets paid down, saving for a downpayment will remain a struggle.
And it helps to take a bigger view. In 2008, there were 28,795 renter households in metro Denver who made $100,000 or more a year. That represented 9 percent of all renters, below the U.S. share at 13 percent, according to Apartment List.
With the impressive 146-percent gain, the share of high-income households who rent in Denver reached 70,860 or 16 percent of the total in 2017. Nationally, it rose to 17 percent.
So Denver, while the leader for gains in high-income renters over the past decade, is just approaching the national average in terms of its share of high-income renters.