DENVER | Main Development Thread #6

[wong21fr]

Originally Posted by RyanD

I was doing MSA v. MSA not County v. County. Whole picture. Not singling out any county.

Yeah, but if we're talking about that, then we should be looking at housing in Will County, IL versus Adams County. Still more expensive in Adams, but it's suddenly looking a lot better for you to stay in ol' Colorado.

Denver proper's massive growth compared to Chicago is a factor in the price difference and since we're talking cool urban neighborhood stock we've got to look at places where that is.

[bunt_q]

I'm sure the good people of Englewood will be happy to hear that their old suburban ranch houses now constitute "cool urban neighborhood stock." What else could explain the fact that they now go for 400k.

[Stonemans_rowJ]

Originally Posted by bunt_q

This notion that millenials can't afford to buy is nonsense. If they can afford $1,800 in rent, at 4% mortgage rates, they can sure as hell afford to buy a condo. And it's easy to claim they don't want to when they don't have the option. That same polling shows that millenials, by an overwhelming margin, have no desire to rape, murder and pillage. And it must be right since, you know, most millenials aren't doing those things.

Have you applied for a mortgage lately?

2 years of job history in the same field, debt to income ratios. Don't forget private mortgage insurance if you're not bringing 20%. And, You won't get 4% on a condo. Closing costs, points, etc.

I have family members paying $1,800 in downtown. Sure they can rent all day long. Without even a co-signer on the lease. Even though rent could be 50% of their take home. These leasing agents don't have underwriters (to my knowledge). It's like buying a car. Get approved in 10 minutes.

Totally different to get a mortgage than for someone to rent you a place because you agree to pay the rent.

[wong21fr]

Originally Posted by bunt_q

That's garbage and you know it. You're comparing apples to oranges. Picking random dates. And making the cardinal error of comparing cities not metros.

Oh, I'm sorry, I thought we were looking at urban, for-sale multi-family housing. I didn't know that we we're talking about the entire goddamn metro market and not considering urban versus suburban type development as interchangeable. If comparing Chicago (urban) versus Denver (as urban as you can get in Colorado) is apples to oranges, then there's no fair comparison to do to look at urban contrasts.

Also, if growth rates and prices are so closely correlated, how do you explain why nearly every city in Arizona, Texas, and Florida has managed to stay relatively affordable? Might it be because they allow themselves to build their way out of the growth?

I said it was a factor, not that is was the biggest one. Further up I argued that the law was the biggest factor and what can be changed now. If that's not siding with you on the pro-development side, than I'm not sure what is. As you said previously, the law and planning dictate what gets built. From the Poundstone Amendment to construction defects liability to zoning (and zoning challenges) we have allowed this housing affordability situation to get worse. Largely because we're an anti-development state at heart. If Denver didn't have growth, aka Chicago, we wouldn't have the issue. But the legal structure that we have set up isn't exactly structured to accommodate massive population growth.

If that's not siding with you on the pro-development side and to advocate the changing of the laws, than I'm not sure what is.

If there isn't a liberal fast growing city that can find a way to remain affordable and inclusive while still growing, it is starting to make a pretty compelling argument for sprawl. I'm sorry, but whatever the reason for being anti-car and pro-urbanity is, it can't be as important as the interest in making sure every person can afford a roof over their head. And the most progressive cities are the ones failing the worst at that. Somebody needs to solve it. And if mhays is correct that an inclusive urban environment is impossible, then maybe we're on the wrong side of history being urbanists.

Who says I want equality in urban development? You're the bleeding heart who thinks that all people should have an equal chance at life, liberty and all that bullshit. I'm at peace that the egalitarian concept of social mobility is going away and we're moving back to a stratified society where people know their place based upon economic status. It's not ideal, but it is what it is. Maybe the pendulum will swing back the other way with increased social unrest and people will demand a better shot at succeeding in the world, but that doesn't seem to be the way it's trending right now.

[wong21fr]

Originally Posted by bunt_q

I'm sure the good people of Englewood will be happy to hear that their old suburban ranch houses now constitute "cool urban neighborhood stock." What else could explain the fact that they now go for 400k.

Because the one's in Denver are going for $450K? That's a 10% discount right there for location while still having that urban vibe which a lot of people want and which we don't have a lot of (which means that even old Englewood is hot). Which has something to do with the law and planning.

Law and planning exasperating supply shortages due to increased demand. Seems like we're back at the argument that it's the law that needs to be fixed.

[ski82]

Originally Posted by bunt_q

And if mhays is correct that an inclusive urban environment is impossible, then maybe we're on the wrong side of history being urbanists.

Agreed, but that’s an absolutely nihilist position that must be fought. What’s the alternative? The poor working class lives in decaying suburbs? The social structures of these groups have traditionally relied on to survive were dense and urban, for good reason. For the first time as a country, we are on the verge of turning these critical social structures on their head. I’m surprised we can allow these profound shifts in our society, to cast such large groups of people (and with these groups of people trending larger) to an almost dystopian future and be ok with it because we have shiny new buildings and artisan turtleneck shops.

Make no mistake, I’m not an opponent of gentrification. Nobody has a right to live in the same neighborhood for any indefinite amount of time. But the fact that people have nowhere to go where there is some diaspora of sorts has profound implications to the health of the country as a whole. It is simply a failure of leadership. And again, I think it is in part directly related to the existing legal framework around development. Markets are an excellent tool, but they are just that, a tool. If you don't use a tool in a way that enables goals, its useless. This is my main beef with the current GOP dogma around free markets, which is the exact dogma some on here are have. A crazy world we live in.

[ski82]

Originally Posted by wong21fr

I'm at peace that the egalitarian concept of social mobility is going away and we're moving back to a stratified society where people know their place based upon economic status. It's not ideal, but it is what it is. Maybe the pendulum will swing back the other way with increased social unrest and people will demand a better shot at succeeding in the world, but that doesn't seem to be the way it's trending right now.

Another nihilist position. Those pendulum swings destroy lives. This country has long told itself it is a place of great economic mobility. That probably hasn’t been the reality to the degree that we’d hope and we probably relied as much as anything on a close knit WASPiness and immigrant communities conforming to that code over time. Long story short, that code is crumbling we may for the first time will be forced to live to the ideals that we have long told ourselves. Is America the land of opportunity? It’s open for debate and more importantly, the question is not resolved.

[Sam Hill]

Originally Posted by RyanD

3.5% down... Okay let's think about this.

In Chicago... (yes I'm going to keep using this example because it's effing ridiculous and makes NO sense that they should be cheaper...

You also keep using Chicago as an example because it's the only one you've got. It's the only city most of us would consider an upgrade over Denver that is cheaper than Denver.

[Brainpathology]

Originally Posted by bunt_q

Has anybody on this Board ACTUALLY READ the study that DRCOG commissioned, at the legislature's request, to look at the issue of the lack of condominium development in Denver? Because it doesn't seem like it. We have a professional study on this exact issue, and instead folks are citing puff pieces that are roughly as sophisticated as CNN Money articles on "best cities to live in." I am confused by that.

YES I have! Not every single word of it.. but that's one of the things I couldn't remember the name of to go looking.. isn't that where a LOT of the numbers concerning the disappearance of Condo building in Denver comes from. I know some of the articles I also remember are anecdotal. But a developer saying "I'm not building because I can't with the existing laws" seems like a compelling anecdote.. after all one 50 story condo building would also only be one anecdotal building.

I just read it again more closely... if anything it makes me more angry at the pushback. 0 units in Downtown for the years following emergence from the recession versus thousands of rentals .. compared to peer cities which are/were building WAY more in their similar downtown districts. Unfortunately no data for anything after 2013 but it's pretty easy to count up all the condos that have been built in the central business district in the last 2 years... because there haven't been any.

From the end of the report too:

Since 2010, the costs attributed to construction defects liability have grown. Based on the assumptions modeled in this study, developers are estimated to need to pay an average of $15,000 of additional cost per unit due to construction defects. Additionally, according to an industry source, insurance premiums are 25 to 45 percent higher in Colorado than other states for comparable products. Developers are unlikely to absorb this cost as a reduction in profit margin, unless the margins are sizeable. These additional costs appear to be disproportionately impacting the feasibility of entry-level housing. Additionally, the national builders interviewed for this project are not currently building for-sale condominium projects in Colorado and have no plans to do so in the near future. The identified reasons were the real and/or perceived costs and risks associated with construction defects, insurance costs, and the potential for construction defects lawsuits.

Hasn't that exact passage been quoted here before or am I imagining that?

[mhays]

I didn't say an urban environment can't be inclusive (in a growing city). I said the methods are limited...subsidies, smaller units, and sometimes older units. And it's important to keep the entitlement process reasonable so more gets built and costs stay in check.

Methods go way beyond that of course. You want to upzone more land so buildable lots aren't priced with an ever-growing scarcity premium. Accessory units should be easily legal to provide small units and also help the main residents financially. As we've discussed, the less parking you can do the better in terms of development cost, and the number of units you can fit on a given property. Here's an aggressive example of the micro concept with very small units and no parking (big file).

I'm against stuff that makes market-rate housing more expensive, like inclusionary zoning, where some residents of a building fund the others, and the entire rental market resets its pricing to reflect the cost of new development (the latter being the relief valve for the former). A big levy is more fair because it's spread to everyone. Voters of course don't get that sticking it to the big bad developers just makes the rental market reflect those costs, including existing ones.

[TakeFive]

For my money Stonemans_rowJ has some good comments. Fairly simple and to the point. wong's fresh candor and overall insight is top notch too.

I just looked it up. The numero uno issue goes all the way back to the 14th century. Imagine. From Wikipedia:

According to Hamid S. Hosseini, the power of supply and demand was understood to some extent by several early Muslim scholars, such as fourteenth-century Mamluk scholar Ibn Taymiyyah...

John Locke's 1691 work Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money.[15] includes an early and clear description of supply and demand and their relationship. In this description demand is rent:

The phrase "supply and demand" was first used by James Denham-Steuart in his Inquiry into the Principles of Political Economy, published in 1767. Adam Smith used the phrase in his 1776 book The Wealth of Nations, and David Ricardo titled one chapter of his 1817 work Principles of Political Economy and Taxation "On the Influence of Demand and Supply on Price"

And there you have it in a nutshell.

A ton of affordable housing has been built in downtown in recent years. Unfortunately it isn't currently very affordable. There's nothing particularly exceptional about most of what has been built. It's strictly, currently a case of demand and supply. (See above)

Even without the construction defects issue why would a developer want to tangle with the hassles and other obstacles of building condos when he can easily, quickly cut a fat hog by building apartments? Makes no sense. (H/T to Stonemans_rowJ)

Yes, I often over-generalize and of course there's always exceptions at the margin but they make little difference in the big scheme of things.

ski82.. So should we go back to preferring decaying inner cities?
I buy your dogma point though. Can we assume that tempting the fate of another Great Depression would show us the silliness of "Cowboy Capitalism?" As if "free markets" are truly ever free? In fact the costs would have been devastating and ferocious, at least for the vast majority; there are always winners and losers I guess. Meh, I suspect we'll have to learn all over again some day.

[mojiferous]

Originally Posted by bunt_q

I'm sure the good people of Englewood will be happy to hear that their old suburban ranch houses now constitute "cool urban neighborhood stock." What else could explain the fact that they now go for 400k.

Am I really the only person on the board that knows people who have bought houses in the last year for $250k or less? Not just one or two, but multiple people... Sure, they aren't on the rail and require updating, but definitely affordable for people who aren't making millions. And in Park Hill, Green Mountain, and Barnum... Were they cheaper before 2010? Yes. But still doable now for people making less than 70k.

I agree that prices here are getting out of hand, but it also feels like there is a lot of attempted justification for moving/being cranky in this thread and not a lot of actual experience in recent housing purchases.

[Sam Hill]

Originally Posted by bunt_q

You're not actually moving back here, are you? Personally, I think it'd be crazy for anybody who's halfway knowledgeable to make the choice to move to Denver today. Some of us are stuck here. And most newcomers just don't know - they're pack animals doing what pack animals do. But to consciously charge into the fire? That's heroic. You're heroic. If you do it.

This is a bit hyperbolic. If you were talking strictly about buying in Denver, I would somewhat agree. Denver is one of the last places I would want to try to buy a home right now. But Denver is still a great place to move to. It's easy to find a job here with the booming economy and the 3.9% unemployment rate, and therefore, even with the rents that are a bit higher than average, it's relatively easy to get by here. And it's a great city. Where else are you going to move? Some place cheaper? Well then you'll be moving to a lesser city.

Personally, there are only so many cities in this country that I would be willing to live in (San Diego wasn't even good enough for me), and the only one on that list that is cheaper than Denver is Chicago.

I am very concerned about the rate at which the cost of living is increasing in Denver - I think it's Denver's single greatest problem right now, by far - but the rents/home-prices haven't gotten crazy yet. I'm worried that they will get crazy one day if this housing shortage continues, but they haven't yet. An average Joe with an average salary can afford to rent a $1200-per-month one-bedroom in Capitol Hill (and if you look, some can still be found for $1000).

[mojiferous]

Originally Posted by bunt_q

Has anybody on this Board ACTUALLY READ the study that DRCOG commissioned, at the legislature's request, to look at the issue of the lack of condominium development in Denver? Because it doesn't seem like it. We have a professional study on this exact issue, and instead folks are citing puff pieces that are roughly as sophisticated as CNN Money articles on "best cities to live in." I am confused by that.

You mean the one that didn't really go anywhere because it stated "As a result, the perspectives summarized below reflect more of the development industry and should be recognized as one side of the discussion."? It may be a sound study, but it didn't help because it could easily be written off by condo-defect defenders as a confirmation-bias-puff-piece.

[Brainpathology]

Wow too bad I forgot to have all my Renaissance textbooks around so I could understand all these problems as clearly as the rest of you.

And stonemanrow's comments would be a perfect explanation for why new condo buildings have been sitting empty in Denver and everywhere else they are being built. But we can't test that can we.. because there isn't any possible avenue for developers to build condos to sit empty and unbought in Denver. I don't really care that apparently all millennials haven't worked two years and can't rent cheaply out of downtown to save for a down payment. It certainly illustrates a problem that SOME people are having IN GENERAL with housing though.

And before I get slammed for not remembering all the empty condo buildings in Miami I'm not talking about condos built specifically for sheiks and princes who for some reason are bored of a giant suburb with some nice tall buildings near the water.. which Dubai does WAY better anyway.

This is getting to the laughable now. But you know maybe it isn't. Maybe someone (no idea who that would be) could reference a 6th century BC Egyptian scroll on what laughable really is and how that doesn't apply to this discussion. I'd be ever so eager to read about that.

In the meantime I'm done with this discussion. I'll buy the condo or townhome I want with cash when the time comes and the rest of you who are letting the city get out of reach for yourselves while you nearly have seizures trying to explain how it has nothing to do with what it actually has to do with can enjoy it. Maybe there's an old Chinese manuscript by an obscure philosopher that someone could reference (no idea who could do that either) which goes in depth about how great that will be for you too.

[wong21fr]

Originally Posted by TakeFive

A ton of affordable housing has been built in downtown in recent years. Unfortunately it isn't currently very affordable. There's nothing particularly exceptional about most of what has been built. It's strictly, currently a case of demand and supply. (See above)

It is a case of supply and demand, but the argument that supply is being artificially constrained by legal and planning issues is absolutely true. A ton of housing has been built downtown, but nowhere near the amount that the market clearly demands. The regulatory framework for how we build isn't adequate to meet demand and is distorting the market.

[ski82]

Originally Posted by TakeFive

For my money Stonemans_rowJ has some good comments. Fairly simple and to the point. wong's fresh candor and overall insight is top notch too.

I just looked it up. The numero uno issue goes all the way back to the 14th century. Imagine. From Wikipedia:

And there you have it in a nutshell.

A ton of affordable housing has been built in downtown in recent years. Unfortunately it isn't currently very affordable. There's nothing particularly exceptional about most of what has been built. It's strictly, currently a case of demand and supply. (See above)

Even without the construction defects issue why would a developer want to tangle with the hassles and other obstacles of building condos when he can easily, quickly cut a fat hog by building apartments? Makes no sense. (H/T to Stonemans_rowJ)

Yes, I often over-generalize and of course there's always exceptions at the margin but they make little difference in the big scheme of things.

ski82.. So should we go back to preferring decaying inner cities?
I buy your dogma point though. Can we assume that tempting the fate of another Great Depression would show us the silliness of "Cowboy Capitalism?" As if "free markets" are truly ever free? In fact the costs would have been devastating and ferocious, at least for the vast majority; there are always winners and losers I guess. Meh, I suspect we'll have to learn all over again some day.

The supply & demand argument is limited. Back to Micro 101, the purpose of the supply and demand curve is price discovery. Prices in this point are constantly adjusting to shifts in the demand curve. There has been very little change in the supply side, which is heavily influenced by zoning, governments, and other non-free-market factors that many try to pass off as free market under the moniker of “supply and demand”.

Which brings us too things mhays suggests above, things that would actually shift the supply curve and enable a new price equilibrium. If the problem of land is too high? Upzoning wide ranges of land across the area would be a great way to increase the supply. In this way, it could bring down the price of a piece of land downtown even if that land itself didn’t change its zoning at all.

I’m not advocating a return to urban decay. But affordable urban areas are critical to the ecosystem of economic mobility. There is going to be poverty and poor people somewhere, better in urban areas that miles away from anything in suburban areas. Large portions of suburban America are facing a truely dismal future, I'm afraid.

[The Dirt]

Anyone know what's going up on Decatur between 28th and 27th up in the JePa neighborhood?

[bcp]

I can't wait for Denver council to address defect liability...supply to jump, and our wobbly economy to slow...and then the private market to be blamed for too many condos and a reduction in home values (as opposed to a win for market based affordability)

Take5 - what do you mean that a ton of affordable housing has been built in recent years? Not sure on that sentiment...

[TakeFive]

Originally Posted by wong21fr

It is a case of supply and demand, but the argument that supply is being artificially constrained by legal and planning issues is absolutely true. A ton of housing has been built downtown, but nowhere near the amount that the market clearly demands. The regulatory framework for how we build isn't adequate to meet demand and is distorting the market.

I hardly see Denver as being overly restrictive. Actually it's from my ignorance that I don't understand what is meant by regulatory framework being the problem.

I think back 3/4 years to when Mill Creek grabbed the block at 2300 Walnut Street. At the time it seemed like a lesser location and we were all delighted to get a full block 4-story project. Now they want to build 6-9 story projects. Point being that it wasn't that long ago that developers were uncertain about the need and demand in Denver. It's taken everybody by surprise how strong the downtown market would become so quickly. The pace of construction has been accelerating but planning, permitting etc. do take time. It's cooking pretty good now though.