Business pros offer overview on state of housing

Metro North Chamber event sheds light on housing shortage in region, state

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The Metro North Chamber of Commerce offered up a buffet of market experts and development professionals at a breakfast housing seminar April 7 at the Todd Creek Golf Club in Thornton.

Professionals shared a common viewpoint when it came to the state of housing in Colorado: Business is booming.

John Covert, regional director for housing data analyst Metrostudy, opened the overview by making a connection between “in-migration” spurred by new job growth and the housing boom. He said the housing market remains booming in Colorado, with estimates trending toward a 10- to 15-percent growth in new house construction in 2016.

According to Covert, a good portion of that growth is tied to in-migration, with the region adding approximately 50,000 new jobs last year. In addition, metro Denver set records last year for housing re-sales, with nearly 55,000 units transferring hands.

“That’s never been done before,” Covert said. “And of course, you read in the papers every day about how tight the inventory is — an incredibly tight supply — which of course pushes prices up.”

The result is a goldmine for housing developers, who have been building and selling homes as fast as they possibly can in a market constrained only by labor availability and cost, along with the availability of shovel-ready building lots.

“The average is almost $500,000 now for a new (single-family) home,” Covert said. “It’s incredible to think about.”

Despite the boom, some developers claim that they are unable to economically provide affordable housing options, due in large part to permitting fees. Rick Dengler, president of Brookfield Residential, directly attributed the shortage of new entry-level development to construction defects laws currently on the books, as well as labor shortages and permitting fees, the latter of which he believes should be on a sliding scale.

“Permitting fees is huge — the impact fees,” Dengler said. “Here, it doesn’t matter what jurisdiction you are in. Except for condominiums, if you are building a 5,000-square-foot house you are going to pay, with water and sewer, on average, $45,000.

“If you build a 1,200-square-foot house, guess what you are paying? $45,000,” he added. “So how are you going to get people into this market space?”

Dengler said differences between definitions of “subdivisions” compared to “communities” can also impact cost and rules of development, and advocated the latter could be cheaper to construct with creative restructuring of development standards.

“Why do I need a 30-foot-wide paved road … doesn’t a 24-foot-wide road work?” Dengler said. “Why do I need sidewalks on both sides of the road? Why can’t I have one? Why can’t I have a meandering path? Why do I need streetlights every 50 feet? … Why? Because there is some law, some rule.”

“My point is, if (you) think out of the box and work with the teams of your local jurisdictions … you can get your costs down,” he added. “Get your costs down, and you can then offer a product to the entry-level buyer.”

Adams County Commissioner Erik Hansen during the Q&A portion of the presentation took exception to Dengler’s comments.

“I have spent 15 years in local government as a local elected official,” Hansen said, “(and) I just think it’s unfortunate that (Dengler) talked about how we can get more affordability by having fewer trees and less sidewalks in subdivisions.

“Frankly, I think we have built enough crappy product in Adams County in the past 50 years,” Hansen added. “There is a reason why we established those standards, and it was because we wanted to have a better quality product for the people who live here. Because, frankly, Adams County and the people who live here deserve sidewalks on both sides of the street.”

Following the discussion, Hansen conceded there may be some validity to a more sliding scale approach to permit fees, so long as the fixed nature of some specific costs were kept in mind. However, he said residential standards needed to remain high for quality of life.

“(A sliding scale) may not be unreasonable to look at,” Hansen said. “I will say, however, that a lot of those fees are fixed, particularly in municipalities. A lot of those are fixed costs … that are being recovered.

“To slide that would (mean) someone else would likely have to pay for it,” he added. “You still have to recover the same amount of fees, so some fees might actually go up, and I’m not sure that is fair.”

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