According to an article published by Mile High CRE, Colorado has placed itself as one of the top cities when it comes to issuing permits for new construction. As the report states, Colorado has broken out into the top ten states since 2015; for 2022 has ranked as eighth highest in building permits. Despite that ranking and research, Denver has been in a wary condition with its permitting operations. Mired by long plan review times, workforce shortages, material price volatility, and new regulations – the number of permits issued year-over-year is a small snapshot of the construction industry in Colorado.
2022 Permits saw a decline in Denver
Almost all Colorado metro areas recorded year-over-year decreases in the number of permits issued in 2022 compared to 2021. The number of permits issued in the state’s largest metro, Denver-Aurora-Lakewood, decreased by -21.78%. In the same metro, the number of permits for multifamily buildings doubled in 2021 (16,028), only to drop slightly in 2022 (12,804). Despite the high ranking of overall permit issuance among other areas, there has been a clear decline in construction planned for the immediate future.
Denver’s Affordable Housing Ordinance Scares Builders Temporarily
In 2022, Denver’s city council approved the Expanding Housing Affordability proposal which introduced new fees and options that would expect more from commercial multifamily developers. The goal was to encourage more options in the affordable housing market by placing the responsibility more on land developers. The additional requirements on developers came in the form of increasing the designated affordable housing units per project. The ordinance specifically requires that new residential construction of 10 units or more are to designate 8 – 12% of their units as affordable housing to those who make up to 60% AMI, area median income. Developers are allowed to opt out of designating their units for affordable housing but will instead be given a fee-in-lieu which can range from $250,000 – $478,000. This fee is expected to go directly to the city’s managed affordable housing program which should use the funds to help construct affordable housing units of its own.
Three months after the newly released housing ordinance, the Apartment Association of Metro Denver shows a negative trend in commercial multifamily development. Applications for commercial multifamily development have dramatically fallen by 88%.
These trends do not prove that the ordinance was a clear cause and effect but many in the construction industry of Denver have drawn their own conclusions. It is uncertain how the fallout of the new ordinance will affect the immediate submittals of new multifamily housing projects.
Material Price Volatility Complicates Budgets
Whether one was building a new commercial apartment building or performing a home addition and remodel, building material prices were on a veritable rollercoaster for the last two years. In 2021, lumber prices skyrocketed due to supply chain issues and economic factors following C-19; reaching a high of $1,481.50 in May 2021. Then in 2022, lumber prices fell and rose again to only begin a swift decline in price well into the new year. Lumber prices fell 66% last year – making it 2022’s worst-performing commodity. Now, in Jan. of 2023, lumber prices sit at $420.20.
Builders have had to find solutions to these price fluctuations in order to protect themselves as well as their clients. Many have had to expand budgetary requirements for contingencies while others have added contract clauses that separate them from the liabilities of prices skyrocketing during a project. Design build companies have the benefit of being present at the beginning of stages of a construction project which allows them to put in suggestions that can help mitigate material concerns. Such as requesting more economical building materials like replacing steel beams for equivalent lumber items or changing unseen materials to a more affordable option. If you are curious how Sustainable Design Build guarantees a better budget delivery at the end of a project reach out to us now. The uncertainty of commodity costs and building materials may have had a hand in the decline of permits over the years but that is subject to change as time goes on.
Permit delays in Denver
For Denver specifically, it has been common knowledge that the Community Planning and Development Department has been struggling with permitting times. The amount of time needed for a major residential project to submit plans and be issued a building permit has reached 289 days as of March 21, 2023. This number varies every day but there is no doubt that one of the biggest challenges for a construction project residential or commercial, is the time to permit approval. Time is money and the longer a project spends waiting for construction, the more risk owners take on. Sustainable Design Build offers years of experience and has trade partners that can help clients navigate the process as fast as the municipality will allow. But permit times are just another factor that might be the cause of such a decline in reported issuances over the years.
The demand remains the same
There is always a need for new construction in Denver. A housing crisis still exists for people to have affordable housing options. Other families need or want to build their own homes or expand on them. The demand is still as strong as ever, but the landscape shifts enough to make it a challenge for the uninitiated. Sustainable Design Build is committed to the community by educating and providing experienced services for construction. If you would like to get more information about how SDB can assist in your commercial multifamily construction project or residential home construction project, please contact us.
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