Long after the housing crisis that contributed to the 2008 Great Recession, the real-estate industry is celebrating a 5 percent increase in home prices and a 26.7 percent increase in rental rates in the Colorado Springs region.
It’s good news, right?
The rate of home sales is rising quickly — Zillow predicts a 3.4 percent increase during 2016 — and people from Denver and Castle Rock are looking south for more affordable homes — avoiding the more expensive enclaves of the Denver market. All the activity means that both apartments and housing inventories are low, pointing to a vibrant real estate market.
But the majority of renters in Colorado Springs report paying more than 30 percent of their income for housing during 2015, and prices show no sign of stopping their steep upward climb.
Since this edition of the Business Journal forecasts industry sectors for 2016, here’s a grim prediction: During the next decade, housing prices will continue to rise, pushing home ownership even further out of reach for middle-income workers.
In fact, as the population of Colorado increases as projected, even rental rates for apartments will take up an increasing amount of personal income.
The increase in population, combined with stricter lending standards to buy homes, will combine to create the perfect storm for low- and middle-income residents. Without aggressive action by the city of Colorado Springs and El Paso County, the region could find itself in a housing crisis of a different sort than the 2008 crash.
Instead of too many short-sales and foreclosures, the city could struggle to find enough affordable homes for its middle-class workers. Companies relocating to Colorado Springs might consider other areas with more affordable homes and rental properties. Young professionals could choose other cities; since they’re already struggling to pay for their student loans, they won’t also want to pay more than 30 percent of their income for housing.
The good news for Realtors and developers equals bad news in other service-industry sectors.
Retailers, restaurants and entertainment could falter. More money spent on housing means less disposable income for everything else.
And there lies the potential beginning of the next downturn. With wages stagnant, home prices rising — there’s a crisis in the making.
Unless we act now.
City planners and developers need to find ways to create more affordable housing. As Baby Boomers age, senior housing will be a priority. What options will less-affluent residents have for homes? We should plan now for the future and realize that the upward trend for housing and flat wage rates are alarms that must be heeded.
Woodland Park, Manitou Springs and other Front Range cities are already taking steps, examining what options are available for affordable housing — and how to address the predicted population increase before it happens.
A housing shortage would harm economic development, create a new working-class homeless population and drive young professionals to more affordable cities.
The solutions are neither clear nor simple — but addressing the predicted housing crunch ahead of time will assure the city’s future success.