It’s up to Denver leadership to decide if increasing the rent (and home) affordability crisis is a worthwhile trade to make for new job creation and population growth. To prevent a worsening affordability crisis, the metro would need to significantly increase its construction, but it seems nearly impossible that the metro would be able to fully keep up. From 2001-2015, Denver added 2.9 new jobs per building permits, and that was without the rapid influx of Amazon employees.
You also discuss low vacancy rates in Denver and too little permitting for new apartment complexes. What kind of an impact could these elements have on rent prices should Amazon build HQ2 in the Denver area?
The low vacancy rate and lack of permitting leads to less available housing stock for Amazon workers, which in turn creates rent increases. Part of the basis for our rent growth calculation is the ratio of jobs per permit. Increasing Amazon jobs with little increase in housing stock increases rents. The Denver vacancy rate of 5.0 percent is the third lowest of the metros studied, indicating very little slack in the housing market.
According to your report, the prospect of higher rent prices post-HQ2 wouldn't be a onetime hit, but has the potential of pushing prices higher over time. What are the reasons for that?
Amazon projects the job growth will take place over the next ten to fifteen years, as employment at the HQ2 expands. We’d predict continued additional rent growth during this period of rapid job growth, a trend we’ve seen in Seattle, home to Amazon’s current headquarters.
Would you expect that rents would go up evenly in the wake of HQ2 whether an apartment is on the lower end or upper end of the scale — or will there be more upward pressure in specific areas?
I think we’ll see pressure on both ends of the market. Many of the Amazon workers will move into luxury apartments, and construction of expensive apartments will continue. Many of the supplementary workers, and current renters displaced by rising rents, will be looking for more affordable rental options. Right now, Denver is already experiencing a shortage of affordable rentals, while there are more vacancies in new luxury buildings.
What kind of renters would you expect to be hurt most by higher rent prices caused by HQ2?
Lower-income renters will be the most negatively impacted by the rent increases, as they are ill-equipped to handle the additional expenses, especially if their wages remain relatively constant. In our previous analysis, we revealed that wages for service and blue-collar workers have failed to keep up with rent hikes, a trend that will intensify with the Amazon HQ2.
Would these negatives extend to renters in that category whether they work for Amazon or not?
Yes, the rent hikes will impact both Amazon employees and non-Amazon employees alike.
There will be benefits to some Denver residents — for example, owners of construction companies, landlords, homeowners and those who are hired by Amazon. Additionally, the competition of workers for the Amazon and supplementary jobs would likely increase overall wages a bit. For low-income renters who do not end up in higher-paying jobs, the costs may not be worth the benefits.
What are some of the other benefits that could come to a city as a result of HQ2 when it comes to housing and rent?
Homeowners would likely see their property values increase, which is a benefit, although not one that renters will experience. Other benefits to the region could come in the form of investments the city makes using the additional tax revenue — for example, improvements to roads or schools. If Denver offers significant tax breaks to Amazon, something many cities are considering, some of this benefit would evaporate.
Is there anything else on this topic that I may have neglected to ask about that you think is important to add?
The only other thing I’d like to emphasize is that this additional rent growth of 0.8 percent to 1.1 percent comes on top of Denver rent growth that has been quite steep. From 2005 to 2015, rents in Denver increased 52 percent. Rents will likely continue to rise with or without the Amazon HQ2, and Amazon will put additional upward pressure at a time when there is already an affordability crisis.