Tenants continue to battle over a limited supply of apartments in the first quarter, pushing up rents by double-digit rates over the past year, according to the latest “Denver Metro Apartment Vacancy and Rent Survey” from the Apartment Association of Metro Denver.

Apartment rent payments in metro Denver averaged $1,765 a month in the first quarter, up 3.3% from the fourth quarter average and 14.4% over the past year, according to the survey, which is conducted by the University of Denver’s Daniels College of Business and Colorado Economic Management Associates.

In dollar terms, average rents are up $56.94 in the quarter and $222.02 over the past year. The apartment vacancy rate remained at 4.3% in the first quarter, where it was in the fourth quarter. A year ago, the vacancy rate was 5.5%.

“Across metro Denver, we’re seeing a record number of applications for rental housing, and we don’t have enough units to meet that demand,” said Drew Hamrick, senior vice president for government affairs and general counsel for the AAMD, in the report. “The key to housing affordability is housing supply.”

During the quarter, developers brought 1,936 new apartments onto the market, less than a third of the outsized 6,282 apartments delivered in the fourth quarter. That brought the total number of apartments in metro Denver to 384,257.

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Renters occupied an additional 2,393 units in the first quarter or 457 more units than were built. But that pace of “absorption” is running below last year when 19,353 additional apartments were filled.

Rent increases lag behind the annual gains in home prices, which rose 22.3% in February in metro Denver, per the S&P CoreLogic Case-Shiller Index Denver. They are, however, outpacing overall consumer inflation, which was running at a 9.1% annual pace in March, said Ron Throupe, associate professor of real estate at the Daniels College of Business and an author of the report.

Demand for rental housing is expected to continue to grow as higher home prices and higher mortgage rates combine to put home and condo purchases further out of reach for renters. A study from Zillow estimated that metro Denver homebuyers faced monthly home payment costs that were 42.2% higher in March than they were a year earlier, and 21% higher than they were at the end of last year.

“It does create some shifting for people who may have been wanting to get a home but no longer can,” Throupe said. “That does prop up the demand for apartment units. It is the next choice of what you can do.”

Throupe predicts that both the home purchase and rental markets will slow significantly in the second half of the year after the spring surge passes.

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