The housing crisis has stalled home building. But apartment construction has come back to life. There’s now a huge pool of people forced to rent because of the recession. CPR's Ben Markus reports that apartment construction is booming in response.
Reporter Ben Markus: The first thing you notice about Lyn Mayo’s apartment is her boyfriend’s proudly displayed rock poster collection.
Lyn Mayo: So, most notable feature of the house.
Reporter: This two-bedroom apartment in Denver’s Congress Park neighborhood costs them more than $900 a month. A bargain, when you consider the costs of homeownership.
Mayo: Absolutely, they just found out that this place needs a new furnace -- so, not my problem. And there’s, you know, the toilet needs a new seal –- not my problem. The roof needs to get replaced, not my problem.
Reporter: Mayo did try, in 2009, to buy a home using the first-time homebuyer tax credit. But because of stricter lending standards she couldn’t close the deal. Though these days she sees herself as lucky – having watched her friends struggle to keep or sell their homes.
Mayo: And so I think the idea of a home being an investment is a myth. But I just don’t see the benefit really.
Reporter: Mayo and thousands like her have flooded Denver’s rental market. Stricter loan standards, foreclosures and a fast-growing population have pushed the city’s apartment occupancy to a 10-year high.
And builders have noticed the trend.
David Zucker: My name is David Zucker, I’m president of Zocolo Development in Denver.
Reporter: Zucker stands next to his latest project -– a poured concrete building near downtown, crawling with men in hard hats. He says for past few years apartment construction -– or any construction for that matter –- was at a standstill in Denver.
Zucker: And so the fact that we are in what might be considered a building boom today is truly remarkable.
Reporter: This project was originally planned as condos. But when the housing market collapsed Zucker went back to the drawing board. Eventually, his financiers looked at all the renters entering the market, and liked his new idea of retooling the project from 60 condos to more than 200 apartments.
Zucker: In 2010, they weren’t interesting in new construction, and today they are. It was such a quick reversal. What was it that changed? It was the realization that multi-family is a relatively safe investment today.
Reporter: Now, more than a dozen apartment buildings are going up in the Denver metro area –- and dozens more are planned. Greg Benjamin is with Northmarq Capital, an investment brokerage firm in Centennial. He says financing is available now because demand is outstripping supply –- allowing landlords to charge higher rents.
Greg Benjamin: Which is now getting near the level that you can justify new construction, based on those kinds of rents, because now we have a reasonable return on cost.
Reporter: And Denver’s not the only place with that “reasonable return on cost.” Apartment construction is taking off across the country. But Ryan McMaken with Colorado Division of Housing says Denver’s market is especially strong -- partly because so many young people continue to move here.
McMaken: They’re realizing that they’re going to be renting into their 30s probably, maybe even later in many cases, whereas, of course, at the height of the boom, we were all meeting 26-year-olds who were running out and buying houses. And that period has clearly come to an end for now.
Reporter: But with all this buzz surrounding apartments, is it possible this could turn into an apartment building bubble? Like in the 90s leading up to the dot com bust -- when there were suddenly thousands of excess units.
That brings us back to David Zucker and his half-built apartment project.
Zucker: It just would be nice if developers could muster some level of temperance
Reporter: But, he adds, there’s not much history of that.