News
December 18, 2024

Multifamily Housing to Slow as Permits Drop 90% in El Paso County

Caroline Raffetto

Construction of multifamily housing, including apartments and condos, is set to slow significantly in El Paso County, following a dramatic decline in multifamily housing permits issued in 2024, according to a quarterly report from the Pikes Peak Housing Network.

The Q3 report indicates an almost 90% decrease in multifamily housing unit permits compared to 2022. El Paso County saw a significant spike in multifamily permits in 2021 and 2022, with 3,847 and 4,955 units, respectively. However, in 2024, only 501 units have been approved so far.

Jill Gaebler, Executive Director of the Pikes Peak Housing Network, explained that the surge in multifamily permits in 2021 and 2022 was driven by increasing demand, which is now being met with new apartment properties in downtown Colorado Springs. “We're starting to catch up with the demand that we have seen for apartments in our community,” Gaebler said. “Here in Colorado Springs, we build and then we don't, and then we build and then we don't. And yet, the people moving to Colorado Springs and the people needing apartments doesn’t change. It doesn’t boom and bust. It continues to grow.”

However, Gaebler voiced concern about the future, citing the sharp decline in apartment permits this year. “Next year, the year after, I think we are going to begin to struggle again,” she said. “As any supply and demand, you know, economist will tell you, if we don’t have enough housing, then rents will go up.”

Thomas Garmong, former President of the Housing and Building Association of Colorado Springs, suggested that the earlier construction boom was likely driven by high demand as home prices and interest rates surged. He attributed the current decrease in permits to the higher costs builders are facing when financing projects. “It was a lot easier to get cheaper money during those COVID years, and basically multifamily builders were using that to finance projects. Now that those cap rates have increased, it’s much harder to finance those projects, so I think that’s also causing some of the drop-off in permits that you’re seeing,” said Garmong.

Despite the drop-off, Garmong remained optimistic, stating, “I think that the spike we saw in the last two or three years on the upside was also against the grain for what we normally see. So I think this is probably a reaction to that. But in terms of a deficit for housing, there’s always going to be a need for housing. It’s just the question of how much supply we can bring on to meet that demand.”

Laura Nelson, Executive Director of the Apartment Association of Southern Colorado, said she wasn’t overly concerned about the decline in permits, noting that the large number of properties coming online now should help cushion any future shortage. “The low number of permits pulled this year is not concerning to me unless the trend continues year after year,” Nelson said.

According to the Pikes Peak Housing Network’s Q3 report, the average monthly rent for a one-bedroom apartment in Colorado Springs is $1,467, which has remained stable compared to the previous year. In downtown Colorado Springs, the average one-bedroom rent is $1,834, showing a slight decrease from last year.

News
December 18, 2024

Multifamily Housing to Slow as Permits Drop 90% in El Paso County

Caroline Raffetto
Construction Industry
Colorado

Construction of multifamily housing, including apartments and condos, is set to slow significantly in El Paso County, following a dramatic decline in multifamily housing permits issued in 2024, according to a quarterly report from the Pikes Peak Housing Network.

The Q3 report indicates an almost 90% decrease in multifamily housing unit permits compared to 2022. El Paso County saw a significant spike in multifamily permits in 2021 and 2022, with 3,847 and 4,955 units, respectively. However, in 2024, only 501 units have been approved so far.

Jill Gaebler, Executive Director of the Pikes Peak Housing Network, explained that the surge in multifamily permits in 2021 and 2022 was driven by increasing demand, which is now being met with new apartment properties in downtown Colorado Springs. “We're starting to catch up with the demand that we have seen for apartments in our community,” Gaebler said. “Here in Colorado Springs, we build and then we don't, and then we build and then we don't. And yet, the people moving to Colorado Springs and the people needing apartments doesn’t change. It doesn’t boom and bust. It continues to grow.”

However, Gaebler voiced concern about the future, citing the sharp decline in apartment permits this year. “Next year, the year after, I think we are going to begin to struggle again,” she said. “As any supply and demand, you know, economist will tell you, if we don’t have enough housing, then rents will go up.”

Thomas Garmong, former President of the Housing and Building Association of Colorado Springs, suggested that the earlier construction boom was likely driven by high demand as home prices and interest rates surged. He attributed the current decrease in permits to the higher costs builders are facing when financing projects. “It was a lot easier to get cheaper money during those COVID years, and basically multifamily builders were using that to finance projects. Now that those cap rates have increased, it’s much harder to finance those projects, so I think that’s also causing some of the drop-off in permits that you’re seeing,” said Garmong.

Despite the drop-off, Garmong remained optimistic, stating, “I think that the spike we saw in the last two or three years on the upside was also against the grain for what we normally see. So I think this is probably a reaction to that. But in terms of a deficit for housing, there’s always going to be a need for housing. It’s just the question of how much supply we can bring on to meet that demand.”

Laura Nelson, Executive Director of the Apartment Association of Southern Colorado, said she wasn’t overly concerned about the decline in permits, noting that the large number of properties coming online now should help cushion any future shortage. “The low number of permits pulled this year is not concerning to me unless the trend continues year after year,” Nelson said.

According to the Pikes Peak Housing Network’s Q3 report, the average monthly rent for a one-bedroom apartment in Colorado Springs is $1,467, which has remained stable compared to the previous year. In downtown Colorado Springs, the average one-bedroom rent is $1,834, showing a slight decrease from last year.