Friday, July 29, 2011

Multifamily permit trends in Colorado counties since 2008

During the first half of 2011, 89 percent of all new multifamily permits were issued in only three Counties: Denver, El Paso and Larimer counties.

This percentage is down slightly from May 2011, in which 95 percent of new permit activity was found in the three counties. Since May, multifamily permit activity has increased in Mesa, Boulder and Summit counties.

Through June 2011, there have been a total of 1163 multifamily permits issued in reporting counties. Of those, 1039 were in Denver, El Paso and Larimer Counties. Totals for all counties that reported multifamily permit activity:

Denver 683
El Paso 230
Larimer 126
Mesa 64
Boulder 34
Summit 16
Boulder 10

The first map divides counties with permit activity in quartiles. Quartiles are based on a multifamily permit index based on the number of permits compared to the number of existing housing units in each county.

Top Q: Brown
2nd Q: Green
3rd Q: Orange
Bottom Q: Yellow
No MF permits issued: White

If we look at multifamily activity over time, we see that multifamily permit activity has increased in some areas in recent years, while it has decreased in other areas.

In the chart, we see multifamily permit activity from 2008 through June 2011. In some areas, a large number of permits were issued, but in those same counties, almost no multifamily permit activity has been seen since the financial crisis of 2008. In Adams County, for example, 108 MF permits were issued in 2008 alone, yet from 2009 to June 2011, only 33 permits have been issued. No multifamily permits have been issued in Adams county during 2011. Araphoe County has seen a similar trend in which mutifamily permits have waned since 2008, with no multifamily permits being issued in 2011.

On the other hand, in El Paso county, where permit activity also dropped off sharply in 2009, multifamily permit activity in the first half of 2011 is almost three times 2010's full-year total. At the current pace, El Paso County will match the number of multifamily permits issued in 2008 before the crisis.

The next two maps show the overall relative trends for reporting counties since 2008 and since the financial crisis.

In first map of the two shows multifamily permit activity in all reporting counties including 2008 through June 2011. Note that multifamily permit activity is widespread and that numerous mountain and western slope counties are in the top two quartiles. Mesa, Weld and El Paso Counties are all in the top quartiles.

The last map shows permit activity by quartile in the period including 2009 through June 2011. Essentially, we're looking only at permit activity after the 2008 financial crisis. We see that since the crisis, multifamily permit activity is much less widespread and also that Mesa County and El Paso County have fallen to the third quartile. Weld County has fallen to the bottom quartile.

Looking again to permit activity for the first half of 2011 (see the map at the top of this article), we see that El Paso and Mesa Counties has risen to the top quartile again, and in all periods surveyed, Denver County remained in the top quartile while Larimer County has remained in the top two quartiles for the duration.

Clearly, the counties with the most robust activity in multifamily permits, relative to other counties, have been Denver County and Larimer county. Also, during the first half of 2011, El Paso County has seen significant growth allowing it to become one of the most active counties in multifamily permitting right now.

This examination of the past 42 months also allows us to make some guesses about where new multifamily construction will actually take place over the next two to three years. While many counties saw relatively large numbers of permits issued in 2008, it is likely that in many cases, the intervention of the financial crisis prevented many of these permits from becoming housing starts. In many of those cases, the projects are likely still pending if they are proceeding at all. If they are still pending, permits issued in 2008 may still provide some indications of where new multifamily construction may take place in the near term.

Note: When discussed here, a "multifamily permit" refers to one unit in a building of 5 or more units. Counties shown in white have reported no multifamily permits issued.