A Mile High Solution To Housing Affordability?

Want to expand the availability of deed-restricted affordable units? Build market-rate ones!

One of the most dispiriting debates in housing policy and land use concerns the relative merits of deed-restricted affordable versus market-rate housing. YIMBY advocates argue building more market-rate units will eventual filter down and expand affordability; many on the Left argue that market-rate housing reduces the availability of land for deed-restricted affordable units. Eunisses Hernandez ran a successful Los Angeles City Council campaign opposing all market-rate development.

This is insane. To date, virtually all the empirical evidence supports the market-rate position, and I have yet to find a single example of the Left-NIMBY position actually occurring, but even so, filtering usually takes decades, especially for very-low and extremely-low income families.

Now, new experience in Denver reveals a sort of compatibility in unforeseen ways. The Mile High City for many years had a horrible rental market that priced out all but more affluent families. But after the COVID pandemic, developers responded to the hot market and began constructing market-rate rental units – doubling from 10-12,000 a year to an unprecedented 23,000 in 2024.

No surprise there. But then:

Rents then began decreasing, and this year they have fallen 8% over 2025 rents to a level comparable to rates five years back….

“That left 12,000 vacant units, brand new,” said [analyst Scott Rathbun, owner of Denver-based Apartment Appraisers & Consultants, Inc., which issues the monthly “Apartment Insights” report used by multifamily developers and managers to plan their operations]. “Because we had overbuilt the market, you had all of these empty units. Vacancies spiked, and apartment owners and managers started lowering their rents and offering huge concessions.”

The vacancy rate topped off last year at around 7.6%. At its height, Rathbun said, there were just over 35,000 vacant units in the seven-county Denver area. With newly completed units included, the vacancy rate had surpassed 12%.

“We hadn’t seen anything like this,” he added. “We’re seeing managers offer 10 or 12 weeks rent free.”

Well, whadda you know: increase supply without an increase in demand, and prices fall. Why didn’t anyone think of that before?

But then it gets better:

According to new data released last week, renters of subsidized affordable units are, in some cases, opting to move to conventional, non-subsidized units as they take advantage of market-driven rent decreases.

“We’re seeing people move out of subsidized affordable housing and move into market-rate units,” Rathbun told The Denver Gazette.

Along with the advantage of getting what may be nicer finishes and amenities, those renters find a second advantage of avoiding subsidized affordable units: “They don’t have to go through all the paperwork each year, which is a lot more onerous than you might imagine,” Rathbun added.

If this report is correct, filtering is working between the market-rate and deed-restricted markets. And that means that increasing market-rate can increase the availability of deed-restricted units because there will be less competition for the scarce deed-restricted units.

Put another way, if you want to “increase” the number of deed-restricted units, one way to do it is to build more market-rate units!! Filtering might work faster we previously thought.

Obviously one story in one housing market in one time period does not a robust empirical finding make. But this deserves closer scrutiny and scholarly attention. If more building can make rents drop – and Denver is hardly the first example of that – how does that affect waiting lists for deed-restricted units?

And if it turns out that waiting lists drop, then…well…what will we argue about then? Somehow I imagine we will find something.

Denver, Filtering, YIMBY