Co-Authored by Matt Frommer, Housing Forward Colorado, and Luke Teater, Thrive Economics

One common myth about new market-rate housing is that it’s all “luxury housing for rich people.” Those who make this argument often acknowledge that we have a housing affordability crisis, but insist that changing zoning laws to allow more market rate homes “won’t help” because none of the new housing will be affordable. At first glance that may sound plausible, but it deserves a closer look. “Market rate” housing means it’s rent or sold at prices set by the private market without any public subsidies, affordable housing tax credits, or rent caps.

 

New apartments are affordable for most households

Census data shows that most apartments built in the last five years are relatively affordable for households across the Denver metro area. Nearly 80% of apartments built since 2020 are affordable to households earning the area median income (100% of AMI). Put differently, a family in the middle of the income distribution can afford 80% of apartments built since 2020, suggesting the vast majority of these homes are not what most people would call “luxury”. According to the US Department of Housing and Urban Development (HUD), a home is affordable if the residents pay no more than 30% of their income on housing costs.

Share of new Denver-area apartments built 2020-2024 by income level they’re priced to serve (household Area Median Income (AMI)). 

Nearly half of new apartments built since 2020 are affordable to low-income households earning 80% of AMI, about $82,000 per year for a two‑person household in Denver. In high‑cost regions like Denver, workers like teachers, bus drivers, restaurant workers, nurses, and childcare providers often qualify as “low income” under housing rules, largely because local housing costs have risen faster than their wages. So, it’s especially notable that much of the new housing is affordable to households earning between 60% and 80% of AMI, a group often left out of traditional affordable housing programs, which tend to target households earning 60% of AMI or below. In other words, new market-rate housing is workforce housing.

 

Truly Luxury Apartments are Rare

Yes, there are some new high‑end buildings with rooftop jacuzzis and pet spas, but the data shows that only 3% of recently-constructed apartments are only affordable to households making over 120% AMI – $135,000 or more for a household of two. These 3% are truly luxury units and reflect properties that are pursuing a different business strategy and tenant base than most apartment owners, as shown by their median rent of $6,018 per month. Many of these high-end units are located in or near downtown Denver.

Interestingly, around 14% of new apartments built between 2020 and 2024 are so competitively priced that they overlap with rents for subsidized affordable housing reserved for families earning 60% of AMI or below. In other words, for some income levels, taxpayer‑subsidized affordable housing is competing with market-rate housing that’s delivered at no taxpayer cost. As a result, owners of affordable housing developments are struggling to lease their units. The vacancy rate for income-restricted units for households making 60% of AMI is 12.8% compared to 8.3% for market rate apartments. This isn’t to suggest we don’t need subsidized housing, but it may be worthwhile to revisit the policy design and adjust the AMI levels to deliver affordable housing for very low-income families earning 30-50% AMI that aren’t served by the market.

 

New apartment rents are very similar to existing apartment rents

Perhaps most surprisingly, new Denver-area apartments are not just being built at the high end of the market. Their rents look a lot like the rest of the rental market. In fact, nearly half of all new units rent for less than the current median rent for all units.

The graph below compares the share of new rental units built since 2020 (red) with all rental units (blue) by monthly rent. If all new apartments were “luxury” housing, we would expect to see taller red bars on the right side of the graph at higher rent levels. Instead, the distribution of new apartments is remarkably similar to that of the overall rental market.

 Source: US Census Bureau Building Permits Survey

For both new and existing rental housing, the most common rent range is $1,500–$2,000 per month. In Denver, that roughly corresponds to 60–75% of AMI for a one-bedroom apartment and 50–65% of AMI for a two-bedroom apartment.

 

New supply is bringing rents down across the board

Not only are new apartments relatively affordable, but the historic amount of new supply is driving down rents in Denver, especially for lower‑income families. In 2025, Denver metro rents fell 7.2% overall and 11.5% for Class C apartments – the older, more affordable segment of the market that typically houses lower‑income families. As new supply comes online, it allows some households to “trade up”, moving into larger or newer units for similar monthly costs. Those moves free up older, less expensive units for others, creating a ripple effect known as “moving chains.” Even if a new building doesn’t look affordable at first glance, adding homes at the top or middle of the market helps relieve pressure at the bottom. Our previous blog post covered this in more depth.

In addition, when compared to detached single-family housing, multifamily homes are inherently less expensive to build. They use less land (and land is not cheap – an acre in Denver now runs around $1.2 million) and tend to be smaller than detached homes. As a result, developers can charge lower prices per unit.

To recap, new market rate housing is affordable for most households and also helps put downward pressure on rents across the market. Therefore, policies that enable more market-rate multifamily housing should be considered core affordable housing solutions. In reality, “luxury housing” may be more of a marketing term than a description of who actually lives in the vast majority of new homes.

 

The risk of slowing production

Unfortunately, Denver’s housing pipeline has slowed dramatically because of higher interest rates, rising construction costs, and softening rents. New housing permits in metro Denver have fallen to roughly half of their 2022 peak. If this trend continues, we should expect rents to climb again in 2026 and 2027, with the sharpest increases likely in the most affordable parts of the market. To get renters off this rollercoaster, Colorado needs sustained, steady housing production, so that homes remain attainable over the long run.

Everything discussed above is specific to the rental market, which has seen meaningful price reductions due to record levels of new apartment supply. The same cannot be said for the homeownership market. This is partly due to the limited number of multifamily condominiums coming online, but it is also a result of exclusionary zoning policies that reserve most residential land for single-family homes on large lots and prohibit affordable “middle housing” options like townhomes, duplexes, and cottage courts. In practice, this means many communities are legally constrained from adding more for-sale housing – regulations that will need to be reformed if we want to see similar success in the homeownership market.

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*This analysis examines RealPage rent data for 851 Denver metropolitan area apartment properties (buildings with 50+ units) that have complete asking rent data for 2023-2025. Properties are classified using RealPage’s standard definitions: Class A (newest/highest quality), Class B (mid-market), and Class C (older/most affordable).

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