Pub. 6 2016-2017 Issue 5

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S March • April 2017 19 Therefore it should be no surprise that the average rent (across all unit types) for Denver Metro is $1,636. While that average rent keeps Denver metro substantially lower than high costsmarkets such as San Francisco, NewYork and Chicago it does demonstrate the multifamily construction growth is weighted to the top tier of the market. The growth on the higher end of the rental market targets a specific income bracket. Based on that average rent HUD defines someone as “cost- burdened” if they are spending more than 30% of their income on rent and utilities. That puts the targeted income bracket at just above $60,000 to not be cost-burdened. For most recent college graduates this would be an excellent paying first job. The reality is that many of the new jobs being created are paying far less (closer to $36,000) and are being created in the office and food service sector (see below): Including utilities these workers may be paying closer to 50% of their income on rents and utilities which HUD defines as “severely cost-burdened”. According to a recent study 25%of the total renters in Colorado today are severely cost-burdened. Multifamily construction supply has been increased to meet growing demand, but in some cases the economic impact of the labor force (and consumer buying power) had not been adequately addressed. This could lead to permanent lenders having debt service coverage violations if concessions are required to lease-up. The banks in the multifamily construc- tion space may subsequently be impacted by fewer permanent take-out options from other lenders. Capital markets lenders which include FHA insuredmort- gage, Agency Debt, and to a lesser extent Life Company and CMBS still remain a viable alternative for banks to provide customers or prospects with off- balance sheet sources of capital. Of these the FHA insured mortgage, 221(d)(4) , is the only combined construction and permanent financing option which would not require a bank construction loan. n Glenn Martin is a Regional Director at Promontory Interfinancial Network. Promontory provides unique balance sheet and liquidity management services, including CDARS®, ICS®, IND®, Yankee Sweep®, Bank Assetpoint®, and Residential Mortgage NetworkSM for members of its nationwide network of banks. HYPERLINK “http://www.promnetwork.com ” www.promnetwork.com Denver has become known as a “lifestyle” destination for young workers and families which helps to drive the in migration. The majority of the projects completed fall under the newer and higher rent categories A+ or A properties based on amenities and location.