Denver could extend key deadline for languishing apartment projects

Denver is considering throwing a lifeline to 23,000 planned apartments and residences at risk of never getting built.

Currently, developers have 30 months from the time their project’s site development plan is approved to obtain building permits to begin construction. Otherwise, their SDP expires, and they must resubmit it if they hope to build.

But with an increasing supply of apartments and the costs to build new ones rising, groundbreakings have fallen off a cliff. That means a lot of SDPs are languishing — approved, but with a developer unable or unwilling to break ground. 

“The oversupply our city is experiencing right now is short-lived, and so it’s really important that we keep these shovel-ready projects alive so that we don’t see an undersupply,” said Brad Buchanan, executive director of Denver’s Community Planning and Development department.

Brad Buchanan

Buchanan’s department is pushing the Denver City Council to approve a measure for all projects that had an SDP approved before 2026 to extend the deadline to get their permits by an additional three years.

The Denver Planning Board will be the first governmental body to review the plan. It’s scheduled to weigh in Wednesday afternoon. The City Council will vote on the measure in May. Councilwoman Amanda Sandoval is also sponsoring the bill.

Many of the projects that could be extended were submitted in the months before the July 2022 implementation of the city’s Expanding Housing Affordability ordinance, which requires new residential projects to reserve between 8% and 15% of their units for people making below the median income, or to pay a large fee.

Jonathan Alpert, partner at local developer Westfield, said that requirement would make it more difficult for him to break ground. He has two site development plans approved. Both are 8-story apartment buildings, one in LoDo and one in Cap Hill.

Westfield’s projects would be subject to the EHA if the plans expire and it resubmits them.

“They certainly do not work right now with the headwinds and the market,” Alpert said of his projects. “If we’re subject to the EHA, that exacerbates the issue.

“This potential extension is huge for us.”

Alpert noted that macroeconomic factors, like high interest rates and construction costs, have complicated development nationally. 

“As a result of the oversupply, rents are not there,” he said. “It’s hard to make any of these projects pencil, and demand is down right now.”

The first projects approved before the EHA took effect had their SDPs expire in December, according to Buchanan.

“We’ve lost some others once since then, and we’re about to lose a lot more this year,” he added.

Denver’s apartment vacancy sits at 8.2%, according to the Apartment Association of Metro Denver, the highest since 2010. And concessions on new units have risen to record highs, too. The city saw 10,300 apartments break ground in 2021, far higher than the 2,300 started last year, according to data from JRES Intelica CRE.

But developers are predicting a turnaround. Sean Campbell, president of Formativ, which is constructing projects in RiNo and Littleton, said he sees rents for new apartments rising in the first quarter of next year.

“If Denver is perceived to have an oversupply … cautious institutional investors will say, ‘Hey, let’s wait six or 12 months and then we’ll [break ground],’ and that’s really what this SDP extension is all about,” he said.

But without approved projects ready to break ground, builders may not be able to construct new housing until supply gets overly constrained and rents shoot up.

“If we canceled everybody’s SDP, we wouldn’t have the ability to regenerate the pipeline,” Campbell said.