The state of Colorado has emerged as a leader in the issuance of permits for new construction, according to a recent article by Mile High CRE. A report shows the Denver Metro Area is ranked eighth among other states in the number of building permits given out. However, the construction industry along with civil engineering firms in Denver has been facing several challenges, including long plan review times, workforce shortages, material price volatility, and new regulations, which have impacted the number of permits issued year-over-year.
A Decline in Denver Building Permits for 2022
Despite Colorado's high ranking in overall permit issuance, there has been a clear decline in construction planned for the immediate future, with almost all Colorado metro areas recording year-over-year decreases in the number of permits issued in 2022 compared to 2021. Denver-Aurora-Lakewood, the state's largest metro area, saw a significant decrease of -21.78% in the number of permits issued in 2022, with a slight drop in the number of permits for multifamily buildings.
Challenges from Denver’s Affordable Housing Ordinance
One of the major challenges faced by builders in Denver is the city council's approval of the Expanding Housing Affordability proposal, which introduced new fees and options for commercial multifamily developers to encourage more options in the affordable housing market. The ordinance requires new residential construction of 10 units or more to designate 8-12% of their units as affordable housing to those who make up to 60% AMI. Developers can opt out of designating their units for affordable housing by paying a fee-in-lieu, which can range from $250,000 to $478,000.
Three months after the release of the housing ordinance, the Apartment Association of Metro Denver reported an 88% decrease in applications for commercial multifamily development, indicating a negative trend in the industry. The fallout of the new ordinance remains uncertain, and its effects on the immediate submittals of new multifamily housing projects are yet to be determined.
Building Material Costs on a Rollercoaster
Builders in Denver also face the challenge of material price volatility, with building material prices experiencing significant fluctuations over the last two years due to supply chain issues and economic factors following C-19. The sharp rise in lumber prices in 2021 and the subsequent decline in 2022 have complicated budgeting for construction projects. Builders have had to find solutions to these price fluctuations by expanding budgetary requirements for contingencies and adding contract clauses that separate them from the liabilities of price fluctuations during a project.
Denver Permit Delays
In the realm of civil engineering, it is widely acknowledged that the Community Planning and Development Department in Denver has been struggling to keep up with permitting demands. As of March 21, 2023, the timeline required for a major residential project to submit plans and receive a building permit has ballooned to 289 days, fluctuating daily. The approval process presents a significant challenge for construction projects, both residential and commercial, as delays in permit approval translate to increased risk and costs for project owners. Raptor Civil Engineering can offer valuable expertise to facilitate the process during early design, but prolonged wait times are just one contributing factor to the decline in reported permit issuances over time.
Raptor Civil Engineering a Vital Member for Development
Civil engineering firms, such as Raptor Civil Engineering, can play a vital role in mitigating material concerns by providing suggestions and recommendations at the beginning stages of construction projects. Raptor can help guide owners and developers through the necessary steps of early-phase construction. Due Diligence and Development plan consultations are just the beginning of Raptor’s service offerings. Despite the challenges faced by the construction industry in Denver, the state of Colorado remains one of the top cities for issuing permits for new construction.