Rising mortgage rates because of inflation have served to dampen the mile-high asking price of a home on the Front Range. But that’s hardly a blessing for buyers. Housing remains out of reach for many; it’s just that lenders rather than sellers are now the ones driving up the cost.

Colorado’s Common Sense Institute issued a report the other day showing that housing affordability in Colorado is in fact plummeting by the lights of the institute’s “Homebuyer Misery Index.” As reported by The Gazette, a 3% decline in home prices since May has been offset by a 32% leap in 30-year mortgages in the same time. And that’s after years of surging real estate prices to begin with. The overall cost to purchase a Colorado home has doubled in the past seven years.

Home prices and mortgage rates factor into purchasing a home, of course. Common Sense’s Colorado Homebuyer Misery Index weighs the impact of both on affordability. And the impact has been harsh. The institute’s report found:

In the past 12 months, rising home prices have required on average an extra 23 hours of work per month to afford the mortgage on a median-priced home in Colorado.

Household incomes are not keeping pace with the rising costs.

Home affordability in Colorado since 2015 has fallen 86%.

Homebuilder confidence has declined 75% since 2020.

“Due in large part to the cost of housing, Colorado is an increasingly expensive place to live,” Common Sense economist Steven Byers said in a news release.

“With increased prices and rising interest rates, the affordability of purchasing a home is near the lowest point in more than 33 years.”

And yet, it’s neither the sellers nor the lenders who are ultimately responsible for Colorado’s spiraling housing costs. Blame goes to a simple lack of supply amid perennially growing demand in a rapidly growing state.

The report found that 80% of Coloradans live in a county that has a housing supply shortage as of 2021. Those deficits range from 25,000 to 117,000 units.

It’s not that homebuilders haven’t been building; they just haven’t been building enough – and certainly not enough in the affordable range. One big reason is an assortment of state and local government regulations – some implemented, some pending – that strangle housing supply or push up production costs.

Those regulatory hurdles are wide-ranging. There are city and county land-use decisions driven by no-growth sentiments. State law exposes builders to excessive liability and the threat of lawsuits for flaws in home construction rather than encouraging a framework for fixing the flaws.

And soon to be implemented is the whole green agenda of the state and some local governments. They stand to substantially raise the cost of homes – to the point that it won’t pay builders to proceed with more modestly priced, entry-level projects; the intended market for them simply won’t be able to afford them.

For example, a pending statewide policy initiative set in motion by recent legislation will force the eventual “electrification” of natural gas-free homes. Not only is current technology questionable in its ability to effectively heat Colorado homes with electricity, but builders are warning it will add substantially to the price of a new home.

Adding only the most upscale, green-friendly homes to the supply side of the equation is no way to accommodate the demand for affordable housing. Will state and local policymakers pay heed?

Denver Gazette Editorial Board