Housing in the Evolving American Suburb The Story of Metro Denver. Prepared for ULI Colorado June, 2017

Transcription

1 Husing in the Evlving American Suburb The Stry f Metr Denver Prepared fr ULI Clrad June, 2017

2 Cntents Key Findings 03 Methdlgy 05 Suburbs Tday: The Metr Denver Stry 09 Suburban Paradigms in Metr Denver 18 Upcming Suburban Trends 26 Methdlgical Cnsideratins 32 Critical Assumptins 34 Backgrund & Study Objectives Tday, much f the discussin surrunding the future f real estate has shifted away frm the areas in which the majrity f Americans currently live and wrk: The suburbs. The ften-verlked reality is that there are many types f suburbs, and the unique challenges and pprtunities within each f thse types f suburbs are frequently lst within the verarching label f suburbia. In December 2016, RCLCO wrked with the ULI Terwilliger Center fr Husing t publish Husing in the Evlving American Suburb, s as t re-rient the discussin arund suburbs and fcus n their unique challenges and pprtunities, rather than the prevailing cities versus suburbs dynamic. Fr the purpse f the riginal reprt, RCLCO develped a new way t analyze suburbs. This methdlgy takes int accunt the fact that, fr many Americans, the wrd suburb is very much tied t husing. As such, RCLCO created a husing-fcused apprach t classifying suburban neighbrhds, cnsidering factrs such as density, husing type, hme value, and prximity t dwntwn. Using this classificatin system, RCLCO determined that there are a wide variety f suburban typlgies and densities, and that, despite recent urban grwth, the suburbs cntinue t be prfundly imprtant t the natin as a whle. Fr the purpse f this reprt, RCLCO has refined its husing-fcused methdlgy, and applied it t the Denver, Clrad metrplitan area. Fr the purpse f this reprt, the Denver metrplitan area is defined as the Denver-Aurra-Lakewd, CO; Bulder, CO; and Greeley, CO Metrplitan Statistical Areas ( MSAs ). The fllwing infrmatin and cnclusins are based n this new way f thinking abut the suburbs. While sme f the maps and findings in this reprt may therefre defy cnventinal wisdm abut the suburbs, they are reflective f a mre nuanced way f thinking abut develpment and redevelpment pprtunities, bth in the range f suburban typlgies, and in light f a rapidly changing suburban cntext. 2

3 Key Findings: Natinal America remains largely a suburban natin. In the 50 largest metrplitan areas, suburbs accunt fr 78% f the ppulatin, 76% f husehlds, and 31% f the land area. Suburban grwth has driven recent metrplitan grwth. Frm 2000 t 2015, suburban areas accunted fr 91% f ppulatin grwth in the tp 50 metrs, while urban areas accunted fr nly 2%. Althugh urban areas captured a larger share f 16% f ttal ppulatin grwth between 2010 and 2015, suburbs still accunted fr 79% f ppulatin grwth, mre than their share f ppulatin. The large majrity f Americans wrk in suburbs, and a disprprtinate amunt f recent jb grwth has ccurred in the suburbs. As f 2014, 65% f emplyment in the 50 largest metrs was in suburbs. Between 2005 and 2010, emplyment in suburban areas remained stagnant, while it increased by 8% in urban areas. But between 2010 and 2014, the number f jbs increased by 10% in suburbs, cmpared with 6% in urban areas. During this same time, 71% f jb grwth ccurred in the suburbs. Suburban residents verall have higher incmes. The median husehld incme in suburbs ($71,600) is substantially higher than in urban areas ($49,100). In additin, 87% f 35- t 54-year-lds with incmes abve $75,000 live in the suburbs (cmpared with 76% f thse with incmes less than $75,000). And 90% f thse between ages 55 and 74 earning mre than $75,000 live in the suburbs (cmpared with 79% f thse in this age range earning less). The suburbs are yung cmpared with their regins verall. 84% f children ages 18 and yunger and, cntrary t ppular perceptin and mst media attentin, 71% f 25- t 34-year-lds in the 50 largest metrs live in the suburbs. American suburbs as a whle are racially and ethnically diverse. Nearly 74% f the minrity ppulatin in the 50 largest metrs lives in the suburbs nt much lwer than the 78% f the ppulatin in these metr areas as a whle. The reginal variatin in hme values between suburbs and cities is substantial. On average, the median hme value in urban areas is $340,000 cmpared with $306,000 in suburban areas (nt cntrlling fr hme type r size), with substantial variatin by regin. In the New Yrk metr area, median hme values in urban areas are 20% higher than in suburban areas. Hwever, the ppsite relatinship is true fr what we define as Legacy (such as Detrit and Prvidence) and Heartland (like Indianaplis and Minneaplis) metr areas, where suburban areas have median hme values that are substantially higher than median hme values in urban areas (25% fr bth). In Gateway (including Chicag and Ls Angeles), Sun Belt (such as Dallas and Orland), and New West (like Denver and Seattle) metr areas, median hme values are very similar in urban and suburban areas, nt cntrlling fr hme type r size. Different types f suburbs will have different husing demand and develpment pprtunities. There are many develpment trends, issues, and innvative husing develpment examples in five distinct types f suburb within the 50 largest metrs: established high-end, stable middle-incme, ecnmically challenged, greenfield lifestyle, and greenfield value. 3

4 Key Findings: Metr Denver The suburbs remain a dminant part f Metr Denver. In Metr Denver, 72% f peple live and 61% f peple wrk in the suburbs. Nnetheless, urban neighbrhds are a substantial part f the Denver metr area. 16% f peple live and 33% f peple wrk in urban neighbrhds, mre than mst peer cities. Hwever, there is evidence t suggest suburbs are n lnger the main driver f grwth in Metr Denver. Ppulatin grwth trends indicate that utward expansin has slwed, and that urban areas are nw an equal driver f new grwth. Between 2000 and 2015, the ppulatin f urban areas grew by 5%. During this time, the suburbs experienced strnger grwth f 21%, likely as a result f the husing bm that ccurred at the suburban fringe as the regin expanded. Hwever, bth urban and suburban areas grew at a rate f 6% between 2010 and This even grwth indicates that Denver, which is a newer metr area in cmparisn t many lder, mre established castal metrs, may be maturing, and that it is n lnger expanding as much as it nce was. Emplyment grwth patterns tell a similar stry. Between 2010 and 2014, urban emplyment increased by 9%, while suburban emplyment increased by 12%. This balanced grwth is rare fr the regin, and may pint t established emplyment patterns in Metr Denver, where suburban jb grwth is nt utpacing urban jb grwth as much as it is in many suthern and western metrs. Mrever, the existing distributin f jbs suggests Denver is a majr emplyment cre in the regin. In Metr Denver, 33% f jbs are in urban neighbrhds, suggesting Denver has a mre established jb cre than peer cities with lwer shares. Metr Denver has prprtinally mre urban Millennial husehlds than ther metrs. In Metr Denver, tw-thirds f Millennial husehlds live in the suburbs. Hwever, an additinal 30% f Millennial husehlds live in urban neighbrhds, mre than the natin, as a whle, and the regin, in particular. In Metr Denver, suburban hme values exceed urban hme values, but this dynamic is flipped elsewhere. In Metr Denver, suburban hme values are 6% higher than urban hme values. Meanwhile, suburban hme values are 22% and 14% lwer than the urban hme values in Seattle and Austin, respectively. This gap indicates that the urban neighbrhds in these peer cities are, as a whle, mre likely t ffer characteristics that result in husing premiums. Nnetheless, the 6% gap is narrw, and suggests many urban neighbrhds in Metr Denver have these characteristics. Husehld incme patterns indicate that the suburbs are mre likely t attract high-incme husehlds than urban areas in Metr Denver. In Metr Denver, suburban husehld incmes are 61% higher than urban husehld incmes, n average. This gap is narrwer in New West metrs like Seattle, which has higher urban incmes than the Denver metr, despite similar suburban incmes. As a whle, the suburbs are racially diverse. In Metr Denver, three-quarters f minrities live in suburbs. Hwever, minrities are far mre likely t live in ecnmically challenged suburbs. In Metr Denver, 42% f minrities live in ecnmically challenged suburbs, cmpared t nly 31% f the general ppulatin. Within these ecnmically challenged suburbs, minrities represent nearly half (48%) f the ppulatin, despite representing nly 35% f the ppulatin f the metr as a whle. 4

5 Methdlgy 5

6 Shrtcmings Factrs Used Name Existing Framewrks Mst existing methds f distinguishing suburban areas frm urban and rural areas use jurisdictinal bundaries, which can be prblematic because jurisdictinal bundaries d nt necessarily reflect differing character f develpment. Typically, areas utside the bundaries f a CBSA 1 are defined as rural, areas within the bundaries f the principal cities (r smetimes just the largest city) inside the CBSA are urban, and the suburbs cnstitute everything else that is lcated within the CBSA. This apprach is prblematic because many jurisdictins have changed in ways that make sense frm a gvernmental perspective but d nt reflect the physical and scial attributes f the place. A handful f definitins seek t define gegraphic areas as urban, suburban, r rural based n measurable and quantifiable, placebased characteristics, such as ppulatin r emplyment density, distance frm dwntwn, transprtatin ndes, and building types. Tw examples f these studies are Wendell Cx s and Jed Klk s methdlgies. These methdlgies have their wn unique shrtcmings, which are described in the table belw. Existing Urban/Suburban Classificatin Methds: Wendell Cx s City Sectr Mdel Jed Klk s Methdlgy Other Studies Transprtatin, emplyment, ppulatin, and husing characteristics, zip cde bundaries Husehld density, with breaks that are based n a natinwide survey f 2,008 adults n hw they describe where they live Jurisdictinal bundaries Shws differences between suburban areas based n when they were develped, but prduces very small urban cres, and des nt include any rural areas within MSA bundaries, regardless f hw develped r undevelped they might be Uses the same methdlgy and breaks fr all MSAs, even thugh densities mean different things t peple in different regins. As a result, prduces t much urban in sme metrplitan areas, and t much rural in thers In areas like Nashville, the principal city cmprises a large prtin f MSA, resulting in a lt mre urban than there is; vice versa in areas like Bstn 1 Cre Based Statistical Area; cnsist f ne r mre cunties anchred by an urban center f at least 10,000 peple, plus adjacent cunties that are sciecnmically tied t the urban center by cmmuting. 6

7 New Framewrk Althugh the existing methds f defining suburbs are analytically credible and useful fr understanding aspects f these places, they are insufficient fr understanding the issue arguably at the heart f the suburban stry: husing. As such, RCLCO created a husing-fcused classificatin f suburbs. The fllwing are the principal features f the system: Lcalized. The apprach classifies and differentiates amng suburbs at the census tract level. Althugh they are nt perfect prxies fr neighbrhds, census tracts ffer an apprpriate level f granularity fr assessing husing issues that the cunty scale des nt. Imprtantly, the apprach reflects the cmmn reality that within many city bundaries are areas that are functinally suburban, just as there are places utside city limits that are, fr all intents and purpses, urban. Multidimensinal. Starting with the general and accepted premise that suburbs are areas utside a city center, RCLCO used census-level data and data threshlds n ppulatin density, emplyment density, husing structure type, and distance frm city center t reflect the ways in which certain cmbinatins f thse characteristics prduce recgnizably suburban places. Reginally varied. The metr areas in which the suburbs are lcated are gruped int ne f six categries because certain regins are mre likely t fllw similar develpment patterns than are thers. Fr example, a metr area like Clumbus, Ohi, is assumed t be mre likely t exhibit similar patterns t Indianaplis than it is t a metr area like San Francisc. This apprach allws fr the reginal variatin f develpment patterns acrss the United States, given that ne city s dwntwn may be the same density as anther s suburbs. High-Density Urban Six MSA Categries Urban/Suburban Rural High-Density Medium-Density Lw-Density Gateway Sunbelt New West Heartland Legacy + New Yrk Based n husehld r emplyment density per square mile Urban High-Density Suburban Lw-Density Urban Suburban Lw-Density Suburban Based n husing unit type, distance frm dwntwn, and what drives the density (ppulatin r emplyment) 7

8 Visualizing the New Framewrk Classificatin f Urban and Suburban Tracts; Denver-Aurra-Lakewd, Bulder, and Greeley, CO MSAs Surce: RCLCO; ESRI Business Analyst 8

9 Suburbs Tday: The Metr Denver Stry 9

10 Descriptin Relevant Prjects Name Urbanizatin f the Regin The Denver metr area, like ther regins acrss the cuntry, has seen an emphasis n the grwth ccurring in urban places. This emphasis is partially attributable t the dramatic transfrmatins that have ccurred in urban neighbrhds. Driven by mass in-migratin and a renewed interest in walkable urban living, neighbrhds such as LD, RiN, LHi, and Cherry Creek have attracted a significant amunt f develpment and redevelpment, and have experienced dramatic transfrmatins. NEW DEVELOPMENT IN URBAN AREAS As a whle, these neighbrhds have seen the delivery f a cmbined 6,700 units since 2010, equivalent t a 65% increase in inventry. During this time, average multifamily asking rents increased by 41%, pinting t the rapid emergence f sme f these places, as well as the cntinued vitality f thers 1. Belw is a summary f the grwth and urban develpment that has ccurred in each f these neighbrhds. Lwer Dwntwn ( LD ) River Nrth ( RiN ) Lwer Highlands ( LHi ) Cherry Creek Denver Unin Statin, Cadence Unin Statin, Ascent Unin Statin, Dairy Blck Catalyst, Zeppelin Statin, Mdera River Nrth, INDUSTRY LHi Gld, The LAB, Line 28 at LHi, Prspect n Central Cherry Creek Shpping Center, HALCYON, Steele Creek, 250 Clumbine The histric lwer dwntwn f Denver, LD led the dwntwn renaissance in Denver in the early 2000s, and has emerged as a vibrant, mixed-use neighbrhd that caters t a variety f residents, businesses, and turists. Frmerly an industrial neighbrhd, RiN has reemerged as an arts district, and ffers a unique blend f urban luxury and industrial revival. Lcated in a mix f new and existing buildings, restaurants, breweries, and bars surrund the neighbrhd, which is nw seeing the additin f a htel and a cwrking space as well. Cnstructed in 2006, the Highland Bridge cnnects LHi t the grwth ccurring dwntwn. Recently named by Frbes Magazine as ne f America s Best Hipster Neighbrhds, LHi has rapidly emerged as a trendy neighbrhd, and ffers a mix f bars, restaurants, galleries, and independent shps. Once a high-end suburb, Cherry Creek is nw ne f the mst desirable urban neighbrhds in Metr Denver. Anchred by the Cherry Creek Shpping Center, Cherry Creek has seen the delivery f new luxury residential and ffice buildings, including sme cnd buildings selling units fr as much as $1,000 per square ft. 1 CStar; Includes Cherry Creek, Five Pints, Highland, and LD submarkets 10

11 Descriptin Relevant Prjects Land Area Name Urbanizatin f the Suburbs Hwever, urban develpment is nt ccurring at the expense f the suburbs. While parts f suburbs are beginning t lk and feel like cities, ther parts are retaining their residential character. Lcated in areas nce characterized by single-family develpment, Arvada, Aurra, Englewd, Lakewd, and Thrntn are seeing an increase in mixed-use, walkable develpment. Nnetheless, these areas are preserving suburban characteristics. As a whle, nly 6% f land in these suburbs is classified as urban, while nearly 66% f the land is classified as suburban. While sme f these suburbs are mre urban than thers, all have attracted frms f residential develpment in recent years. Fr examples f this develpment, see Suburban Paradigms in Metr Denver. NEW DEVELOPMENT IN SUBURBAN AREAS Arvada Aurra Englewd Lakewd Thrntn 1.8% Urban 86.0% Suburban 12.3% Other 3.5% Urban 51.2% Suburban 45.3% Other 22.0% Urban 78.0% Suburban 0.0% Other 14.5% Urban 72.2% Suburban 13.3% Other 4.0% Urban 95.9% Suburban 0.0% Other Arvada City Center, Water Twer Village, Slana Olde Twn Statin Anschutz Medical Campus, Hyatt Regency Aurra, the Frum at Fitzsimns, Edge Pinte CityCenter Englewd Belmar, Dwntwn Belmar Apartments, Trifeca Belmar The Ridge at Thrntn Statin Using urban renewal and ther subsidies, Arvada facilitated the transfrmatin f Olde Twn Arvada, which is nw an urban district that serves surrunding residents. Recently, Arvada has als seen suburban develpment near a frmer nuclear weapns facility, as a result f increasing demand fr husing in the area. Cupled with the pening f the Anschutz Medical Campus in 2006, the recent expansin f light rail alng I-225 has started t bring urban develpment t Aurra, which is in the prcess f planning a new, transit-riented dwntwn with access t dwntwn Denver After a light rail statin pened in 2000, Englewd helped pen CityCenter Englewd, replacing a struggling enclsed shpping mall that was adjacent t the statin, and giving the suburb its wn transit-riented dwntwn. In Lakewd, Belmar prvides urban residential and retail experiences, despite being lcated in a suburban cntext. Once an enclsed shpping mall, Belmar pened in 2004, and is nw a mixed-use, pedestrian-friendly dwntwn district that attracts peple frm acrss the regin. With three N Line statins currently under cnstructin and anther tw that have been prpsed, Thrntn is seeing transit-riented develpment begin t ccur n sites lcated alng the crridr. Nte: Other land area includes thse census tracts classified as rural and park/recreatinal/institutinal. 11

12 Cntinued Demand fr Suburban Lifestyle Despite recent grwth in urban areas, there is still strng natinal demand fr husing in suburban, residentiallyfcused areas. Buyers cntinue t mve t the suburbs fr a variety f reasns. Natinally, sme f the mst imprtant factrs influencing the mve frm cities t suburbs include: The ability t purchase larger and/r single-family hmes that are cmparatively mre affrdable n a per square ft basis, in many cases Lcatinal Distributin f Hmes Purchased; Natinal 60% 52% 50% 40% 30% Highway accessibility Better schl systems Larger lts Hmes that meet many f these criteria are generally difficult t find in cities, and, when available, are als very expensive. As such, there has been and will cntinue t be demand fr husing in the suburbs, where hmes that meet these criteria are ften bth mre prevalent, as well as mre affrdable. 20% 10% 0% 20% 14% All Buyers Suburb/Subdivisin Small Twn Urban Area/Central City Rural Area Resrt/Recreatin Area 13% 2% Factrs Influencing Mve frm City t Suburbs; Natinal Able t buy a larger hme Only single family hmes Access t Highways Better schls Larger lts Similar services Upscale finishes Established neighbrhd with lder hmes Shrter cmmute New hme and exactly what I want Mre prestigius neighbrhd Walkable t lcal stres Mix f peple with varius backgrunds Public Transit Surce: RCLCO; 2016 NAR Hme Buyer and Seller Generatinal Trends Reprt

13 Metr Denver Takeaways: Ppulatin Like ther metrs in the regin and acrss the cuntry, Metr Denver has a large and grwing suburban ppulatin. Hwever, while the suburbs have traditinally accunted fr mst f the ppulatin grwth in Metr Denver, urban areas are nw grwing at the same rate, and this balanced grwth pints t the maturity f the regin as a whle. Suburbs accunt fr 77% f the ppulatin in Metr Denver, as cmpared t 78% f ppulatin in the 50 largest metrs, and 81% f thse metrs classified as New West. This trend suggests that peple in Metr Denver are generally just as likely t live in suburban areas as peple in ther metrs in the natin, as a whle, and the regin, in particular. Between 2000 and 2015, the suburbs f Denver experienced strng ppulatin grwth, likely as a result f the husing bm that ccurred as the regin cntinued t grw, and as the suburban fringe cntinued t expand. Nevertheless, shrter-term grwth trends suggest that ppulatin grwth is nw ccurring evenly. Between 2010 and 2015, bth urban and suburban neighbrhds grew by 6%. Cnsistent with natinal and reginal trends, this even grwth indicates that Denver, which is a relatively newer metr area in cmparisn t lder, mre established castal metrs, may be maturing as a regin, and that it is n lnger expanding t the extent it nce was. Distributin f Ppulatin; Varius Gegraphies; 2015 Tp 50 Metrs New West Metr Denver 77.5% 80.8% 77.1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% DISTRIBUTION OF POPULATION POPULATION GROWTH POPULATION GROWTH ( ) ( ) URBAN SUBURBAN URBAN SUBURBAN URBAN SUBURBAN NATIONAL Tp 50 Metrs 16.7% 77.5% 1.4% 13.1% 3.4% 3.7% REGIONAL New West 14.2% 80.8% 5.2% 22.2% 4.8% 4.8% PEER CITIES Seattle 9.9% 85.7% 12.3% 13.2% 9.2% 4.8% Salt Lake City 14.1% 79.9% 3.3% 31.9% 4.1% 6.9% Austin 17.6% 71.9% 4.7% 50.6% 7.5% 12.7% DENVER 15.6% 77.1% 5.3% 21.2% 6.3% 6.2% Surce: RCLCO; ESRI Business Analyst Urban Suburban Rural/Park/Institutinal 13

14 Metr Denver Takeaways: Emplyment Thugh the majrity f jbs in Metr Denver are lcated in the suburbs, Metr Denver has mre urban emplyment than many ther metrs, and urban and suburban emplyment are increasing at similar rates. These patterns are cmmn in metrs with established urban jb cres, where suburban emplyment is nt grwing at the expense f urban neighbrhds. Suburbs accunt fr 61% f jbs in Metr Denver, as cmpared t 65% f jbs in the 50 largest metrs, as well as 64% f jbs in thse f the 50 largest metrs that are classified as New West. This trend suggests peple in Metr Denver are less likely t wrk in the suburbs than peple in bth the natin and the regin. Similar t peple in the Seattle metr, peple in Metr Denver are mre likely t wrk in urban areas than peple in ther New West metrs. Distributin f Emplyment; Varius Gegraphies; 2014 Tp 50 Metrs New West Metr Denver During the Great Recessin, Metr Denver saw strng urban jb grwth, cmpared t stagnant suburban jb grwth. This pattern is cmmn in Gateway metrs like San Francisc and Chicag, which have urban jb cres that are strnger and mre established than urban jb cres in many ther metrs. Hwever, recent jb grwth has been mre balanced in Metr Denver. Between 2010 and 2014, urban emplyment increased by 9%, while suburban emplyment increased at a rate f 12%. This balanced jb grwth ccurred in mst Gateway metrs, and suggests places like Denver and Seattle have established jb grwth patterns, and that suburban emplyment grwth in thse metrs is nt ccurring at the expense f urban areas, as it is in many ther emerging suthern and western metrs. Further, this strng urban jb grwth is likely part f the reasn why utward residential expansin appears t be slwing. 65.2% 63.5% 61.3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% DISTRIBUTION OF EMPLOYMENT EMPLOYMENT GROWTH EMPLOYMENT GROWTH ( ) ( ) URBAN SUBURBAN URBAN SUBURBAN URBAN SUBURBAN NATIONAL Tp 50 Metrs 30.4% 65.2% 7.5% -0.3% 6.4% 9.6% REGIONAL New West 32.7% 63.5% 5.6% 1.0% 5.0% 11.6% PEER CITIES Seattle 33.7% 64.0% 16.6% 1.8% 9.4% 11.3% Salt Lake City 25.4% 68.4% 9.3% 2.4% 0.2% 16.5% Austin 44.5% 51.4% 13.8% 14.5% -0.5% 23.0% DENVER 33.2% 61.3% 7.2% -0.1% 9.1% 11.9% Surce: RCLCO; Lngitudinal Emplyer-Husehld Dynamics (LEHD) Urban Suburban Rural/Park/Institutinal 14

15 Metr Denver Takeaways: Millennials Cntrary t ppular belief and mst media attentin, there are many Millennials living in the suburbs, particularly in New West metrs. While the share f Millennial husehlds is indeed higher in urban areas than it is in suburban areas, there are many mre Millennial husehlds living in suburban areas. Hwever, Metr Denver has prprtinally mre Millennial husehlds in urban areas than many ther metrs, thugh the majrity f Millennial husehlds still live in the suburbs. In the 50 largest metrs, Millennial husehlds cmprise 29% f all husehlds in urban areas, as cmpared t 18% f husehlds in suburban areas. Hwever, thugh Millennial husehlds represent a larger share f the husehlds living in urban neighbrhds, 71% f all Millennial husehlds still live in the suburbs. These trends suggest that the idea that all r mst Millennials live in urban neighbrhds is based n the fact that Millennials represent a larger share f urban ppulatin than ther grups. Hwever, while urban neighbrhds are generally mre likely t attract Millennials instead f ther demgraphic grups, the majrity f Millennials still live in the suburbs. This statement is true fr Metr Denver, where 66% f all Millennials live in the suburbs. Hwever, 30% f Millennial husehlds in Metr Denver still live in urban neighbrhds, mre than the natin, as a whle, and the regin, in particular. This trend indicates that, while Millennial husehlds in Metr Denver are still mst likely t live in the suburbs, they are prprtinally mre likely t live in urban neighbrhds than thse Millennial husehlds living in many ther metrs. What Percentage f All Husehlds are Under the Age f 35? Varius Gegraphies; 2015 Where D All Husehlds that are Under the Age f 35 Live? Varius Gegraphies; % 35% 30% 25% 20% 29.3% 17.8% 32.0% 35.8% 20.0% 20.1% 100% 90% 80% 70% 60% 50% 15% 10% 5% 40% 30% 20% 10% 71.3% 72.8% 65.9% 0% Tp 50 Metrs New West Metr Denver 0% Tp 50 Metrs New West Metr Denver Urban Suburban Suburban Urban Rural/Park/Institutinal Surce: RCLCO; ESRI Business Analyst 15

16 Metr Denver Takeaways: Ethnicity Suburbs are racially and ethnically diverse, particularly in Metr Denver, where three-quarters f minrities live in the suburbs. In the 50 largest metr areas, nearly 74% f minrities live in the suburbs. The percentage f minrities living in the suburbs is higher fr New West metrs, in general, and Metr Denver, in particular. In Metr Denver, three-quarters f minrities live in the suburbs, while nly 20% f minrities live in urban neighbrhds. This distributin is similar t the distributin seen in ther New West metrs, as well as peer metrs like Salt Lake City and Austin. Minrity Ppulatin as a Percentage f Ttal Ppulatin; Varius Gegraphies; % 62.8% Distributin f Minrity Ppulatin; Denver-Aurra-Lakewd, Bulder, and Greeley, CO MSAs; % 50.0% 40.0% 54.4% 45.6% 47.0% 44.2% 34.3% 5.4% 30.0% 19.5% 20.0% 10.0% 0.0% Tp 50 Metrs New West Metr Denver Urban Suburban DISTRIBUTION OF MINORITY POPULATION PERCENT MINORITY PERCENT MINORITY URBAN SUBURBAN URBAN SUBURBAN TOTAL NATIONAL Tp 50 Metrs 21.9% 73.7% 62.8% 45.6% 48.0% REGIONAL New West 16.2% 79.5% 54.4% 47.0% 47.7% PEER CITIES Seattle 9.4% 87.1% 32.6% 34.8% 34.3% Salt Lake City 19.3% 76.7% 33.6% 23.6% 24.6% Austin 14.7% 70.8% 40.0% 47.0% 47.7% DENVER 19.5% 75.1% 44.2% 34.3% 35.2% 75.1% Urban Suburban Rural/Park/Institutinal Surce: RCLCO; ESRI Business Analyst 16

17 Metr Denver Takeaways: Hme Values and Incmes In the Denver metr area, suburban hme values and incmes are higher than urban hme values and incmes, suggesting that the suburbs are hme t many high-incme husehlds that are willing t pay a premium fr suburban living. While this dynamic is cmmn in the regin, it is flipped in a handful f peer metrs. In the 50 largest metrplitan areas, suburban hme values are 10% lwer than urban hme values. Hwever, this gap is inverted in New West metrs like Denver, where suburban hme values are, n average, 6% higher than urban hme values in thse areas. On the ther hand, urban hme values are higher than suburban hme values in certain peer cities like Seattle and Austin. This gap indicates that the urban neighbrhds in these metrs are mre likely t ffer characteristics that result in premiums fr husing. Hwever, the gap between urban and suburban hme values is narrw in Metr Denver, suggesting urban neighbrhds still have many f these characteristics, particularly in cmparisn t ther, less urbanized metrs such as Salt Lake City. Husehld incme patterns shw a similar trend. In Metr Denver, urban incmes are 61% lwer than suburban incmes. This gap is narrwer in the Seattle metr, which has higher urban husehld incmes than the Denver metr, despite similar suburban incmes. Median Hme Values; Varius Gegraphies; 2015 Median Husehld Incmes; Varius Gegraphies; 2015 $360K $340K $320K $300K $280K $340K $306K $336K HOME VALUES INCOMES AVERAGE HOME VALUE DIFFERENCE FROM URBAN MEDIAN HOUSEHOLD INCOME DIFFERENCE FROM URBAN URBAN SUBURBAN ABSOLUTE PERCENT URBAN SUBURBAN ABSOLUTE PERCENT NATIONAL Tp 50 Metrs $340,000 $306,000 -$34, % $49,100 $71,600 $22, % REGIONAL New West $336,000 $354,000 $18, % $49,200 $71,700 $22, % PEER CITIES Seattle $513,000 $399,000 -$114, % $57,400 $74,000 $16, % Salt Lake City $222,000 $263,000 $41, % $42,200 $69,800 $27, % Austin $321,000 $276,000 -$45, % $43,400 $77,600 $34, % DENVER $309,000 $328,000 $19, % $46,500 $74,900 $28, % Surce: RCLCO; ESRI Business Analyst $354K $309K $328K Tp 50 MSAs New West Metr Denver Urban Suburban $80,000 $60,000 $40,000 $20,000 $0 $71,600 $71,700 $74,900 $49,100 $49,200 $46,500 Tp 50 MSAs New West Metr Denver Urban Suburban 17

18 Suburban Paradigms in Metr Denver 18

19 Methdlgy T accunt fr the fact that nt all suburbs lk r functin the same way, RCLCO develped a mre nuanced way f thinking abut suburban neighbrhds. T further characterize suburban areas relative t their likely current and future develpment ptential, RCLCO fcused n thse census tracts which were classified as high-density suburban, suburban, and lw-density suburban, and utlined five suburban paradigms t incrprate the impact f land value and availability n develpment trends: Established High-End Suburb Stable-Middle Incme Ecnmically Challenged Greenfield Lifestyle Greenfield Value Within each MSA, RCLCO analyzed the census-reprted median hme value in each suburban census tract as a prxy fr land value t identify them as: High value: Mre than ne standard deviatin abve that MSA s average. Medium value: Plus r minus ne standard deviatin frm that MSA s average. Lw value: Mre than ne standard deviatin belw that MSA s average. Using value dynamics, previus census tract classificatins, and infrmatin abut distance frm the principal city, RCLCO then re-classified each suburban census tract t fit ne f the afrementined suburban paradigms. Fr mre infrmatin n specific criteria f these classificatins, please reference the chart t the right. Suburb Classificatin Methdlgy; Tp 50 Metrplitan Areas High Density Urban High Value Middle Value Lw Value Urban High Value Middle Value Lw Value Lw Density Urban High Value Middle Value Lw Value High Density Suburban High Value Middle Value Lw Value Suburban High Value Middle Value Lw Value Lw Density Suburban High Value Middle Value Lw Value Urban Established High-End Stable Middle-Incme Ecnmically Challenged Greenfield Lifestyle Greenfield Value Less Than 5 Miles Frm Dwntwn 5-10 Miles Frm Dwntwn Miles Frm Dwntwn Mre Than 15 Miles Frm Dwntwn 19

20 Visualizing the Categries Established High-End Suburbs, such as Gldin and Cherry Hills Village, have high hme values and established develpment patterns that ffer strng pprtunities fr market-based develpment, but als tend t have sme cmmunity bjectin t new grwth. When new hmes r cmmunities are built, they are ften at higher densities r price pints than nearby neighbrhds. Suburb Classificatin; Denver-Aurra-Lakewd, Bulder, and Greeley, CO MSAs Stable Middle-Incme Suburbs, such as parts f bth Brmfield and Littletn, include a wide range f hme values attainable t a range f husehlds. Sme evidence indicates that these areas are becming increasingly scarce, as they are gentrifying int higher-end cmmunities r deterirating int ecnmically challenged areas. Ecnmically Challenged Suburbs, such as Brightn and the suthern parts f Thrntn, have lwer hme values and have seen little ppulatin grwth in recent years. They may have aging infrastructure r underperfrming city services that make them less attractive fr new market-rate develpment. Greenfield Lifestyle Suburbs, such as Gunbarrel and the uter parts f Aurra, are at r clse t the suburban fringe, typically adjacent t established high-end suburbs, and are where the bulk f new cmmunity develpment is ccurring. These areas have mstly develped ver the past ten t 15 years and likely have sme land available fr new develpment. Greenfield Value Suburbs, such as Milliken and parts f Hendersn, are clse t the suburban fringe, ften adjacent t stable r ecnmically challenged areas, r near lwer-wage jb cncentratins. These suburbs attract new value-riented cmmunities that ffer attractive hme prices fr many husehlds, and smetimes reflect a drive until yu qualify pattern. MAP KEY SUBURB CLASSIFICATION POPULATION EMPLOYMENT ECONOMICS DEMOGRAPHICS POPULATION MEDIAN % GROWTH % OF TOTAL JOB GROWTH JOB GROWTH MEDIAN HOME % HOUSEHOLDS ( ) JOBS ( ) ( ) INCOME VALUE MINORITY WITH KIDS % OF TOTAL POPULATION % HOUSEHOLDS UNDER 35 Urban 15.6% 5.3% 33.2% 7.2% 9.1% $46,500 $309K 44.2% 20.4% 35.8% Established High-End Suburb 13.8% 23.4% 14.8% 7.2% 12.0% $100,000 $524K 21.9% 34.8% 15.8% Stable Middle-Incme Suburb 17.6% 11.6% 11.2% 1.4% 5.7% $76,300 $313K 27.6% 34.6% 17.5% Ecnmically Challenged Suburb 30.6% 7.5% 27.7% -3.6% 14.0% $51,600 $204K 48.4% 36.3% 25.2% Greenfield Lifestyle Suburb 11.9% 78.9% 6.0% 18.5% 12.5% $105,400 $440K 21.9% 40.0% 14.4% Greenfield Value Suburb 3.3% 128.6% 1.6% -43.6% 22.7% $64,300 $217K 34.5% 45.7% 26.4% 20

21 Suburb Prfile: Arvada Develpment Case Study: Candelas Lcatin: Established High-End Prduct: 1,500 master-planned cmmunity with planned twn center, within prximity t frmer nuclear weapns prductin facility Price Pint: $450K - $800K, versus $375K - $600K fr mst nearby resales POPULATION EMPLOYMENT ECONOMICS DEMOGRAPHICS POPULATION % OF JOB MEDIAN GROWTH IN % HH % HH MAP % OF % OF TOTAL MEDIAN % SUBURB CLASSIFICATION GROWTH TOTAL GROWTH HOME HOUSING UNITS WITH UNDER KEY LAND POPULATION INCOME MINORITY ( ) JOBS ( ) VALUE ( ) KIDS 35 Urban 1.8% 2.6% 2.7% 13.7% 9.9% $30,800 $232, % 47.4% 19.3% 42.1% Established High-End Suburb 28.3% 15.4% 6.1% 15.3% 15.2% $108,500 $409, % 13.5% 36.2% 8.7% Stable Middle-Incme Suburb 18.7% 27.3% 1.6% 15.1% -5.7% $73,000 $303, % 14.4% 30.2% 12.7% Ecnmically Challenged Suburb 30.5% 53.3% 2.2% 54.9% 7.9% $57,400 $238, % 33.9% 30.9% 20.0% Greenfield Lifestyle Suburb 8.4% 1.2% 32.5% 0.7% 55.0% $128,000 $623, % 16.9% 40.3% 5.3% Greenfield Value Suburb 0.0% 0.0% N/A 0.0% N/A N/A N/A N/A N/A N/A N/A Rural/Park/Institutinal 12.3% 0.2% 1.7% 0.4% -31.9% $83,500 $430, % 7.8% 26.3% 15.9% TOTAL 100.0% 100.0% 4.0% 100% 6.9% $69,400 $287, % 20.3% 31.9% 16.0% Surce: RCLCO; ESRI Business Analyst; Redfin; Cmmunity Websites 21

22 Suburb Prfile: Aurra Develpment Opprtunity: Inspiratin Lcatin: Greenfield Lifestyle Prduct: 1,800-hme resrt-style masterplanned cmmunity with large active adult cmpnent Price Pint: $400K - $725K, versus $300K - $1M+ fr mst nearby resales POPULATION EMPLOYMENT ECONOMICS DEMOGRAPHICS POPULATION % OF JOB MEDIAN GROWTH IN % HH % HH MAP % OF % OF TOTAL MEDIAN % SUBURB CLASSIFICATION GROWTH TOTAL GROWTH HOME HOUSING UNITS WITH UNDER KEY LAND POPULATION INCOME MINORITY ( ) JOBS ( ) VALUE ( ) KIDS 35 Urban 3.5% 10.1% 6.0% 32.8% 32.2% $39,100 $177, % 65.8% 29.8% 32.3% Established High-End Suburb 1.0% 1.4% 4.2% 1.1% 3.1% $122,900 $509, % 57.5% 39.0% 16.6% Stable Middle-Incme Suburb 2.8% 6.8% 6.1% 5.4% 18.5% $69,500 $289, % 41.7% 37.0% 19.1% Ecnmically Challenged Suburb 26.7% 70.3% 3.7% 52.6% 25.1% $51,200 $195, % 52.6% 37.9% 23.9% Greenfield Lifestyle Suburb 20.8% 8.6% 24.8% 5.4% -19.2% $114,300 $428, % 43.3% 41.0% 18.5% Greenfield Value Suburb 0.0% 0.0% N/A 0.0% N/A N/A N/A N/A N/A N/A N/A Rural/Park/Institutinal 45.3% 2.8% 19.7% 2.7% 65.5% $67,000 $230, % 41.9% 40.4% 21.9% TOTAL 100.0% 100.0% 6.9% 100% 23.8% $52,800 $226, % 53.8% 37.3% 24.1% Surce: RCLCO; ESRI Business Analyst; Redfin; Cmmunity Websites 22

23 Suburb Prfile: Englewd Develpment Opprtunity: Small-Lt Redevelpment Lcatin: Stable Middle-Incme; Ecnmically Challenged Prduct: Scatter-lt duplex, triplex, and twnhme develpment n infill sites Price Pint: $600K - $700K, versus $250K - $475K fr mst nearby resales POPULATION EMPLOYMENT ECONOMICS DEMOGRAPHICS POPULATION % OF JOB MEDIAN GROWTH IN % HH % HH MAP % OF % OF TOTAL MEDIAN % SUBURB CLASSIFICATION GROWTH TOTAL GROWTH HOME HOUSING UNITS WITH UNDER KEY LAND POPULATION INCOME MINORITY ( ) JOBS ( ) VALUE ( ) KIDS 35 Urban 22.0% 18.4% 8.5% 31.3% 40.2% $36,900 $230, % 59.0% 21.2% 36.1% Established High-End Suburb 6.6% 10.1% 4.9% 1.6% 128.9% $53,700 $456, % 11.3% 24.1% 33.4% Stable Middle-Incme Suburb 18.3% 16.5% 2.7% 6.8% 23.1% $49,000 $298, % 53.0% 23.6% 17.5% Ecnmically Challenged Suburb 53.1% 55.0% 1.4% 60.2% 13.3% $40,300 $247, % 38.5% 24.2% 23.5% Greenfield Lifestyle Suburb 0.0% 0.0% N/A 0.0% N/A N/A N/A N/A N/A N/A N/A Greenfield Value Suburb 0.0% 0.0% N/A 0.0% N/A N/A N/A N/A N/A N/A N/A Rural/Park/Institutinal 0.0% 0.0% N/A 0.0% N/A N/A N/A N/A N/A N/A N/A TOTAL 100.0% 100.0% 3.0% 100% 22.3% $41,900 $260, % 26.9% 22.8% 25.4% Surce: RCLCO; ESRI Business Analyst; Redfin; Cmmunity Websites 23

24 Suburb Prfile: Lakewd Develpment Opprtunity: Slterra Lcatin: Established High-End Prduct: Hillside master-planned cmmunity with well-segmented prduct lines Price Pint: $400K - $2M+, versus $300K - $700K fr mst nearby resales POPULATION EMPLOYMENT ECONOMICS DEMOGRAPHICS POPULATION % OF JOB MEDIAN GROWTH IN % HH % HH MAP % OF % OF TOTAL MEDIAN % SUBURB CLASSIFICATION GROWTH TOTAL GROWTH HOME HOUSING UNITS WITH UNDER KEY LAND POPULATION INCOME MINORITY ( ) JOBS ( ) VALUE ( ) KIDS 35 Urban 14.5% 22.7% 2.6% 45.8% 0.3% $42,200 $225, % 53.5% 25.2% 33.7% Established High-End Suburb 22.6% 11.9% 5.9% 5.0% 9.0% $94,600 $426, % 10.8% 31.6% 10.5% Stable Middle-Incme Suburb 32.0% 36.3% 1.4% 24.0% -11.6% $65,300 $304, % 31.2% 26.4% 15.8% Ecnmically Challenged Suburb 17.7% 26.4% 2.7% 15.5% 0.0% $49,700 $234, % 45.7% 27.7% 20.9% Greenfield Lifestyle Suburb 0.0% 0.0% N/A 0.0% N/A N/A N/A N/A N/A N/A N/A Greenfield Value Suburb 0.0% 0.0% N/A 0.0% N/A N/A N/A N/A N/A N/A N/A Rural/Park/Institutinal 13.3% 2.7% 5.2% 9.7% 109.4% $62,000 $100, % 31.5% 26.9% 35.4% TOTAL 100.0% 100.0% 3.1% 100% 2.5% $56,000 $287, % 31.4% 26.8% 21.5% Surce: RCLCO; ESRI Business Analyst; Redfin; Cmmunity Websites 24

25 Suburb Prfile: Thrntn Develpment Opprtunity: Eastlake Lcatin: Stable Middle-Incme Prduct: Lw-maintenance, active lifestyle cmmunity with 140 smaller, single-stry ranch hmes, in an infill lcatin Price Pint: $300K - $375K, versus $200K - $350K fr mst nearby resales POPULATION EMPLOYMENT ECONOMICS DEMOGRAPHICS POPULATION % OF JOB MEDIAN GROWTH IN % HH % HH MAP % OF % OF TOTAL MEDIAN % SUBURB CLASSIFICATION GROWTH TOTAL GROWTH HOME HOUSING UNITS WITH UNDER KEY LAND POPULATION INCOME MINORITY ( ) JOBS ( ) VALUE ( ) KIDS 35 Urban 4.0% 3.8% 5.7% 25.3% 21.6% $35,200 $206, % 62.8% 40.7% 52.1% Established High-End Suburb 1.8% 0.2% 107.5% 0.1% -1.2% $90,200 $422, % 20.4% 43.7% 7.5% Stable Middle-Incme Suburb 15.7% 19.4% 7.7% 4.4% 20.1% $101,300 $324, % 34.7% 50.3% 15.4% Ecnmically Challenged Suburb 47.7% 70.2% 3.9% 63.2% 7.8% $60,600 $202, % 54.8% 41.8% 27.9% Greenfield Lifestyle Suburb 30.7% 6.4% 18.4% 7.0% 52.6% $110,000 $389, % 40.8% 49.5% 16.2% Greenfield Value Suburb 0.0% 0.0% N/A 0.0% N/A N/A N/A N/A N/A N/A N/A Rural/Park/Institutinal 0.0% 0.0% N/A 0.0% N/A N/A N/A N/A N/A N/A N/A TOTAL 100.0% 100.0% 6.3% 100% 14.0% $72,400 $251, % 42.5% 43.9% 25.1% Surce: RCLCO; ESRI Business Analyst; Redfin; Cmmunity Websites 25

26 Upcming Suburban Trends 26

27 Distributin f Metr Denver Ppulatin As time ges n, the suburbs are likely t cnfrnt issues related t the aging ppulatin and changing preferences. Gen Z (Less than 18) currently lives with parents, but is likely t fuel demand fr student husing, rental husing, and ther frms f entry-level husing as they enter and graduate cllege. Millennials (18-34) live in student husing, rental husing, and ther frms f entry-level husing, but are likely t fuel demand fr larger hmes as they begin t get married and have children. Gen X (35-50) currently lives in larger hmes, but is likely t fuel demand fr smaller hmes as they becme empty nesters and begin t dwnsize. Baby Bmers (51-69) are beginning t dwnsize and purchase r rent their retirement hmes. Eisenhwers (70 r Older), fr the mst part, are already living in their retirement hmes. The verall generatinal distributin f the Denver metr is in line with that f ther metrs, thugh certain areas are weighted mre twards certain grups. Fr example, the Denver MSA has a large share f yung prfessinals and families (ages 30-45), while the Greeley MSA has an utsized share f children (yunger than 18), and the Bulder MSA is weighted heavily twards cllege students (ages 18-24). Distributin f Ppulatin; Denver-Aurra-Lakewd, Bulder, and Greeley, CO MSAs 60,000 50,000 40,000 30,000 20,000 10, "Gen Z" Millennials "Gen X" Baby Bmers Eisenhwers Tp 50 MSAs - Ppulatin Distributin Rent as Cuple / Buy Empty Nester Buy/Rent Retirement Year Student Husing Rental Husing Yung Family Own Mature Family Own Cnd Dwnsize Own Hme Gen X Baby Bmers Eisenhwers 2015 Millennials Millennials Millennials Baby Bmers Millennials Gen X Baby Bmers Baby Bmers Eisenhwers 2020 Gen Z Millennials Millennials Millennials Gen X Gen X Baby Bmers Millennials Millennials Gen X Gen X 2025 Gen Z Millennials Baby Bmers Gen Z Gen Z Millennials Baby Bmers Gen X Gen X 2030 Gen Z Gen Z Gen Z Millennials Baby Bmers Millennials Baby Bmers NOTE: Tp 50 MSAs Ppulatin Distributin represents the age distributin f all MSAs examined, applied t the verall ppulatin in Metr Denver Surce: RCLCO; ESRI Business Analyst 27

28 Addressing the Aging Ppulatin and Ptential Husing Misalignment As the ppulatin ages, and as husing ccupied by Eisenhwer and Baby Bmer husehlds becmes available, there is uncertainty surrunding whether the evlving prduct preferences f yunger generatins will generate enugh demand t fill newly vacated units. In general, lder husehlds are mre likely t wn single-family hmes than the general ppulatin. As these hmes becme available, they will need t be filled by yunger and family husehlds, many f which are still renting because they cannt affrd a dwn payment yet. In Metr Denver, this issue is cmpunded by the fact that Millennial husehlds demnstrate a prpensity t live in urban areas, relative t thse Baby Bmer and Eisenhwer husehlds. Life Stage Distributin Cmparisns by Husehld Type; Natinal; 2014 All Husehlds 3% 8% Multifamily Rental Single-Family Owned 8% Single-Family Rental 4% 10% 4% 17% 31% 32% SOURCE: RCLCO; U.S. Census Bureau 27% 49% 17% 18% 21% 20% 48% 40% 27% 18% 0% 20% 40% 60% 80% 100% Pst Grad Yung Wrkers, N Kids Family Middle Aged, N Kids Older Wrks & Retirees, N Kids Distributin f Ppulatin; 2015; Denver-Aurra-Lakewd, Bulder, and Greeley, CO MSAs 100% 10% 8% 10% 10% 9% 90% 3% 3% 3% 2% 2% 10% 80% 12% 12% 12% 11% 70% 60% 50% 40% 30% 20% 10% 0% 34% 15% 14% 12% 31% 14% 13% 22% 31% 29% 16% 18% 15% 15% 30% 18% 15% 15% 13% 15% "Gen Z" Millennials "Gen X" Baby Bmers Urban Stable Middle-Incme Suburb Greenfield Lifestyle Suburb Rural/Park/Institutinal Eisenhwers Established High-End Suburb Ecnmically Challenged Suburb Greenfield Value Suburb 28

29 Catering t the Missing Middle A separate but related issue pertains t the idea that there is a gap in the husing being built. Tday mst new husing is either large, exurban, and single-family, r small, urban, and multifamily, and there are few in-between prduct types currently being built. Missing middle husing is defined as "a range f multi-unit r clustered husing types cmparable in scale with single-family hmes that prvides a slutin t the mismatch between the available U.S. husing stck and shifting demgraphics cmbined with the grwing demand fr walkability. This cncept fcuses n the fact that, in general, the new husing supply being built tday typically falls int ne f tw buckets: Small units in urban, mid/high-rise multifamily buildings Large, exurban single-family detached hmes As a result, there are key market segments that wuld purchase r rent new prduct but are currently underserved. Yung families and first-time buyers are ften priced ut f detached prduct, but may want r need mre space than an apartment r small cnd. The lcatin f new detached prduct may als be t suburban fr their preferred lifestyles. Empty nesters may want t dwnsize, but may nt be ready t give up their frnt dr, prch, garden, etc. Lw- and middle-incme renters cannt affrd the largely luxury prduct cming nline tday. Because much f the new husing cming nline is either smaller urban r larger exurban prduct, these buyers are ften unable t find the mid-sized prduct that fits bth their lifestyles and budgets. Large, exurban single-family detached hmes Small units in urban, midrise/highrise multifamily buildings Yung Families and First-Time Hmebuyers Empty Nesters Lw and Middle-Incme Renters Surce: Optics Design 29

30 Grappling with Racial, Ethnic, and Incme Inequality Issues pertaining t the available husing stck and the prduct currently being built are exacerbated by issues pertaining t racial, ethnic, and incme inequality in the suburbs. The cntemprary suburban landscape is grwing increasingly diverse, despite the traditinal steretype that suburbs are mstly enclaves fr middle- and upper-class whites. Hwever, while the suburbs are diverse as a whle, the minrity ppulatin is mre likely t live in ecnmically challenged suburbs than the general ppulatin, especially in Metr Denver. In Metr Denver, three-quarters f minrities live in the suburbs, thugh 56% f thse suburban minrities live in ecnmically challenged suburbs, where they cmprise nearly half (48%) f the ppulatin f thse neighbrhds. As a whle, 42% f the minrity ppulatin in Metr Denver lives in these ecnmically challenged suburbs, as cmpared t 31% f the general ppulatin. Natinwide, many ecnmically challenged suburbs are seeing little new develpment activity, and, at the same time, the existing husing and infrastructure in these neighbrhds is grwing increasingly likely t fall int disrepair. In Metr Denver, minrities are als disprprtinately mre likely t live in urban neighbrhds (20%) than the general ppulatin (16%). On the ther hand, they are far less likely t live in established high-end (9%) and greenfield lifestyle (7%) suburbs than the ppulatin as a whle (14% and 12%, respectively). Distributin f Minrity Ppulatin and General Ppulatin; Denver-Aurra-Lakewd, Bulder, and Greeley, CO MSAs; % 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 15.6% 19.5% 13.8% 8.6% 17.6% 13.8% 30.6% 42.0% Urban Established High-End Stable Middle-Incme Ecnmically Challenged 11.9% 7.4% 3.3% 3.3% 7.3% 5.4% Greenfield Lifestyle Greenfield Value Rural/Park/ Institutinal Surce: RCLCO; ESRI Business Analyst Ttal Ppulatin Minrity Ppulatin 30

31 Recapturing Walkability As yunger husehlds mve frm cities t the suburbs, many f them will lk fr neighbrhd amenities that are similar t the nes t which they are accustmed, such as walkability. Suburbs with elements f walkability are strng candidates t attract yunger husehlds mving frm urban neighbrhds as well as lder husehlds dwnsizing frm within the suburbs, and it is therefre likely that walkability will be a strng driver f hme values. Heat Map f Walk Scres; Metr Denver In Metr Denver, many suburbs already have pckets f walkability, Many f these cmmunities have relatively high hme values, in cmparisn t the regin as a whle, which has a median hme value f $362, Littletn, CO Walkable Cre: Walk Scre f 80 Median Hme Value: $402,600 % Over MSA Median Value: 11% Stapletn (Denver, CO) Walkable Cre: Walk Scre f 89 Median Hme Value: $564,500 % Over MSA Median Value: 56% 1 MAP KEY 3 Glden, CO Walkable Cre: Walk Scre f 85 Median Hme Value: $496,900 % Over MSA Median Value: 37% Walkscre f 100 City f Denver Walkscre f 25 Surce: Walk Scre; Zillw 31

32 Methdlgical Cnsideratins 32

33 Methdlgy T analyze trends in husing and neighbrhd chices, RCLCO develped a methdlgy t bradly categrize the census tracts int several grups based n hw urban r suburban they are. Fr the purpse f this analysis, these grups included high-density urban, urban, lw-density urban, high-density suburban, suburban, and lw-density suburban, as well as a handful f ther categries, including park/recreatinal/institutinal, rural, and nn-residential. T assign each census tract t ne f these categries, RCLCO perfrmed a series f initial cuts. The first f these cuts invlved examining the number f husing units in each tract, classifying tracts withut any husing units as nn-residential. Next, RCLCO examined ppulatin and emplyment densities, using whichever was higher t classify tracts as high-density urban if they had mre than 20,000 jbs r residents per square mile, r as rural if they had fewer than 100 jbs r residents per square mile. RCLCO believes these categries are likely t remain cnstant in metr areas acrss the cuntry, regardless f any reginal differences. After this series f initial cuts, RCLCO tk reginal differences int accunt, and classified each MSA int ne f six categries, including Gateway, Sun Belt, New West, Heartland, and Legacy, with a sixth and separate categry fr New Yrk given its unique urban fabric. In general, the purpse f these categries was t draw fair cmparisns between different types f cities when cnsidering variatins in density, the thery being that density standards in a city like Clumbus, Ohi are likely different frm thse in a city like San Francisc, Califrnia. Fr mre detail n hw each MSA was classified, please see the table n page 34. T make cmparisns, RCLCO examined ppulatin and emplyment densities in terms f standard deviatins frm the average value fr each MSA categry, again cnsidering whichever density value was higher. RCLCO then examined the percentage f husing units that are in single-family detached hmes in each census tract. Ultimately, RCLCO categrized high-density tracts with little single-family detached prduct as urban, medium-density tracts with a lt f single-family detached prduct as suburban, and lw-density tracts with a lt f single-family detached prduct as lw-density suburban. Lw-density tracts with little single-family detached prduct were classified as park/recreatinal/institutinal, after bserving where this classificatin was ccurring. Tw final categries high-density tracts with a lt f single-family detached prduct and medium-density tracts with little single-family detached prduct were then gruped tgether due t their similarities, and then brken apart based n their distance frm the city center. After being cnsidered cncurrently, these categries included bth in-twn residential neighbrhds, as well as dense uter cres and crridrs. As such, tracts that were less than five miles frm the city center r between five and ten miles frm the city center with a high emplyment density were categrized as lw-density urban, while the remaining, slightly mre uter tracts were then categrized as high-density suburban. Using these riginal categries, RCLCO then tk a clser lk at high-density suburban, suburban, and lw-density suburban tracts, re-classifying each f them as ne f five suburban paradigms similar t thse included in the reprt. Fr the purpse f this analysis, the new categries included established high-end suburb, stable middle-incme suburb, ecnmically challenged suburb, greenfield lifestyle suburb, and greenfield value suburb. Using standard deviatins t cmpare the median husing unit value f each census tract t that f its wn MSA, RCLCO assigned each tract a value rating, and used these value ratings t reclassify each suburban tract int ne f the abve categries. Fr mre infrmatin n this step, please see the table n page