While the average Denver resident spends just 23.7% of their annual salary on rent, that number went up 7.1% between 2016 and 2017 — the third-largest increase in the country.

Denver also ranks as one of the most expensive cities in the United States, costing residents an average of $74,088, according The True Cost of City Living, a recently released report from rent.com.

The report also found that 78% of the average Denver resident’s expenditures are essential, leaving just 20% of their income for things like saving and entertainment. Essential expenses include housing, transportation, personal insurance, healthcare, groceries and education.

While Denver has higher costs than many non-coastal cities overall, the average income is higher, said Tyler Stevens, Cushman & Wakefield's director of capital markets and multifamily investment sales.

The study found that Denver residents pay an average of 23.7% of their income in rent, though Cushman & Wakefield studies suggest it is closer to 28%, Stevens said. The national average is 27%, according to the rent.com study.

As long as job growth continues to be strong, there is room for rents to increase, Stevens said.

“The market fundamentals are saying that rents are under what they should be,” he said.

As more apartment projects are being delivered, metro Denver’s vacancy rate has continued to rise, but Stevens expects that it will level off, causing rents to increase. He also said that construction of multifamily projects is likely to continue.

“Homeownership is so out of reach that we have a large pool of renters out of necessity,” he said. “We’re one of the most expensive single-family home markets in the U.S. — especially for a non-coastal city.”

Though developers are actively looking for sites for multifamily projects, they are being much more selective than they have been in recent years. The biggest limiting factor for multifamily development is construction costs, Stevens said.

“Construction costs have gone up significantly in the last six months with the tariffs and steel costs,” he said. “But you will continue to see a lot of multifamily development because market fundamentals are so strong.”

A recent survey by the National Apartment Association found that Denver's top barriers to affordability are land availability and rising construction costs, followed by infrastructure constraints and density growth restrictions. The region ranks 32nd among 58 metro areas, making it one of the more difficult cities in the country in which to build new housing.

National Apartment Association Director of Industry Research and Analysis Paula Munger said that while there is a lot of building in metro Denver, it is getting absorbed.

"It's incredible when so much is coming online and firms like CoStar are forecasting vacancy decreases," Munger said. "If you're building a lot and you see a pullback on absorption, you'll see an easing up on rent, but it's not going to happen if your product is getting absorbed."