SALT LAKE CITY — New research shows rapid job and population growth in Utah is producing exceptionally strong demand for housing, creating an affordability issue as the costs of renting or buying climb higher and higher.
The report, “What Rapidly Rising Prices Mean for Housing Affordability,” showed that since 2010, the Beehive State has led the nation in employment and demographic growth resulting in an ever-rising demand for housing that has prompted steep increases in rents and the amount buyers are having to pay to purchase a property.
While the impact of higher housing prices is widespread — affecting buyers, sellers and renters in all income groups — low-income households are being disproportionately affected, the report stated.
Housing affordability is defined as a unit that an owner or tenant pays no more than 30 percent of their household income toward housing costs. High housing prices can lead to a “severe housing cost burden” for households that sometimes pay over half their income on housing. It’s a situation faced by 1 in 8 Utah households — approximately 120,000 households, according to one of the report’s lead authors.
“Housing prices in Utah will continue to increase at rates well above the national average due to relatively high rates of population and economic growth,” said Jim Wood, Ivory-Boyer senior fellow at the University of Utah’s Kem C. Gardner Policy Institute. “But the threat to affordability from rising prices may be secondary to increasing interest rates, which could significantly reduce housing affordability and homeownership opportunities for a large share of Utah households.”
Considering where interest rates may go, affordability would be seriously impacted, Wood added. Speaking during a panel discussion at the institute in downtown Salt Lake City, he also said wage growth has not been keeping up with increasing prices, which is exacerbating the affordability issue.
“What’s troubling right now is (price) acceleration,” Wood said. “We’re probably not at a crisis level now in terms of housing price increases, (however) it’s certainly something that raises our concern. But the trajectory is concerning.”
He said another couple of years of double-digit price appreciation would definitely be something that would create problems for the local housing market. Wood noted that while market and demographic conditions are mostly responsible for increasing housing prices, government policies at all levels could help to moderate price increases and mitigate the impact of those rising prices.
The study showed that over the past 26 years, the average annual increase in Utah housing prices has been 5.7 percent. If that rate of increase were to continue for the next 26 years, the median price of a home in the Salt Lake and Provo-Orem metropolitan areas would be $1.3 million — similar to the current median price in San Francisco.
Panelist Clark Ivory, the chief executive officer of Ivory Homes, noted that Washington state faced some of the same issues several years ago that Utah is experiencing now, when housing affordability in the Seattle metro area decreased at an alarming rate. He said residents there urged developers to build for more density as a way to mitigate the increasing cost of housing, something Wasatch Front residents and developers may have to consider going forward.
“NIMBY-ism — not in my backyard — is what we’re used to dealing with as developers,” Ivory explained. “But ‘yes in my backyard’ — YIMBY— is happening in Washington (state).”
“The question is will public sentiment come around fast enough in the state of Utah so that there is positive pressure to bring on housing options that are more moderate and not as expensive,” he said. “If that would happen, that would be the one thing that would have the most dramatic impact.”
The community will have to accept a shift in the way housing is planned and developed in the years to come if the area is to continue having properties that new generations of buyers and renters can afford to live in without spending an exorbitant amount of their income to put roofs over their heads.
As housing has become more expensive in recent years, affordability has become a significant issue for more and more families, particularly in the Salt Lake City metro area, said panelist Dan Lofgren, president and CEO of Utah-based multifamily and mixed-use real estate development firm Cowboy Partners. It’s a problem that must be addressed in a thorough and thoughtful manner, he said.
“Demand in the market is putting upward pressure on rents and putting more households into that ‘rent burden’ category,” he said. The problem is complex and requires lots of consideration in developing multifaceted solutions that will adequately address the affordability challenge, he added.
“It’s about policies and ensuring that none of the policies instituted by cities or the state are aggravating the problem,” Lofgren said. “It’s both policies and resources that have to be pointed in the right direction.”
Tara Rollins, executive director of the Utah Housing Coalition, a Salt Lake City-based affordable housing advocacy organization, said more financial resources should be invested in the infrastructure needed to help ensure low-income individuals and families are able to find decent, affordable housing.
“We need to have the resources, we need to have the policies and the cities on-board,” she said. “There is just not one solution. There are going to be a lot of solutions to address this issue.”
Meanwhile, the Salt Lake Chamber Tuesday launched the Housing Gap Coalition — a business-led group created to target the state’s looming housing affordability problem before it’s too late.
“As a business community, we’ve had great success when we’ve worked together to address other issues like transportation and education,” said Derek Miller, president and CEO of the Salt Lake Chamber and Downtown Alliance. “We’ve organized the Housing Gap Coalition to proactively address housing affordability before it becomes a crisis.”
The coalition was created in direct response to the study commissioned by the Salt Lake Chamber through the Gardner Policy Institute, which highlighted the fast-rising rate of housing prices in Utah that could “threaten our cost of living, economic prosperity and quality of life” if left unchecked, he said.
Utah housing is more expensive than some top competitor cities in economic development, said Utah Jazz President Steve Starks, who also serves as chairman of the Housing Gap Coalition.
“Part of our growth and prosperity in this state is due to the fact that so many Utahns want to stay here, close to their families and in the communities they love,” he said. “The way things are going, that simply won’t be possible for many. They’ll be priced out. Housing affordability is the greatest unaddressed threat to our economic prosperity in Utah.”
The business community is determined to address the issue before it becomes a crisis, he said. The coalition is looking at opportunities to get in front of this issue, including addressing the way cities, towns and municipalities look at their housing policies, he added.