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The Salt Lake story: Rents soaring, apartments booming

SALT LAKE CITY — Aubrey and Eric Jackson’s possessions have been packed in a U-Haul truck for the past several weeks.

That’s because they had to suddenly move out of their Salt Lake apartment when the complex was sold, Eric Jackson said, and since then they’ve been living in his sister's basement in Highland, struggling to find a reasonably affordable place to live in the Salt Lake area.

With a 3-year old son and his wife seven months pregnant, Jackson said they’re desperate to find a new place to live as soon as possible, but the search for a new apartment has been painstaking.

“About a year and a half ago, we had a ton of options to rent a two-bedroom apartment for around $1,200 a month,” he said. But now they’re struggling to find something within their budget to fit their family.

Eager to remain in Salt Lake City, near Aubrey's work and their son’s preschool, they submitted an application for a $1,700 a month, two-bedroom loft near Pioneer Park. But their application wasn't accepted when the landlord explained to them that multiple others had offered a higher price for the same apartment.

“For us it’s so bizarre that people are willing to pay more for rentals in this market. They’re just little, two-bedroom duplexes with no yard," he said. "It's definitely the landlord's market right now."

While nationwide and statewide trends reflect steadily increasing real estate prices, renters in the greater Salt Lake area are under particularly intense pressure as employment opportunities and the population are flourishing.

Rental rates are skyrocketing due to high demand for apartment living and limited unit availability. In Salt Lake City, vacancy rates linger at a low 3 percent.

Map key:

  • Green marker: 100 percent affordable units

Yellow marker: Mixed (affordable and market rate)

Red marker: Market rate housing

Developers have reacted by building high-quality, high-price units, according to new research by James Wood, a senior fellow at the Kem C. Gardner Policy Institute at the University of Utah.

“We are in the biggest apartment boom in Salt Lake County and Salt Lake City in 30 years,” Wood said.

Statewide, 20,000 apartment units having been built in the past five years, yet demand persists. In Salt Lake City specifically, Wood said there have been 2,500 class A — or high-end — apartments built in the past five years.

“There appears to be very high demand for these units despite having high rental rates of $1,300 to $1,400 for two-bedroom apartments,” Wood said.

The demand allows landlords to mark up monthly bills. Ten years ago, the average two-bedroom, two-bath unit in Salt Lake City rented for about $890 a month, Wood said. But now, the average rent for the same type of unit is about $1,050.

That's a 17 percent increase over the past 10 years, Wood said.

And yet, incomes haven’t kept pace with demand. In the past 10 years, the median income of renters increased only 3 percent, according to Wood’s research.

Consequently, the number of renters with housing cost burdens — those who spend more than 30 percent of their income on housing costs — has ballooned in the past 10 years. In 2005, 50 percent of Salt Lake County renters earning between $20,000 and $34,999 a year were cost burdened. In 2014, that number has increased to 80 percent, Wood wrote.

“It’s squeezing renters' budgets,” Wood said. “Affordability is most of an issue on the renter’s side. That’s where you have the greatest need.”

Housing forecast

About 5,416 new town house, apartment or condo units have been recently built or are in the planning stages, estimated to be available to Salt Lake renters or buyers within the next six to 24 months, according to the Salt Lake City Planning Division.

Nearly 80 percent of those — 4,227 — are projected to have market-rate price tags.

That leaves 1,189 roughly expected within in the next two years to be classified as affordable, targeting renters with incomes below 80 percent of area's median income. Most of those units will be for those making 26 precent to 40 percent of the area median income, which is $72,200 for a family of four in Salt Lake County according to 2015 data.

Encouraging developers to build affordable units is part of an effort to fill Salt Lake's citywide shortage of roughly 8,000 affordable rentals for low-income households.

In 2014, former Mayor Ralph Becker launched the 5000 Doors Initiative to provide 5,000 affordable units over 5 years. However, with some projects still in the planning stages and not expected to be completed as far as two years out, Salt Lake City is facing a daunting task to fill that 8,000 door gap, especially having to swim upstream against rising rents.

"Obviously with rents going up, there isn't as much affordable housing access," said Mike Akerlow, the city's director of Housing and Neighborhood Development. "But what's encouraging to me is that we're seeing the number of affordable units increasing."

In Salt Lake's 2015 to 2016 fiscal year, 179 affordable units were in-progress or completed. In the current fiscal year, so far 709 affordable units have been proposed or planned. The other 301 are so far projected for fiscal year 2017 to 2018.

"We're seeing developers do more, and the city has really worked hard on being a partner," Akerlow said, noting that his office has been working with Mayor Jackie Biskupski's administration to "modify" Becker's 5000 Doors Initiative.

"We have been working really hard to come up with recommendations or some new tools that can be used, and we will be presenting them to the mayor in the next couple of weeks," Akerlow said.

He added that they're seeking ways to extend beyond the usual affordable housing tool: tax credits.

"Tax credits will always be a part of this, but we're limited in how many we get, so we're looking for other tools we can use to supplement the tax credits or just finance affordable housing on its own," he said. "If you look at the gap — if Salt Lake City were to get every tax credit in the state, it would still take us 15 years to fill that gap of 8,000 units."

Affordability vs. quality of life

Kenzie Smith, 23, currently pays $508 a month for a studio apartment at SoDo Lofts, an affordable housing complex, near I-15 in downtown Salt Lake City.

"This is a deal of a lifetime," she said. "When people hear how much my rent is, they're like, ‘What? Can I get your landlord's number?’”

But the 18-unit complex is usually fully occupied, and Smith said it took "hundreds" of calls to the landlord to get her foot in the door.

Plus, she said she only qualified for the restrictive income rate a year and a half ago because she was working as a server at Stoneground Kitchen, making less than $20,000 a year. But since then, she said she's upped her salary, now working as a graphic artist for a local beverage company and expanding her freelance clientele.

While Smith knows her monthly rate is rare as she enjoys her 10-minute commute to work, she's turned her eyes to real estate listings because she said she's frustrated living in a small apartment with her two dogs.

She said she's looking throughout Salt Lake County — willing to trade up to a 45-minute commute for a larger apartment or a small house.

"I'm comfortable paying the $500, but if it came down to it, I could pay $1,000 a month if I had to," she said, noting that she could also find a roommate to help offset the cost. "It would be worth it."

While Smith could make that choice, other renters throughout Salt Lake County aren't so lucky. Some are forced to spend a majority of their income just to keep a roof over their head. According to Wood's research, 91 percent of Salt Lake County residents earning $20,000 or less a year were cost burdened in 2014.

Search for solutions

Salt Lake County Mayor Ben McAdams said cost-burdened households, especially those spending upward of 70 percent of their income on housing, are a "blip away from being evicted from their homes" — and that's one reason he said affordable housing is at the root of some of Utah's most challenging issues like homelessness.

"When a family is a small crisis away from homelessness because two-thirds of their paycheck is going to housing, whether it's for sickness or their car breaks down, they may have to choose between paying rent or fixing their car so they don't lose their job," he said.

The Salt Lake metro area currently faces a 43,000 shortage of affordable housing units, McAdams said.

"Another thing we know is because of lack of affordable housing, people are having to locate further and further away from their jobs," which he said could be contributing to wear and tear on roads and the valley's battle with air quality.

"These are the challenges we face," he said, adding that he feels like the county is "losing ground, not gaining ground on affordable housing," when considering rising rents and the demand for high-end apartments.

But solutions are in the works, McAdams said, pointing to funding that the Utah Legislature secured this year for homeless prevention.

"It's a start. It's not going to be enough yet to solve all of our challenges, but we're heading in that direction," he said.

As for Salt Lake City, Biskupski said she has directed her Housing and Neighborhood Development team and the Redevelopment Agency to "look at the 5,000 door plan in a broader sense to achieve broader goals."

"We're coming out with a new model to move forward so we are a little more aggressive in addressing the low-income housing needs in the city," Biskupski recently told Deseret News/KSL editorial boards. "Part of the vision moving forward is to make sure that wherever possible we are incorporating very mixed income housing opportunities. … Every housing project that is being looked at we are doing our best to incorporate mixed-income opportunities."

Biskupski did not increase funding for affordable housing in her budget proposal Tuesday, but that's because she said she wants to first initiate a "harder look" at the issue.

"It's 'How are we doing this? What are some things that we're missing?'" she said. "How do we incorporate more mixed-income housing into everything that we have some control over?"

McAdams also noted his homelessness steering committee is working on developing a "formula" to understand more about the county's 43,000 gap in affordable housing units.

"We know the metro area has the shortage, but where in the metro area, and how do we best address that?" he said. "We're laying the groundwork … but this is a problem that took years to make, and it's going to take years to solve."

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