Opinion: Here are solutions for Utah’s housing affordability crisis in 2022
Utah can take steps to prevent its housing market from developing the dysfunction of places like California by doing these four things
It’s the talk of the town. Any town in Utah, really.
House prices have skyrocketed. Rents are rising rapidly. There is no sign that housing affordability will improve any time soon. Many young families are priced out of the market in the city they grew up in. Couples are delaying having kids or having smaller families because of high housing costs.
The problem started before the pandemic but the pandemic accelerated house price growth due in part to expectations of increased work from home. However, the main cause of Utah’s affordability problem is the combination of its unique geography and its high long-term population growth, the vast majority of which is from high historical fertility rates. As recently as 2000, Utah’s fertility rate remained above 2.5 children per woman. Many of these children are now ready to form families of their own and that creates significant demand for housing units.
Utah can take steps to prevent its housing market from developing the dysfunction of places like California. In fact, Utah can be a national leader in affordability solutions.
Second, states and cities can provide better data and analysis of our housing needs. Better information will ensure that the type of housing being developed is the type most needed, particularly with respect to what size households can be accommodated by a housing unit.
While new housing is generally the least affordable housing, much the same as new cars are more expensive than used ones, new housing is more likely to keep existing units affordable if it’s produced in the market segment with the most overall demand.
While it is tempting to assume developers know best, there can be a coordination problem in development when there is not systematic data on demographics and the stock of permits by unit type. For example, there may be a profitable opportunity to develop 1,000 micro-units in Salt Lake City. But if 10 developers each develop 400 units, we could end up with more micro-units than we need and it is costly to convert these to other types of housing.
Third, the state can coordinate cities by harmonizing and simplifying zoning codes across cities within Utah. Land use control is a constitutionally guaranteed right of states, not municipalities. States can take back the power they have delegated to municipalities if it is in the public interest to do so.
Harmonized zoning would encourage more housing supply because developers would know they could develop a certain kind of housing in several cities. A harmonized zoning code would also pave the way to scale potentially lower-cost home production techniques such as 3D-printing of houses and modular housing. Anything that reduces construction costs by encouraging competition or allowing economies of scale will in turn be passed on to households in the form of lower home prices and rents.
It may seem daunting to harmonize zoning codes all at once but even small steps like ensuring that the most common single-family zoning code has the same meaning in Tooele and in St. George will help. Over time, the state could harmonize other common zoning designations such as those governing apartments and ask cities to incorporate state-level zoning codes into their master plans.
Cities can take steps on their own to reduce the total number of zoning designations governing a particular use. Why have 10-plus different residential zoning codes rather than two or three?
Finally, the state can empower individuals by creating a level information playing field. In practice, Utah’s nondisclosure policy prevents people from transacting without a full-service real estate agent. In addition to effectively imposing a 6% tax on all housing transactions, the nondisclosure policy violates individual liberty by forcing households to buy a service that they may not otherwise need at a prespecified price.
The pressures facing the Utah housing market are steep. Fortunately, there is still time to avoid the very worst of the affordability crisis by being smart now.
Andra Ghent is the Ivory-Boyer Chair in real estate and a professor of finance at the University of Utah.