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This is how to fix Utah’s runaway housing costs

The only viable long-term solution is to help supply catch up with demand

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A home for sale sign in the Salt Lake Valley.

A home for sale sign is pictured in the Salt Lake Valley on Friday, July 16, 2021.

Scott G Winterton, Deseret News

Anyone who has tried to buy a house recently along the Wasatch Front knows the frustration. Make an offer the moment a home is listed, and you still find yourself competing with multiple buyers. Winning offers tend to be higher than the asking price — home sellers are raking in an average of 103.5% of original list price, according to the Utah Association of Realtors. No one has time to be picky.

The result of this red-hot real estate market has been an unprecedented rise in prices — a 30% year-over-year increase in Utah in June. To get a median-priced house in Salt Lake County, you’ll need $505,672, according to Zillow. But location is everything. In South Jordan, the median is a healthy $610,971. In Park City, it’s a whopping $1,146,888, which isn’t too far behind San Francisco’s $1,477,442.

The figures look like typos, but they’re not. And the usual solutions seem inadequate. 

At its simplest, this is a supply and demand issue. But here’s how far ahead the demand curve has gotten: Matt Ulrich, president of the Salt Lake Board of Realtors, told the Deseret News the state is about 45,000 housing units short of what it needs. That’s in line with a recent estimate of 50,000 by the the Kem C. Gardner Policy Institute at the University of Utah.

Yet local governments in Utah issued almost 32,000 building permits last year, which was an all-time record. Construction seems as stable and reliable a profession as one can find these days. Still, if the current breakneck construction speed continues, Ulrich said it would take 10 years to catch up to demand.

Given that Utah was the fastest-growing state in the nation during the 2010-2020 decade, demand will continue growing.

The best long-term solution remains work to join supply with demand. That means cities should loosen rules that keep people from renting parts of their homes to others, and zoning laws should be changed to allow more high-density units.

Some advocates are pushing for greater government involvement, including rent subsidies. These ideas sound tempting, especially in light of the newly released “Out of Reach” report by the Utah Housing Coalition and the National Low Income Housing Coalition. It concluded that a person in Utah would need to earn $20.21 per hour just to afford rent on a two-bedroom apartment.

But a good rule of thumb is that government can’t insert itself into economic issues without creating unintended consequences. Adding too much public funding into the housing market likely would push prices even higher. Some experts believe excess cash brought on by stimulus checks may be a factor in the current inflation.

There are reasons to believe today’s conditions, while not a temporary bubble, may eventually calm down. One is that the number of existing homes for sale is down 62% over last year, which is perhaps a reflection of how the pandemic slowed economic activity, even as it forced people to stay home. Sales of existing homes normally supply a great deal of any market’s housing needs without the construction industry having to do anything. This may loosen up as the pandemic wanes.

Another limiting factor may be what economists call price exhaustion. If too many buyers find themselves unable to pay what sellers are asking, prices will begin to level.

This housing shortage is not unique to Utah. Market Watch estimates the housing deficit nationwide is 3.8 million units.

None of this helps desperate Utahns who currently face long odds while attempting to buy or rent a home. Unfortunately, there are no quick answers or easy fixes. All Utah governments can do is make construction and renting as easy as possible to let the market catch up.