Opinion: Treat the cost of housing as what it is — a nationwide crisis
In Salt Lake County, 19% of renters spend more than 50% of their monthly income on rent and utilities. This burden forces difficult tradeoffs and can lead to pressures on other social services.
No question about it, the housing market is tight. It’s tight nationwide, with inventory levels at 40-year lows, according to Fortune.com.
It’s also tight in Utah. Along the Wasatch Front, an apartment construction boom so far has done little to alleviate demand by people priced out of the real estate market. The Kem C. Gardner Policy Institute reported this month that the vacancy rate in Salt Lake County dropped below 2% in 2021.
More startling yet, the report cited data from the Department of Housing and Urban Development that showed 41% of renters in the county spend more than 30% of their income on rent and utilities, and that 19% spend more than 50%.
As the report says, using that much of your income for housing is considered “a severe housing cost burden.” For people of modest means, it can force difficult decisions and tradeoffs. Sometimes, people forgo medicine, food or other essential items in order to pay rent. Those choices become even more difficult when inflation takes hold. In the Intermountain West, inflation is at 9.7%, according to the Consumer Price Index for February. That compares with 7.9% nationally.
In other words, the nation, and especially states such as Utah, are in a housing crisis. This ought to set off alarm bells in the halls of power, especially in Washington.
Fortunately, there are things the government could do.
First on that list would be to remove the crippling tariffs on imported lumber. The Trump administration imposed an 8.99% tariff on the import of Canadian softwood lumber. The Biden administration last fall raised that to 17.99%.
At the time, Engineering News-Record quoted Canada’s minister of international trade as saying this would be a tax on American consumers, “raising the costs of housing, renovations and rentals at a time when housing affordability is already a significant concern for many.”
If you want less of something, you tax it more. The United States obtains 83% of its softwood lumber by value from Canada, according to the SUNY College of Environmental Science and Forestry. These tariffs undoubtedly have a downward pressure on the supply of new housing, which leads, ultimately, to an increase in rents.
The U.S. Department of Commerce has indicated it may lower the tariff to 11.64%, but the Financial Post reports a final decision won’t be made until November. That’s too late, and that tariff rate is still too high.
Janneke Ratcliffe, vice president for the Housing Finance Policy Center at the Urban Institute, wrote an opinion piece for CNN Business last month in which she noted that the nation faced a similar housing crisis at the end of WWII. At that time, President Harry S. Truman issued an emergency order removing all tariffs and duties on imported lumber that would be used to build housing.
She also noted that Washington enacted new loan guarantees requiring small down payments and long repayment terms, and it enacted measures limiting nonresidential construction. The result was a building boom and a nearly 20% increase in the percentage of Americans owning homes from 1940 to 1960.
Washington may not want to repeat that strategy exactly, but the nation’s best minds certainly could come up with ways to address today’s needs.
One solution may be to incentivize faster construction methods, such as the “printing” of homes using computers and large machines that quickly construct homes using mortar. Such methods have been shown to eliminate the need for many construction workers, an important factor in today’s tight labor market and a way to reduce the cost of housing.
Or perhaps governments could incentivize the use of more prefabricated homes. Both of these solutions might require local and state governments to adapt zoning and housing code laws.
Local governments could do more. Salt Lake County Mayor Jenny Wilson has proposed using $27 million in federal recovery spending for affordable housing. State lawmakers have allocated $70 million for the same purpose. Advocates say it won’t make much difference.
The Gardner Policy Institute study noted that Utah is seeing an unprecedented boom in apartment construction already, going from an average of about 1,100 new units a year between 2000 and 2010 to 6,672 new units receiving permits last year alone. And yet it hasn’t been enough to keep up with demand fueled by a job market that reduced Salt Lake County’s unemployment rate to 1.7% as of December.
The report also predicts the apartment vacancy rate will ease by 2024, to a 5.7% level. But that won’t make things much more affordable in a market where the average three-bedroom unit currently rents for $1,628 per month.
Utah cannot run the risk of hurting its favorable economy through unaffordable housing costs. The United States cannot run the risk of exacerbating the social costs associated with homelessness and cost burdens that lead to demands for other social services.
The sooner affordable housing is treated as a true nationwide crisis, the better.