When it comes to a housing shortage, Utah is not alone. The entire nation is in the grips of one, and it’s starting to shake up politics.
Democrats in California recently joined Republicans in rolling back an environmental law that was notorious for stifling new construction. The New York Times said Gov. Gavin Newsom, who is thought to be interested in running for president, refused to sign a budget bill unless lawmakers did so.
That may seem odd for a liberal, but he faces stiff political headwinds from unaffordable housing and rising homelessness.
Utah’s housing goal
In Utah, Gov. Spencer Cox has set a goal of providing 35,000 new starter homes by 2028. His office is now looking at condos to help provide the solution. But, as the Deseret News reported, the state is running into “complicated regulatory and insurance issues.”
And yet, prices keep rising, while starter homes are shrinking in size across the United States in an effort to keep things affordable.
In Salt Lake County, the average house price has risen to $567,066, according to Zillow, and fast-growing Utah County is not far behind at $547,582. The American Enterprise Institute last year ranked Salt Lake City as the nation’s second least affordable metro area for first-time homebuyers. The only place worse was San Jose.
Even San Francisco, Los Angeles and San Diego were considered better.
Writing for the Atlantic, staff writer Rogé Karma said Americans used to count on coastal cities, run by progressive Democrats, to have runaway housing prices, which in turn would push people inland to more affordable cities. But now, home prices are rising out of control in those inland cities, as well.
He cited the following increases over the last decade: Phoenix 134%, Miami 133%, Atlanta 129% and Dallas 99%.
Salt Lake County’s prices
He didn’t cite Salt Lake County, so I looked it up. In 2015, the median price for a single-family home was $272,000. Today’s median price (as opposed to the average price listed above) is $565,900, according to Redfin. That’s an increase of 108%. We’re not even in the sunbelt, but that hasn’t been a factor. Redfin said the median price in Phoenix is well behind Salt Lake at only $450,000.
In a separate Atlantic piece last week, Karma said he thinks California took a step in the right direction by easing environmental restrictions, which had been “weaponized to block not only dense housing but also solar farms and transit and other things that would actually reduce emissions.”
But he was skeptical that it would solve a problem that “has been metastasizing for decades.”
Factors leading to high prices
What are all the factors leading to this crisis? Writing for Yahoo!Finance this week, Hal Bundrick and E. Napoletano did a good job enumerating some of them. The No. 1 reason is that demand is outpacing supply. Cities simply aren’t building fast enough.
They quote Josh Hirt, senior U.S. economist at Vanguard, saying part of the reason is that builders stopped focusing on starter homes in the early 2000s, when foreclosure rates were high and supply was plentiful. Now, the opposite is true, but it’s hard to play catchup.
Also, recent interest rate hikes have caused a lot of people to stay put when they otherwise would move up. “If you have a mortgage in the 3% range, there’s little incentive for you to trade up or out of that home when mortgage rates today are more than double that,” Yahoo quoted Hirt saying.
For the few who have homes for sale, this tilts the market in their favor, leading to bidding wars among buyers.
Tariffs pose another problem, particularly those on Canadian lumber. The Yahoo piece quotes the National Association of Homebuilders as saying, in March, that projected tariffs would increase the cost of a new home by an average of $9,200.
In addition, the Trump administration’s immigration policies are creating labor shortages in an industry that typically hires a lot of undocumented workers. The result is higher costs and longer delays.
Hirt said recent interest rate hikes should have reduced prices, but they didn’t. And now, interest cuts would only add more prospective buyers to the market, stoking further upward pressures on prices.
The good news is that places like California are beginning to loosen restrictions that have kept builders from flourishing. Many cities nationwide, including in Utah, could do more to loosen zoning restrictions and allow more starter homes, condos and high-density construction, where appropriate.
But, even with the political shakeups caused by this crisis, long-term solutions are hard to find. That’s not good news for young, first-time homebuyers.