SALT LAKE CITY — The Wasatch Front is on the verge of a housing affordability crisis, analysts say, and unless measures are taken immediately to address the issue, thousands of Utahns will be in danger of being priced out of the market.
The Kem C. Gardner Policy Institute, in conjunction with the Salt Lake Chamber’s Housing Gap Coalition, Wednesday released a research study identifying several “best practices” that may give local municipalities the greatest chance to meeting the state’s housing affordability challenge, which has seen housing prices skyrocket since 2014.
“We’ve had six years of housing price increases — that’s by far the longest period we’ve ever had continuous significant increases in housing prices,” said study author Jim Wood, Ivory-Boyer Senior Fellow at the University of Utah’s Gardner Institute. “Not the average like 3% or 4%, this year it’s going to be double digits. In the last five years, housing prices have gone up over 60% for the median sales price for a home or a condo.”
In Salt Lake County, he expects the median home price this year will be around $381,000.
“We’re in what I would characterize as perilous territory,” he said.
Wood said the Salt Lake metropolitan area ranked 22nd out of the top 182 metros in the United States.
“We’re almost in the top 10%, so 88% of all metro areas have housing prices lower than Salt Lake metro area,” he said. “Several years ago, we were at 44th or 45th, something like that. We leapfrogged over a lot of metro areas and statewide in the last five years.”
The state ranked fourth in housing price increases, he added. Besides homeownership, the matter of affordability is also impacting the rental housing market as well, he said.
Statewide, the median housing costs decreased slightly for homeowners, falling from $1,573 to $1,551, but increased from $944 to $1,037 for renters, data showed.
Eight of the nine counties with changes in median monthly mortgage costs saw prices decrease, while 10 of the 11 counties with changes in median rent showed upticks. The largest median rent increases were in Morgan County, rising from $833 to $1,182, along with Wasatch County climbing from $1,147 up to $1,364.
Data indicated 36 cities saw median rent costs increase, while three cities — South Jordan, White City and Vernal — experienced declines.
Utah leaders have expressed concern the issue may create a potential long-term problem for the state.
“The seriousness of Utah’s housing crisis is an issue Utah’s business community has been faced with for some time,” said Derek Miller, president and CEO of the Salt Lake Chamber. “Insufficient and unattainable housing impacts businesses’ ability to recruit and retain employees, affects the quality of life of our workforce and limits our potential for economic growth. Support for housing affordability is support for our continued prosperity.
“This report zeros in on the specifics of what needs to be addressed to successfully and sustainably meet the needs of our families and future.”
To mitigate the issue of housing affordability, Wood outlined five specific ways to tackle the problem.
“Addressing the housing crisis requires a multipractice approach and will involve strategies that are tailored to a city’s political climate, development history and socioeconomic conditions,” he said. “While a city’s housing practices are unique to that city’s needs, there are a few universal elements for successful housing strategies: community outreach, commitment and flexibility.”
To pinpoint best practices, the Gardner Institute conducted a survey of 35 practitioners who specialize in housing affordability development throughout the state. The research assessed which practices are best, then examined the implementation of each one and the potential outcomes that could result.
Among the proposed adjustments include changes to local zoning ordinances that control the supply of housing through land use, density and design regulations, which more than any other local policies, govern the annual supply of single-family and multifamily housing, the report stated. They are powerful policy tools that can help to increase the supply of housing, Wood said.
He said redevelopment agencies in the Beehive State have used tax increment financing for more than five decades as a way to promote economic development. Tax increment financing is used to help support investment, generally for 20 to 25 years, in a targeted geographical area designated as a project area, he said.
“At the establishment of a project area, the current local property tax revenue from the land and structures within the project area becomes the base amount of property tax revenue,” Wood explained. “As economic development occurs in the project area, property values rise, and property tax revenues increase. RDAs played a long and important role in providing affordable housing in some areas, particularly in Midvale and Salt Lake City, where they’ve been really beneficial.”
Transit-oriented developments are also a useful option in developing new housing units, he noted.
“(They) are compact, mixed-use developments anchored around transit hubs and walkable communities,” he said. “Zoning for high-density housing often comes with the establishment of a (transit-oriented developments), which has the additional advantage of reducing transportation costs and increasing access to jobs, education, essential goods, and local services.”
He said a low-cost alternative to new development would be preserving and rehabilitating already existing affordable units, which usually cost at least 40% less than new ones.
“Preservation avoids the high development costs of new construction and the neighborhood opposition — ‘not in my back yard’ — associated with developing new units,” he said.
Lastly, the study cited a recent survey by the Terner Center for Housing Innovation at the University of California, Berkeley, which indicated that an accessory dwelling unit — sometimes called a “mother-in-law” apartment — rents for an average of 58% below market value. He said they are an essential tool for delivering affordable units to the market
“They can quickly provide affordable options in areas with higher rents increasing affordable housing in owner-occupied, high-cost, residential neighborhoods,” Wood said.