Housing Affordability Is Key To Utah’s Economic Future
A lot can change in 20 years. In 2000, there were approximately 1 million fewer people living in Utah than there are today, the word “tweet” had only one meaning, the median home price along the Wasatch Front was $168,742, USB flash drives had just made their entrance into the market, and many of today’s jobs in technology were unfathomable.
These snapshots of days gone by make one fact clear: our economy and population have changed dramatically since 2000. Over the last two decades, Utah’s economy has become one of the most diverse in the country with booming tech, healthcare, and manufacturing sectors. We have experienced tremendous job growth, low unemployment rates, and have maintained a high quality of life sopeople want to stay and raise their families here.
Due to births and in-migration, the population growth in Utah—especially along the Wasatch Front—has also steadily increased and is expected to nearly double by 2065. Utah County alone, for example, has experienced immense growth in the last 20 years, making it an epicenter for technology businesses. In fact, it’s predicted that in 50 years from now, four of every ten new Utah residents will reside in Utah County.
Beyond population projections, economic accolades, and demographic statistics, growth has a direct and personal impact on our daily lives. This growth is certainly not a negative, it has propelled our state to success by almost every measure, however, it does come with repercussions. Most concerning is the skyrocketing cost of housing in Utah.
The median price of a home along the Wasatch Front has more than doubled since 2000, nearing $400,000 today, and is expected to continue rising. Twenty years ago, as a father with young children, I didn’t expect that homeownership may not be attainable for them in their adulthood. Now, 20 years later, it is clear that may be the case.
Not only for them, but buying a home may be out of reach for their future children as well. New data from the Kem C. Gardner Policy Institute shows that only 35 percent of households in Salt Lake County are able to afford the median-priced new single-family home within the county.
Understanding The Problem
In 2017, the Salt Lake Chamber began hearing from concerned business leaders that their employees couldn’t find affordable housing options. It was not until the Chamber commissioned a study by the Kem C. Gardner Policy Institute, “What Rapidly Rising Prices Mean for Housing Affordability,” that we got a clearer understanding of the problem. The reality the study brought to light was serious―Utah has a housing shortage which has exacerbated the burden of housing costs among all income levels.
It is clear housing affordability, if left unaddressed, that will remain a threat to our state’s continued economic prosperity. Yet how can businesses, local officials, lawmakers, and every Utahn contribute to finding solutions? Enter the Salt Lake Chamber’s Housing GAP Coalition, established in May of 2018. Made up of community and business leaders across sectors, academicians, and local elected officials, this group has partnered together to help answer this question and tackle the issue of housing affordability head-on.
The work of the Housing GAP Coalition is focused on preserving Utah’s cost of living advantage and ensuring Utahns at any income level can afford their housing—whether in a single family home, townhome, or apartment. In just under one year, the Coalition has made great strides in raising awareness of this issue and bringing the right people together to advance innovative solutions that address the five main components of Utah’s housing affordability problem: the housing shortage, local policies, Not in My Backyard (NIMBY) mentalities, construction and trades labor shortage, and skyrocketing construction and material costs.
The Housing Gap
Explaining Utah’s rising housing prices is a matter of supply and demand. For the first time in 40 years, Utah has had more household formations than available housing units. In other words, there is a gap between the number of families or individuals in need of housing and the available supply. For every four new households added in our state, there are only three new housing units, leading to upward pressure on housing costs.
Over the last ten years, a 54,000-unit gap has accrued affecting all three housing markets: new construction, rentals, and existing homes and will likely continue to expand until the next economic downturn. While the Salt Lake Chamber’s Housing GAP Coalition cannot directly solve the housing shortage facing our state, it has worked to bring the existence of the housing gap to the forefront of public knowledge and discussion.
Local policies that limit housing projects is another component of the state’s housing affordability problem. Local policy can be complex and often varies from one city to the next. It should be acknowledged that different areas of the state have different needs and it is crucial to maintain local control. That’s why solving the housing affordability problem has the most positive results when local communities do their part to implement informed land use policies that keep housing affordable.
As population growth continues, the Wasatch Front is quickly running out of developable land. With mountains to the east and lakes to the west, our state’s geography limits how far we can grow. In this case, the best is not saved for last. There is limited land available for development and what is left is harder and more expensive to develop—leading to a more expensive home, a longer commute, and less accessibility.
Now more than ever, local policy decisions that encourage smart growth are crucial to closing the housing gap. This includes incorporating density in some way, whether by smaller lots, apartments or mixed-use, and transit-oriented developments. The Housing GAP Coalition has partnered closely with the Utah League of Cities and Towns and also visited 47 city councils across the Wasatch Front to talk about the housing affordability issue and learn from the ideas, concerns, and best practices of cities working to solve our housing problems.
Not In My Backyard
As Utahns start to feel the effects of population and economic growth, the Not in My Backyard (NIMBY) mentality has become prevalent. In fact, the inability to zone and make necessary land use decisions on the local level is often a result of residents’ opposition to change and growth.
This has driven up costs and constrained supply across all markets, but particularly for affordable high-density rental housing. In order to solve the housing affordability challenges in Utah, a balance between housing types is important to make sure we aren’t pricing people out. Especially those that we need and want in our community such as teachers, nurses, and first responders.
Change can be hard, however, when I think about my children and future grandchildren entering the housing market, it becomes apparent why new housing developments are necessary. Density does not mean compromising the high quality of life we have all come to enjoy.
Dwindling Construction And Trades Workforce
For every five individuals retiring from the construction and trade labor force, only one replacement is being trained. This strained workforce creates risk for the homebuilding industry and contributes to increased housing prices. To address this component of the state’s housing affordability problem, the Housing GAP Coalition has been an integral part of advancing the Build to Success program administered by the Ken Garff Success in Education Foundation as well as the Construction Pathway Program in conjunction with Talent Ready Utah.
These programs help students―in high school and college respectively―connect with private sector internships and other unique on-the-job learning opportunities to gain education and skills in the construction trades. From this, students are able to see first hand the lucrative job opportunities within those career paths.
Construction And Material Costs for Housing
Homes are more expensive to build as hard costs increase. Just in the last year, the cost of construction materials has climbed 7.4 percent. This ongoing increase in construction and material costs are likely passed on to the consumer through higher home prices. This is another component that is mostly out of our control, but is important to understand the overall impact it has on housing affordability.
Predicting The Future (Without A Crystal Ball)
Closing the housing gap, and addressing Utah’s affordability challenges, requires collective responsibility. Today’s trends can, in part, can be reversed through a collaborative approach to solving the five components to the housing problem described above. Whether you are an employer or employee, lawmaker or city councilor, homebuyer or home builder, NIMBY or YIMBY—recognizing the seriousness of Utah’s housing gap and taking steps, however big or small, to make a difference in these ongoing efforts will not only allow more Utahns to achieve the dream of housing ownership, but also help Utah maintain its economic competitiveness.
A lot can change in 20 years, and this change should be viewed in a positive light. Even without a crystal ball, I am optimistic that Utah can and will continue to have communities with a variety of housing types at affordable prices for all income groups. This includes options for my own children and their children who, together with all Utahns, will contribute to a thriving economy in jobs that may not be invented yet, enjoy Utah’s exceptional quality of life, and secure our economic future.
Derek Miller is the president and CEO at the Salt Lake Chamber and Downtown Alliance.