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Residential Construction Is Booming In Utah

Recent US Census Bureau estimates indicate a 2.2 percent growth in the number of housing units in Utah from 2017 to 2018. That puts Utah ahead of the other 49 states, and well above the national housing unit growth rate of 0.8 percent. 

Ivory Homes, which has been named Utah’s number one homebuilder by the Construction Monitor for more than 30 consecutive years, can attest to that growth. “We do apartments, townhomes, condos, cottages, traditional single family, on up to high-end and custom homes,” says Michael Parker, vice president of public affairs at Ivory Homes. “We were ready for a more moderate year, but with interest rates where we’re at and demand, we’ve had a really strong spring.” 

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Ivory Homes anticipates selling 1,100 homes, townhomes and cottages in 2019. That total builds on the company’s recently achieved milestone of closing their 20,000th home in May of this year. Ivory, who only builds in Utah, also has 70 active residential communities across the state and plans to build an additional 300 or more apartments this year as part of their growing diversity of offerings and locations for Utah families.

LOTS OF PEOPLE, LIMITED SPACE

Utah’s economy is strong, and that’s attracting more people to the state. US Census Bureau estimates place Utah third in national population growth from 2017 to 2018. And Utah’s five fastest-growing cities were Herriman, Vineyard, Eagle Mountain, South Jordan, and American Fork. Vineyard grew the fastest of those listed, with growth of 60 percent. 

A higher percentage of Utahns live in large cities than the rest of the nation—nearly 43 percent, compared to the national level of 39 percent. The challenge here is that Utah’s large cities are competing with Utah’s natural landscape. “We have something that’s a little unique—we have mountains and lakes, and we’re down to our last 20,000 acres left in Salt Lake County. Davis County doesn’t have a lot of available land left either,” says Ari Bruening, president and COO at Envision Utah, an organization dedicated to quality growth throughout the state.

`He goes on to explain Utah’s topographical issues, “Unlike a lot of cities, if you want to build the next ring of suburbs, the next ring for us is on the other side of a mountain range, adding 20 minutes to your commute. It’s creating this dynamic where we have a big demand for a limited amount of land within our current Wasatch Front valleys.”

THE DENSITY QUESTION

Mr. Bruening indicated that we’re seeing a shift in the type of homes being built to accommodate the increase in population—from single-family housing to multi-family units. “If you look at building permit data for the Wasatch Front, it used to build about 70 percent single-family detached homes. For the last 10 years, it’s been about 50/50. That’s the way the market’s headed; that’s what people can afford. From all the survey data we’ve looked at, the majority of millennials would still like a single family detached home, but by a smaller margin than previous generations. More of them would prefer to live in an urban environment or apartment.”

Downtown Salt Lake City, for example, is about to see its first all-residential-rental skyscraper—24 stories high. Looking specifically at the capital city, the Kem C. Gardner Policy Institute released an August 2018 report entitled, “Salt Lake City’s Current Apartment Boom.” In it, the report highlights: “Since 2014, Salt Lake City has issued building permits for 6,481 units; 91 percent were for apartments.” 

The rise of apartments and condominiums, however, is not without controversy. Some communities are resistant to high-density developments moving into their otherwise single-family neighborhoods. A high-profile clash arose in Holladay over the move to redevelop the 57,000-acre site of the former Cottonwood Mall in Holladay. Residents formed a united effort to block the proposed mixed-use development of retail, office, and apartment space, citing concerns about increased congestion and diminished property values. The issue made it all the way to the Utah Supreme Court, with the Holladay resident coalition winning out.

FROM COTTAGES TO CASTLES

Looking at density and continued growth, Mr. Bruening says, “I also think that our single-family market is going to have to shift a little bit. I think our average household size in the last 50 years has significantly declined. Over the same period, the average size of a new single-family home has doubled, so when you have these affordability constraints, it seems like one solution will have to be people will settle for smaller units. Maybe they’re attached units, or detached, but smaller and higher density.”

High profile builders including Ivory Homes, Garbett Homes, Nilson Homes, and others are making the most of limited space with patio home communities. These tend to be smaller—around 2,000 to 2,500 square feet, on small lots—about 3,000 to 6,000 square feet. Affordability, less property maintenance, and desirable locations are part of the appeal. “Our cottage homes are highly amenitized, with large parks, trails, a clubhouse, and a swimming pool,” says Mr. Parker.

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From affordability to lifestyle, builders like Ivory Homes are also accommodating the budgets of many new home buyers. “For traditional homes, it continues to be the more moderate-priced homes—from about $260,000, like in Eagle Mountain, up to about $400,000—that are highly competitive,” said Ivory Homes’ Mr. Parker. 

For some builders, however, the emphasis on affordability and space is not an issue. A far cry from the apartments and cottage homes springing up throughout the Wasatch Front, Magleby Construction, which specializes in custom homes in Park City, Utah; Sun Valley, Idaho; and Big Sky, Montana, builds homes in the 10,000-plus square footage range, with an average construction budget of $5 million or more. 

“On the opposite end of the spectrum is where we participate,” says Pierrette Tierney-Magleby, vice president of development at Magleby Construction. “We’re experiencing extremely strong momentum, part of that is due to some of the wealth growth that is occurring in the stock market and business investments. We also work with a number of local Utah residents who have recently grown their companies and have taken them public, and Utah is where they call home.” 

INDUSTRY TRENDS 

Regardless of size and budget, there are consistent trends throughout the residential construction industry. In architectural style, for example, contemporary influences are inspiring design. Take a look at Garbett’s portfolio, for example, and you’ll find ultra-contemporary elements dominate exterior profiles. Even in alpine locales, which for years were dominated by rustic touches, Magleby Construction is creating homes with contemporary, clean lines. 

The latest electronics are also in demand. “Technology is becoming a big deal,” says Ross Ford, executive vice president at the Home Builders Association of Utah. “Conveniences like camera doorbells and smart home tech are big. Builders are having to figure out how to get all of that in. It’s changing so fast that what we wired into a house five years ago is different now.”

Beyond aesthetics and technology, one of the biggest musts for homeowners is energy efficiency. Garbett Homes, for example, has made it a central part of the company’s mission to become a “Zero Energy Ready Home” builder. Ivory Homes has turned its attention to the issue, as well. “We’ve made a big push to be a leader in sustainability, to make sure our homes have a positive impact on air quality. Buyers are looking to make sure their impact on the community is minimal,” says Mr. Parker. 

Mr. Ford adds, “There’s a certain expectation among buyers that the home will meet a specific quality, an assumption the home will be energy efficient.”

GOOD… BUT NOT ENOUGH

With a robust residential construction industry, advances in energy efficiency, and thriving communities, Utah’s number one spot in housing unit growth is something to celebrate, but it’s important to note: it’s not enough. 

“We have a housing shortage right now,” says Mr. Bruening. “We have high demand because our economy is strong, and we have a huge millennial generation in Utah, now moving into housing. We’ve also had a huge increase in costs, materials, labor, and land.

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“We also need to consider what causes growth. Growth happens because we have children and a great place to live and a strong economy. Zoning and development happen because of growth. If you try to stop growth by not approving development, all you’ll do is continue is drive prices up.”

“Probably the biggest thing I would emphasize the most is the housing gap we have in the state, with roughly a shortage of 50,000 units,” says Mr. Parker. “That’s not a small number. We need to be smart about land use, where we’re matching transportation investments with good, smart planning.” 

Envision Utah reminds us that Utah’s population is expected to nearly double by 2050. The residential construction industry, civic decision-makers, and communities must come together to develop solutions that will not only house the Utahns of today, but also of tomorrow.

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