Originally published in the Deseret News.
The Utah economy continues to perform. The expansion celebrated its eighth birthday this year, and the federal tax cuts will extend the expansion, which is already the nation’s and state’s second longest ever. These are prosperous times.
Every economic expansion party has a host of well-wishers — low unemployment, strong job growth, in-migration and rising incomes bring plastic hats, whistles and gifts to the party. But every party also has the party pooper, the rude uncle who can’t leave well-enough alone.
Utah’s economic party pooper may well be rapidly rising housing costs that are pricing moderate to low-income people out of the market. Utah’s millennials, schoolteachers, first responders and many other people starting their careers find it near impossible to find housing that is affordable. If we are not careful, unaffordable housing will impair our economic competitiveness as a region and end the expansion.
Clark Ivory, the president and CEO of Utah’s largest homebuilder, made this point at a recent seminar hosted by the David Eccles School of Business. He said, “Housing affordability is the key to economic development.” I couldn’t agree more. We need to take purposeful steps to get ahead of Utah’s affordability challenge.
Jim Wood, the Ivory-Boyer senior fellow at the University of Utah, possesses a wealth of knowledge about Utah’s housing, construction and real estate industry. He is the lead author on a new report on Utah’s housing affordability challenges. Here are some of the findings:
- Utah’s rate of housing price increases ranks fourth highest in the nation over the past 26 years. Only Colorado, Oregon and Montana have experienced greater price appreciation.
- For the first time in more than four decades, new household formation exceeds housing unit construction in the Beehive State. Utah faces a housing shortage that will likely continue for several more years.
- A labor shortage, rising land and material costs, increasing permit and impact fees, federal banking regulations and local zoning ordinances are pinching supply and preventing Utah builders from meeting demand.
- A gap exists between growth in income and housing prices. In Salt Lake County, for instance, single-family housing prices are increasing by more than twice the growth in median household income.
- The greatest challenge is for moderate- and low-income households. Households below the median income have a one-in-five chance of facing a severe housing cost burden (paying at least 50 percent of their income toward housing).
- Impact fees charged by local governments are rising, making housing even more expensive. The median fee for the municipalities surveyed increased by 26 percent in 10 years.
- The median sales price of a home in Utah’s two largest metropolitan areas is now 20 percent higher than home prices in neighboring metros of Boise, Las Vegas and Phoenix.
- Rising interest rates over the next few years will intensify the problem.
These are chilling findings, but there are ways to address the affordability challenge. As a first step, let’s welcome a greater mix of housing types in our neighborhoods. Cities should explore the benefits of inclusionary zoning ordinances, welcome accessory dwelling units and think twice about large lot zoning. Cities should exercise restraint in impact and permit fee increases and work with builders to eliminate egregious policies.
Let’s continue to invest in public transit. If a household can get along without a car or with one fewer cars it will help with housing affordability.
Let’s put pressure on the Utah congressional delegation to do their part to reform America’s immigration system. The Utah economy needs more hourly and skilled workers, the perfect match for the immigrant workforce.
Most importantly, let’s have a bias toward action. Dan Lofgren, president and CEO of Cowboy Partners, one of Utah’s largest builders of affordable housing, said it this way: “Nobody should get a pass. Find a way that you can be part of the solution now.”
Let’s avoid a California-sized housing cost problem and celebrate more economic expansion parties.