SALT LAKE CITY — Right before the housing market crashed in 2008, tumbling America into the Great Recession, the average apartment rent in Salt Lake County peaked at a little over $800.
A decade later, Salt Lake County’s average rent has escalated — at over $1,150 a month and climbing — and researchers don’t see any end in sight, analysts from the University of Utah’s Kem C. Gardner Policy Institute told the Salt Lake City Council last week when reviewing the institute’s latest housing report.
“That’s frightening,” Salt Lake City Councilwoman Amy Fowler said.
Rents in Salt Lake County — and other counties along the Wasatch Front — are on a steep upward trajectory, according to the report, straining the increasingly difficult search for affordable housing and begging the question how much longer Utahns can take skyrocketing rent prices.
Figures from 2018 show Salt Lake County with the highest average apartment rent of the Wasatch Front, while Utah and Davis County also showed average rents over $1,100 a month, according to the report.
Since the year 2000, Salt Lake County apartment rents have nearly doubled from their average of about $650 a month. That’s a 78% increase, with more than two-thirds of that escalation occurring in the last five years. Meanwhile, rent has outpaced income growth and inflation. Since 2000, the percentage rise in rent in Salt Lake County more than doubled the rate of inflation and almost doubled the growth in renters’ median income, according to the report.
How Utah fits into America’s housing ‘crisis’
It’s following a national trend, with cities across the country struggling to keep up with housing demand.
“America is currently experiencing a crisis in housing,” states a National League of Cities report on housing market conditions across the U.S. released this month. “Residents are having to pay more and more for housing while wages remain largely stagnant, making safe, quality, affordable housing harder and harder to find.”
In Utah, those rising rent prices are despite new apartments being built at rapid rates, particularly in downtown Salt Lake City where a handful of skyscrapers, including a 448-foot high rise with 39 floors of luxury apartments, are proposed. Areas in the south end of the county like South Jordan, Sandy and West Jordan have also seen rapid expansion of the apartment market.
The report shows ZIP codes near downtown Salt Lake City are “increasingly desirable,” with average apartment rent in five Salt Lake City ZIP codes having increased more than 75% since 2000, “driven, in large part, by new upscale developments,” the report states. In Salt Lake City, the downtown ZIP code 84105 has an average apartment rent price of $1,300 or more, according to the report.
According to the National League of Cities and Towns’ 2019 housing study, Salt Lake City is considered a “rent burdened” city, tending to exhibit low median income and job growth and are approving the a high number of single and multi-family building permits. Orem and St. George are also on the national map as “rent burdened” cities.
The ZIP code 84009 in South Jordan, home of the planned community Daybreak, now has an average apartment rent of more than $1,950 — the highest in the state, according to the Kem C. Gardner report. According to the National League of Cities and Towns’ study, South Jordan is considered a “wealth pocket” city, or a city that tends to exhibit the highest median income and job growth and are approving high levels of single-family building permits, but low levels of multi-family building permits.
In Sandy, some ZIP codes have average rent prices of over $1,400.
Wasatch Front’s housing ‘explosion’
That’s even though apartments in Salt Lake City and southern Salt Lake County have been sprouting rapidly across the county.
“Apartment vacancy rates remain low, under 5%, in all four Wasatch Front counties, despite high levels of apartment construction,” the report states.
Salt Lake City had just over 12,000 apartments in 2000. In 2018, that’s gone up to more than 20,500, according to the report.
DJ Benway, a research analyst at the Gardner Institute, shied away from calling today’s housing market a housing “boom” because he says he doesn’t necessarily think there will be a “bust” like in 2008.
Instead, Benway describes it as an “absolute explosion.”
“The market is severely overpriced, but it’s also severely under supplied,” Dejan Eskic, senior research analyst at Gardner, explained to the council, pointing to rapid population growth in the state. “So whatever happens in the economy, the demand for housing doesn’t go away, especially in Utah because we’re growing every day.”
Eventually, market forces should lead prices to “stabilize” once supply catches up with demand, but as vacancy rates continue to stay low and even decline, “we’ve not yet found that point,” Benway said.
Statewide, Utah is estimated to have a 50,000-unit housing shortage of all kinds, from single-family homes to apartments, according to other estimates from the institute.
Meanwhile, other factors are pushing developers to build now. Construction costs are continuing to escalate, and homebuilders seek to benefit from opportunity zones, or areas where developers can take advantage of tax breaks if they build in designated low-income areas under new federal tax reform. The New York Times recently published a piece detailing how opportunity zones have “fueled a wave of developments financed by and built for the wealthiest Americans.”
“I think the unforeseen cost of the opportunity zone is it’s fueling a fire of gentrification,” Eskic said, noting that as more high-priced apartments come online, they affect the overall market average, pushing rents even higher.
Eskic pointed to the 380-unit luxury apartment Kensington Tower proposed downtown and the 270-unit, high-end residential tower Liberty Sky barely a block away as two projects that could set an example nationwide for the success of those investments.
“Just through the grapevine, the eyes of the country are on those two projects seeing how successful they will be. If they work out the way the developers have envisioned they will work out, I think it will really change our market for better or worse,” he said. “The success of that project could really elevate rents further up because it will create kind of a higher-end dynamic downtown.”
Why $38 million for affordable housing not enough
That’s even though Salt Lake City officials have put affordable housing high on their priority list over the last several years. Since 2016, the city has spent about $38 million on affordable housing initiatives to encourage developers to build low-income units, leading to the construction of more than 2,000 affordable units in an attempt to close city-estimated gap of 7,500 affordable housing units.
Gardner Institute analysts told the Salt Lake City Council affordable housing initiatives are helping, but they urged city leaders to continue seeking creative ways to not only build new affordable units, but also preserve or renovate existing affordable housing.
“We’re not going to build our way out of the affordable problem, but we can rehab our way out of it,” Eskic said.
Eskic told city leaders to find the “low-hanging fruit” through policies, applauding city leaders for recently voting to allow accessory dwelling units. He said more policy changes like that — throughout Salt Lake County — will allow communities to renovate existing housing into affordable housing without threat of gentrification.
“The biggest bang for your buck is rehabbing instead of building from the ground up,” he said.
Salt Lake Council Chairman Charlie Luke thanked the researchers for their study, saying for future research it would be “helpful” to see what impact Salt Lake City’s affordable housing decisions have made on the market “because I think it’s going to inform whatever else we choose to do related to affordable housing.”
Salt Lake City Councilwoman Amy Fowler said the City Council can “still be creative” to find solutions — for both new units and rehabilitation of existing housing.
“Because we’re not going to build our way out of this,” she said.