Utah’s housing shortage is getting worse because of the coronavirus pandemic
(Trent Nelson | Tribune file photo) A home for sale in Salt Lake City. Market analysts say the pandemic is likely to worsen an existing shortage of available homes and rentals in Utah.
The coronavirus and its broad impacts on society appear to be worsening Utah’s ongoing shortage of homes, economists and market analysts say — and in turn, that housing gap could be worsening the pandemic.
Home sales dipped in April and May due in part to wariness on behalf of buyers and sellers.
Sales then came roaring back in June in a dramatic uptick that has left supplies of available homes on the Wasatch Front “really dangerously low,” one leading residential broker said.
Combined with demand spurred by lower interest rates, the deficit in housing supplies “will drive prices up, which exacerbates the housing affordability problem,” said Mike Ostermiller, CEO of the Northern Wasatch Association of Realtors. “We’re going to struggle to do deals because of a lack of inventory.”
The bleak picture for renters and would-be homebuyers alike was in the making well before the pandemic, Ostermiller and others noted. Utah entered this health crisis with an estimated gap of roughly 50,000 fewer homes than family units or households in the state
, after a decade that saw both home prices and average rents grow far faster than median incomes.
That squeeze had created more situations where friends and family members, often from several generations, were doubling up in the same home. A top Utah economist believes that the overcrowding trend has started to show up in the latest rise in the state’s COVID-19 case counts.
Doubling up, said James Wood, senior fellow at the University of Utah’s Kem C. Gardner Policy Institute, “makes social distancing much more difficult and transmission more likely. I think that’s what we’re seeing, particularly for our minority populations.”
Today’s housing markets don’t have the structural flaws they did during the Great Recession, where a housing crash damaged financial and credit markets, said Wood. This time, effects from the pandemic are deepening an existing set of problems.
Home builders had made some headway on closing the state’s housing supply deficit in recent years, but their work has slowed with COVID-19. New construction of single-family homes, condominiums and apartments are all now expected to decline in Utah by between 5% and 10% this year, according to new Gardner Institute forecasts.
Wood said demand for homes is also likely to sag as large numbers of residents continue to struggle long-term with COVID-19-related unemployment and loss of income. “We just don’t know right now by how much,” he said, but reduced demand won’t counteract the effects of lower supplies.
“Utah will continue to have a serious housing shortage,” Wood said.
He said the latest consensus on housing and other economic projections provided to lawmakers do not reflect the latest surge in COVID-19 cases, nor the potential effects if political leaders shut down parts of the economy again to fight the virus.
“It’s just such a moving target,” Wood said. “But it’s really concerning and troubling what’s happened in the last three weeks.”
The pandemic continues to heighten pressure on thousands of renters in Utah, many of whom were already spending half or more of their incomes on housing before COVID-19. A vast majority of the jobs lost in Utah due to the pandemic and social distancing measures were held by those earning lower wages, data show.
Yet Utah has not seen a dramatic spike in evictions, at least not so far.
One expert advising Utah Gov. Gary Herbert says that federal COVID-19 relief — including stimulus payments and beefed-up unemployment benefits — “have done a remarkable job stabilizing the market.”
“Even with historic job losses, we’ve actually seen rent payments holding up quite well,” said Darin Mellott, a real estate executive who heads a group of economic advisers to Herbert on housing issues during the pandemic. “It’s fair to say the safety net is largely holding.”
Concerns are rising over how that picture could shift when a congressionally approved $600 weekly stipend now being added on top of state jobless benefits
expires in a couple of weeks.
State lawmakers, meeting in special session, recently retooled a separate $20 million program for rental assistance, to make the money available sooner in case evictions and homelessness should begin to rise.
But there appears to be little political appetite for a repeat of the 45-day eviction moratorium Herbert enacted in April
, according to several of the governor’s advisers. That, they said, was tantamount to foisting financial problems from the pandemic on to the state’s landlords, many of whom are smaller property owners with their own mortgages.
“We don’t want to trade one person’s pain for somebody else’s,” said Chris Gamvroulas, head of Ivory Development, a financial services arm of Utah’s largest homebuilder, Ivory Homes. Instead, Gamvroulas and others said, housing market experts are advising state officials to offer rent subsidies to people in dire need.
But wider fears persist, he said, that if coronavirus cases continue upward and death rates start to rise, problems with housing could spread to homeowners, as they did during the Great Recession, which led to thousands of foreclosures.
Gamvroulas said, “That’s what we really have to guard against.”