Utah’s housing crisis: Could an answer be in your backyard?

This story is part of The Salt Lake Tribune’s ongoing commitment to identify solutions to Utah’s biggest challenges through the work of the Innovation Lab.

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For Tessa and her one-year-old daughter, the rental market may be the only lottery going in Utah.

As a single parent working a full-time job, Tessa has little spare time. For the last month, that time has been spent hunting for a modest two-bedroom rental in Salt Lake City.

“It’s been challenging to say the least,” said Tessa, who requested we only use her first name out of fear it would hinder her from getting a rental.

Tessa believes she is the ideal tenant. Stable job. Sizeable income. A near-perfect credit score. Zero credit card debt. Yet, she hasn’t had much success.

“Landlords have 26 ideal potential tenants and you don’t always win,” said Tessa. “It just feels like luck at this point.”

The housing options for Tessa and her daughter are few and far between. She’s upped her rental budget and dropped desired amenities.

“At this point, my budget is under $2,000, with all of the utilities, everything included,” said Tessa. “Properties don’t seem to have garages or storage space. I’m having to get rid of a lot of my stuff.”

Tessa and her baby girl are among many other households struggling to find a home that meets their needs. Within the last five years, rent prices in Salt Lake City alone have jumped 52%, according to a recent report by the Utah Foundation.

But Utah’s housing crunch isn’t just an affordability problem.

“I think a lot of it has to do with the fact that there’s just not enough housing, period,” said Tessa.

The lack of varied housing types has hindered the progress to fill the 45,500 unit shortage, according to the Utah Foundation. In order to close the gap, more adaptable housing, such as townhomes, duplexes and mother-in-law suites, need to be a larger percentage of Utah’s housing stock.

“Apartment complexes alone cannot close the 45,000-door housing gap, considering the demand for owned homes. And single-family homes cannot close the gap considering costs,” reads the Utah Foundation housing report. “Instead, there need to be more options for a wider variety of Utahns.”

Different needs, new housing

While the number of new households is outpacing the current housing stock, the Utah Foundation found household sizes are also shrinking, the population is getting older and square footage is becoming less of a priority.

“In the next 30 years, we’re gonna have a lot more people that are 65 plus,” said Shawn Teigen, the vice president, and research director at the Utah Foundation. " And if the projections are correct, we think there will be a lot more smaller homes because we feel we’re going to have a lot smaller families.”

Instead, the Utah Foundation is examining what housing options could replace where a single-family home or high-rise apartment complex might be to accommodate different lifestyles and price points.

“Do we really need McMansions?” questioned Teigen. “Do we still need, you know, 3,500 square feet for four people?”

To adjust to changes in demographics and preferences, some real estate developers are experimenting with different forms of housing to not only address the shortage but to broaden ownership and rental selections.

“ADUs are becoming more acceptable with officials,” said Teigen. “Townhomes are more acceptable in a lot of ways just for people that are like, ‘Oh my goodness, I cannot afford a single-family home.’”

Unknown waters

When Nicholas Motzkus migrated to Utah from Los Angeles, home prices came with sticker shock.

“I remember looking at 900 square-foot little townhomes, you know, and they’re like $450,000,” said Motzkus.

He was striking out until he came across an experimental property by Utah real estate developer Ivory Homes. As a test case, Ivory Homes, a sponsor of The Tribune’s Innovation Lab, built The Pines, a small three-unit development with an attached ADU included.

“ADUs are kind of an untested market in Utah,” said Chris Gamvroulas, the director of Ivory Homes Development, noting ADU developments aren’t new to the national housing market.

The two-story main dwelling blends right in with the character of the surrounding neighborhood. Tucked in the back, where a sizable backyard would otherwise be for a single-family home, is the ADU. The quaint unit is equipped with its own parking space and separate entrance. It even has washer and dryer hookups stealthily placed out of sight.

Matt Stingham, the marketing director for Ivory Homes envisions “a young couple or working professional,” renting out the spare unit, also referred to at the “Fonzi apartment,” a reference from the hit TV show ‘Happy Days.’

After being on the market for a week, Motzkus snatched up one of the homes for about $735,000, with the intention of renting out the ADU.

“It became just kind of an economic decision as a way to be able to afford something because I could have been in something much smaller, less expensive,” said Motzkus.

Motzkus may live in the ADU and rent out the home. Either way, the rent revenue would help Motzkus pay down his roughly $3,000 mortgage payment.

Even though Motzkus is the first buyer of the trial property, it’s a success in the eyes of Ivory Homes.

“I’m grateful that the experiment is working,” said Gamvroulas. “We’ve been trying to take lessons along the way and learn as we go so we can start to perfect them.”

Relief in sight?

As Utah continues to boom, the stress on the housing and rental market will only grow. If Utah doesn’t build a mix of units, the problem is expected to get worse and more residents will be priced out of the existing inventory.

Generally speaking, supply responds to demand, says Teigen, a researcher at the Utah Foundation. The more housing units available, the slower prices are to increase, and in some cases could even drop the cost.

On average, Ivory Homes builds 1,200 new homes a year, and they anticipate ADUs becoming a common addition to new homes moving forward.

“The plan is to start to offer these [ADU additions] wherever we can just throughout our entire portfolio,” said Gamvroulas. “We’ve got 60 plus locations, and we can probably do these in most of them.”

Ivory Homes is in the process of getting an ADU development approved in the Avenues in Salt Lake City, which has received a fair amount of pushback from the neighborhood. However, Gamvroulas says leaders around Utah have nudged Ivory Homes about the possibility of an ADU development in their city.

“City officials are asking how that might work with, you know, a different set up on a different lot size,” said Gamvroulas.

ADUs will need to be far more widely adopted in order to bring the base price down for renters and they are also only a small solution for a big problem, notes Teigen. Rather, it’s a step in the right direction.

“I don’t think ADUs alone will do it [solve the housing shortage],” said Teigen. “We’re seeing a lot more ADUs than we ever maybe saw before,” continued Teigen. “It’s still a small percentage, but in my mind, it’s getting more and more doors available.”