With houses out of reach, condos could fill a need — but they’re expensive, too

Financing, risk and insurance costs are a few reasons developers say condos don’t pencil.

(Chris Samuels | The Salt Lake Tribune) The Wells Fargo Building framed by the American Towers Condos in Salt Lake City, Friday, Nov. 17, 2023.

This story is and excerpt from The Salt Lake Tribune Inno Lab Notes newsletter, which explores housing, transportation and energy solutions.

Could apartments for sale be the new starter home, the new ticket to the American Dream and retirement? Although the first condominium in America was built here, the more affordable form of homeownership is now rare in Utah.

“Condominiums can be one of the most affordable ways to get into homeownership,” Austin Taylor, member of the Congress for New Urbanism, told a crowded auditorium at the Salt Lake Public Library on Friday afternoon.

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“Condominiums are a critical piece of what we need to do in our state,” said Steve Waldrip, the governor’s senior advisor for housing strategy and innovation.

The governor is pushing for the construction of tens of thousands of new starter homes. Homeownership and the opportunity to buy and sell property is important for Utahns who someday want to retire, Waldrip said.

But Utah is now one of the most expensive markets in the country and the majority of renters in the state are now priced out of homeownership, explained Dejan Eskic, senior research fellow at Kem C. Gardner Policy Institute.

“Right now it is significantly more affordable to rent than it is to purchase,” Eskic said. But is that still the case for condos?

Yes, according to Eskic’s data. In Salt Lake County, the median two-bedroom condo is $2,073 (including homeowners association fees), while renting a two-bedroom would be about $1,604.

But the difference in cost is even worse for those looking to buy a single-family home. “We don’t really have any new condos in our market for sale,” Eskic said, “they’re in Park City because that market can absorb all those costs associated with the risk associated.”

Markets with a lot of wealth — think Miami, Hong Kong, Tokyo, New York — have more condos sold at higher price points that make the risks more appealing to developers.

Developer Derek Allen of LandForge explained that construction costs go up for condos because of a desire to personalize apartments and more expensive insurance requirements. Plus the risk of not selling units is significant. Capital gains taxes are also less favorable for developers selling apartments versus renting them, according to Allen.

Regulatory incentives like more flexibility on setbacks and ground floor activation might help, Allen said, however, “there is no one easy solution.”

Jarod Hall, architect-developer said cities are making it more difficult to build condos by requiring a minimum lot size to subdivide, although that’s not the case in Salt Lake City.

Cities could help by providing funding on for-sale projects or help for small HOAs, Hall said.

Do you live in a condo? Email sjeremias@sltrib.com to tell me about your experience.