Astonishing. Jaw-dropping. Mind-blowing. When it comes to housing price increases in Utah, the exclamations could just keep flowing.
The cost of housing in Utah has been skyrocketing. Median home prices increased by 15.4% in 2020 and even further in 2021 – with a year-over-year appreciation of 29% at September.
Yes: 29%. That’s not a typo.
And Utahns have noticed. Recent Utah Foundation research reveals that more than 80% of Utahns perceive home prices and rents as being too high. A Utah Foundation survey found that most respondents don’t think they could afford the homes they currently own if they wanted to purchase them today. And nearly 90% are worried about housing costs, especially for young Utahns.
As detailed in a new Utah Foundation report on housing, from 2010 to 2021, an inflation-adjusted mortgage payment with 10% down on a median-priced Utah home increased by $469, from $1,131 to $1,600. Over time, the cost of lower-priced homes has increased more than higher-priced ones, so the attainability of homeownership with affordable mortgages has disappeared for some Utahns.
Why not just rent? Well, rents in Utah have increased dramatically during the past 20 years, and especially in just the last two years; for example, Davis County and Utah County rents rose more than 50% from January 2019 to July 2021.
There’s little relief in sight. Utah’s rapid population growth is projected to continue. And the housing supply isn’t there. Nationally, the vacancy rate for homes is at an all-time low, and nowhere is supply more constrained than in the Beehive State. Utah’s vacancy rate is the lowest in the nation.
So, yes: Astonishing. Jaw-dropping. Etcetera.
How do we address this challenge? More precisely, how do we address it in a way that does not damage our vaunted quality of life, which provides entry points to homeownership, and that does not strain the tax base?
There’s no silver bullet, but the Utah Foundation has embarked on a project focused on one important answer. The new study, “Is the Middle Missing? A Guide to Expanding Options for Utah Homebuyers and Renters,” explores “Missing Middle Housing” through four installments. The first installment, “The Scope of the Challenge,” examines Utah’s housing problem and introduces middle housing as one means of addressing it.
“Missing Middle Housing” is a term that encompasses a variety of multi-unit housing buildings that are house scale, facilitate neighborhood walkability, accommodate changing demographics and preferences, and are available to people with a range of incomes. They occupy the often “missing” middle zone between large apartment complexes and large-lot single family neighborhoods. Middle housing can increase the supply of housing in existing communities, and potentially in a way that is not objectionable to most people and with a standard of design that can improve upon the neighborhoods.
The cost of building middle housing is often less per square foot than mid-rise and high-rise condominiums and apartments because they are stick frame, wood-constructed units, with lower costs for materials and simpler construction parameters. And middle housing may not have the amenity packages seen in larger condominiums and apartment complexes – such as parking garages, common rooms, gyms, and pools. Cost, of course, depends not only on construction costs or amenities but on home size and the price of land. And middle housing focuses on smaller, often attached, homes on smaller lots.
For the first-time homebuyer, middle housing may provide an entry point. In Salt Lake County, the August 2021 median (or middle) sale price of a townhome was $390,000, nearly 30% less than the median for single-family homes ($546,450).
Looking at the challenges first-time homebuyers face, I reflect on the options I once enjoyed. While I was still in my 20s, I was able to buy a four-plex as an owner-occupant. There was zero setback and a postage stamp yard. But after collecting the rent from the other three apartments, I had enough money to cover the mortgage payment and then some.
If we want young Utahns to enjoy the benefits of homeownership, we may need to open the playbook to create a wider range of options. In the meantime, Utahns already in the homeownership game can enjoy a bonanza of growing equity.
Peter Reichard is president of the Utah Foundation, a nonpartisan, nonprofit public policy research organization. Reach him at email@example.com. Find the new “missing middle” series at utahfoundation.org.