A group from the Utah League of Cities and Towns met with the combined Deseret News and KSL editorial boards this week to tout, among other things, last year’s passage of SB34 by the state Legislature, a bill designed to encourage construction of more affordable housing.
But almost simultaneous with the meeting came a report from the Salt Lake Board of Realtors showing the median home price in Salt Lake County had reached $389,000, a new record high.
I’ve written before that the Wasatch Front is on a fast-moving trend to become the San Francisco of the Mountain West in terms of house prices. This report adds fuel to that concern, as well as to the need for solutions.
And yet, the trend isn’t irreversible, even though it will be hard to stop, particularly in a state that remains among the nation’s fastest growing, where unemployment stood at 2.5% in October.
To put the problem in a different perspective, the American Enterprise Institute published what it calls a “carpenter index” on Wednesday. This is an attempt at measuring whether the people who build houses — carpenters with modest incomes — can afford to buy an entry level one.
The news for Salt Lake isn’t good. Out of the top 100 metropolitan areas in the United States, only nine were deemed completely unaffordable, which is defined as a place where the average carpenter could afford less than 20% of entry level homes. The Salt Lake area was one of them, coming in at No. 8. In Salt Lake County, a carpenter could afford only 19.4% of entry level homes.
But Provo was even worse, at 12.1%. It was ranked fifth.
That puts the two main population centers of the Wasatch Front in the same general league as Los Angeles, San Francisco, Portland and Denver for affordable housing. Combine that with recent winter inversion weather and you have the makings of new state motto — “breathtakingly expensive to live!”
The least affordable metro was San Diego, where carpenters could afford only 6.5% of entry level homes. By comparison, in Indianapolis and Kansas City they could afford 100%.
The good news is that the least affordable cities are all desirable places. In order to be unaffordable, a city has to be a place where people really want to live. That’s a list on which any city would love to reside. But it can be no fun to live in a place where housing takes all your income, leaving nothing left of food, let alone fun.
Things are getting worse. The index showed that in 2012 an average carpenter could afford 51% of entry level homes in Salt Lake, and 51.2% in Provo.
What can be done?
Two experts at AEI, Edward J. Pinto and Tobias Peter, offer some common-sense solutions in an op-ed published Tuesday by Marketwatch.com. In short, this is a matter of supply and demand, and it has been exacerbated by restrictive zoning and other land-use practices, they said.
Local government could abolish single family zoning and instead allow more “light touch density” housing, defined as buildings housing two to four families each. In 1950, the authors said, these comprised 19% of the housing stock nationwide. As of a decade ago, when the latest data was available, they were at 8%. Returning them to 1950 levels would add up to 12.5 million affordable units over time.
They also chided government housing agencies for offering loose credit standards, which they said drive up prices.
Despite the irony of our visit over SB34, the good news is the bill does encourage cities to do more to spur affordable housing, which often means zoning changes. Our visitors came with data showing that, “from January to June of 2019, apartment construction increased 48.2% over mid-year 2018, accompanied by a 14.6% decline in single-family permits.”
Will this new trend be enough to slow the rapidly rising home prices along the Wasatch Front? Can local carpenters build fast enough to stay ahead of the demand? We will know in a few years.