A year ago, I asked readers whether the Wasatch Front could help ending up like San Francisco.
Silly question, right? The Salt Lake area will never rival the Bay Area as a destination or an economic or cultural center. Nobody is likely to write a hit song about leaving his or her heart here, unless it’s about a transplant at University Hospital.
But that doesn’t mean we can’t be just as expensive a place to live.
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A year later we’re still on track for that.
The median home price in South Jordan, for example, is $425,255 right now, according to Zillow. That’s a 9.1 percent increase over the past year. Figures vary for the rest of the Wasatch Front. In Park City, it’s $679,189.
In San Francisco, the media home price was $1.6 million in April. According to the federal Department of Housing and Urban Development, a family of four could earn a salary of $117,400 there and still qualify for federal assistance.
While that still sounds like light years ahead of the Wasatch Front (where a salary of $64,000 qualifies), a report in March by the Kem C. Gardner Institute at the University of Utah calculated that if trends from the last 26 years continue, the media home price here will be $1.3 million in 2044.
That historical trend, by the way, is an average annual increase of 5.7 percent in the price of a house. I doubt average salaries will increase 5.7 percent annually each year until 2044. If so, they’re off to a really sluggish start.
The question then, is how low- to moderate-income folks will survive. How do we reverse this trend?
The answer is elementary. If you have any excess demand for something, such as housing, you must increase the supply in order to keep costs down.
That’s different than the answer you’ll get from many politicians, who typically start first by talking about subsidies. A form of that may be necessary for people in the very lowest income categories, but market forces, if properly unleashed, would take care of much of the problem.
That means allowing more high-density, high-rise housing, which may not be what a lot of people who already live here want. It means cities should allow more alternative types of housing, including non-traditional small houses such as those built from discarded shipping containers, which were featured recently in the Deseret News. It means allowing people to rent out basements or build so-called mother-in-law homes on their lots.
In other words, it means relaxing a lot of zoning laws and restrictions, which create scarcity.
It also means political risk. People don’t like change. Municipal elections hinge on such things.
Jeff Andrade-Fong of the Foundation for Economic Education has another idea. Writing about San Francisco’s problems last month, he suggested doing away with traditional property taxes, which are based both on the value of land and the structures it holds, and replacing them with a tax on land only.
This, he wrote, would make property taxes a “fixed overhead” cost for landowners. Their incentive would be to do as much as the market will bear in order to make money off that property, such as building a lot of housing.
Andrade-Fong would then fund housing vouchers for low-income people from the land tax. When demand causes land to become more expensive, the vouchers would rise, as well.
Solutions may require that kind of radical thinking. Utah politicians like to say that if you tax more of something, you get less of it. It follows, then, that the more you tax the value of property, the less construction, or new property, you get.
One thing is fairly certain: The last 26 years have shown that simply continuing on the same path will lead to ever-higher housing costs. The U of U report found only three states in which housing rose more than in Utah during that time.
In San Francisco, you can leave your heart, and an arm and a leg, and still not get much of a place to live. That’s not the model the Wasatch Front should be aiming to follow.