Home builder leader: New inventory 'critically low'

By Brice Wallace

Some people might be impressed that members of the Salt Lake Home Builders Association constructed 3,600 housing units in the Salt Lake Valley last year.

Don’t count Jaren Davis among them.

The executive officer of the association recently told a crowd that the figure — included in a meeting handout’s statistics — is symbolic of a housing shortage along the Wasatch Front.

“That seems like an incredible amount of business … but what that paper doesn’t show you [is] in the Salt Lake Valley, we could have built 9,000 dwelling units,” he said, basing the figure on 23,800 new workers in the area and the average home having about 2.5 residents.

For the first time in more than 40 years, the number of Utah households is outpacing the growth in housing units, according to James Wood of the Kem C. Gardner Policy Institute at the University of Utah. Late last year, Wood said that the number of households has grown by 109,321 since 2010, while the number of housing units has increased by only 81,656.

Davis and group of panelists cited several reasons for the troubling trends, including a population spreading outward from the Salt Lake Valley.

“We will argue that we won’t get to the 9,000 dwelling units in the Salt Lake Valley because we can go to Utah County, we can go to Tooele County — people choose to live in outlying areas,” Davis said.

He provided data and anecdotes indicating the severity of the situation for people looking to buy a home. In a good market, he said, a house is on the market typically for about 40 days, but it’s down to 13 days. One real estate agent recently listed a home at $279,900. It sold for $310,000 cash after 50 showings and 10 offers — after only two days. Plus, the current housing inventory is 24 days.

“So, if the builders stopped building today, we’d have no houses to sell you in 24 days. Inventory is critically low, and it’s at a time when we have land issues, lending issues and talk to any of our builders here today about labor issues,” Davis said. “We’re going to price those people out of the homes, whether it be the baby boomer who wants to downsize or the millennial who wants to come into the market. Both ends of the spectrum are critical. …”

Prices for existing single-family homes grew 8.1 percent last year in Salt Lake County, and apartment rents are growing 5 percent to 8 percent annually. Meanwhile, home lot sizes are shrinking, from 13,000-plus square feet in 1980 along the Wasatch Front to 6,000-plus square feet in 2010.

The number of permits for single-family units has fallen while permits for multi-family units have increased. As recently as 2005, single-family homes accounted for 78 percent of the total, but in 2015 the figure had dwindled to 48 percent. Ari Bruening, chief operating officer at Envision Utah, said the reasons for that include affordability, preference and demographics. Davis said more people are wanting to rent apartments or have multigenerational dwellings.

Bruening attributed much of the housing situation to simple supply-and-demand forces. Utah’s population is growing — it could reach 6 million by 2065 — while the amount of developable land is limited. Salt Lake and Weber counties each have 40,000 acres — 15,000 more if Salt Lake adds land owned by Kennecott — and Davis has only 20,000 acres. Utah County has 240,000 acres, much of it west of Utah Lake. “A lot of that is not necessarily near where jobs are,” Bruening said of Utah County’s situation.

“You have this increasing demand and at the same time you have a decreasing supply close-in, and as a result housing prices increase, people aren’t able to afford the same kinds of things they used to be able to afford, and so on,” he said.

Several city mayors highlighted reasons for the tough housing market, including a lack of developable space. Among them was Midvale Mayor JoAnn Seghini, who said people wanting to live in Midvale and still have open space need to realize that that requires high-density housing.

“We’ve got not quite six square miles in my community,” she said. “We can’t go out. We have to go up.”

Draper is willing to have development go “up,” but Mayor Troy Walker told the crowd, “You guys build what you can sell.” A few years ago, the city rezoned an area near a FrontRunner stop, allowing for unlimited building height and unlimited density. But now the area has five-story buildings and no residential units, he said.

“Someone today could go build a giant, high-rise condominium on that project right now,” Walker said. “There would be no zoning problems whatsoever for it, but no one’s done it.”

Sandy Mayor Tom Dolan predicted that the Salt Lake Valley and Wasatch Front are “going to become far more dense” because many older and younger people prefer condos or townhomes to single-family dwellings.

Panelists talked about several other issues — transportation, social media and communications, one-issue political candidates, lending issues and city regulations — and Seghini suggested cities need to establish rules and guidelines about housing and spacing and try to stick to them even in the face of a small-but-vocal minority. “Just because 10 people didn’t like it doesn’t mean it’s not a good thing for the community,” she said.

The economics of the crisis can be seen in the home builders association’s statistics for 2016. Even that relatively small figure of 3,600 new homes along the Wasatch Front had a total value above $1.3 billion, required the work of more than 5,000 licensed contractors and had a ripple effect of adding 2,400 other jobs, adding $131 million in income to the economy and generating $38 million in local tax revenues.

Bruening and others suggested more dialogue to help overcome the issues raised at the gathering.

“The good news is, those challenges are things that come as a result of our successes,” Bruening said of the Utah economy. “We’re growing because we’re doing well, [and] we’re a great place to live. I think that’s encouraging, and I think we can have a bright future.”