Utah County has a growing housing affordability issue, according to a new study released by the Kem C. Gardner Policy Institute.
The report, “What Rapidly Rising Prices Mean for Housing Affordability,” published in the May “Gardner Business Review,” shows that the median purchase price of a house in the Provo-Orem metro area rose from $80,000 in 1991 to $302,000 in 2017, an increase of 277.5 percent. That puts Provo-Orem at 12th among 12 metro areas in the United States, behind Salt Lake City, which comes in seventh.
The average annual increase in housing prices since 1991 has been 5.7 percent, the report says. If that rate of increase continues for the next 26 years, the median price of a home in the Salt Lake and Provo-Orem metropolitan areas will be $1.3 million.
Lower-income households are hit the hardest by the rising housing cost. According to the report, a household with income below the median has a one-in-five chance of having to pay at least 50 percent of their income toward housing. That is described as “a severe housing cost burden.” By contrast, a household with income above the median has a one in 130 chance of being so burdened.
The report shows that Utah County has had the second strongest rate of housing price growth among the four Wasatch Front counties, with a 4.3 percent average annual growth rate followed by Davis County at a 4.0 percent growth rate, and last, Weber County at a 3.8 percent growth rate.
The increase has been driven by population and job growth, which have created a housing shortage. The reportshows that since 2010 Utah as a whole has led the nation in population and employment growth, driving steep rises in both house prices and rents.
Clark Ivory, CEO of Ivory Homes Ltd., a speaker and panelist at a seminar on this issue held by the Gardner Institute on April 30, cited four factors creating a “crisis of affordability”: rising interest rates; the resistance of cities to “smart growth,” which includes an openness to diversity of housing and to higher-density housing, rising cost of land, rising cost of labor and rising cost of building materials.
Ivory’s concern about population growth goes beyond the cost of housing.
“I am particularly concerned about what’s going on in northern Utah County,” Ivory said, “I don’t know that we are prepared to really handle the growth that is coming forward. The biggest issue will be transportation and access to that area. We need to watch that carefully. How are we going to get the people to and from?”
The report suggests a number of policy approaches that communities might take toward mitigating rising housing costs, including:
- Waive or reduce fees for affordable housing.
- Adopt inclusionary zoning ordinances that provide a wide range of housing types and prices.
- Exercise restraint in impact and permit fee increases.
- Change building codes to encourage more affordable housing.
- Explore new funding models such as public/private partnerships.
- Provide legal services for low income renters in eviction hearings.