Utah’s apartment building spree isn’t satiating its hunger for housing
Even as Utah’s housing market cools down, the rental market continues to heat up. A new report from the Kem C. Gardner Policy Institute looks at the change in the Wasatch Front’s apartment market as more residents scramble to rent due to unattainable housing prices.
Dejan Eskic, a senior research fellow focusing on housing with the Kem C. Gardner Policy Institute said 76% of Utahns are currently priced out of home ownership. That leaves more residents searching for rentals.
“When we talked about the housing shortage and there just weren’t homes to buy,” he said, “rentals just kept getting more and more pressure because people are priced out of the housing market they can't afford, so they are forced to rent.”
A little more than 24,000 apartment units are currently under construction throughout the Wasatch Front. Salt Lake County is in the lead. Of the roughly 14,000 units under construction in the county, 54% are located in Salt Lake City.
There are just shy of 6,000 units under construction in Salt Lake City’s downtown area that will all hit the market around the same time, Eskic said. The majority of units being built in the Salt Lake City area are one-bedroom apartments.
“That will help stabilize rents downtown. Might even lower them because vacancy rates will increase because so much new product will come online,” Eskic said.
But on the west side of Salt Lake City, it’s a different story. That part of town has seen the largest rent increase. Over the course of a year, rent jumped 42% in some parts of West Valley City.
On average, Salt Lake County landlords raised rents by $321 over the last two years, according to the report. Across the Wasatch Front, rents rose 10.5% annually between 2020 and 2022. The reason for the increase, Escik said, is that there isn’t enough rental inventory to meet the demand.
With rent prices increasingly difficult to afford, it’s unclear if prices will drop despite more inventory.
Even with 245,000 units under construction, more housing is needed to meet the demand. Eskic said around 31,000 units are required to comfortably accommodate the housing needs of residents. However, that figure assumes little to no population growth.
And while apartment construction may be on the rise now, Eskic said that could quickly change as interest rates rise. It’s expensive to build housing, especially big apartment complexes, and without capital investment or a sure way to retain profit, there’s less desire to build.
“I think we're unfortunately going to see less housing the next two years being built because of what market conditions are,” he said.