Even as Utah’s housing market cools, the rental market continues to heat up. A new report from the Kem C. Gardner Policy Institute examines the evolution of the Wasatch Front apartment market as more residents scramble to rent due to unattainable housing prices.
Dejan Escik, a senior housing researcher at the Kem C. Gardner Policy Institute said 76% of Utahns are currently homeless. This leaves more residents looking for rentals.
“When we talked about the housing shortage and there were just no houses to buy,” he said, “rents kept coming under more and more pressure because that people are shut out of the housing market that they can’t afford, so they’re forced to rent.”
Just over 24,000 apartments are currently under construction on the Wasatch Front. Salt Lake County leads. Of the approximately 14,000 housing units under construction in the county, 54% are located in Salt Lake City.
There are just under 6,000 units under construction in downtown Salt Lake City that will all hit the market around the same time, Escik said. The majority of units being built in the Salt Lake City area are one bedroom apartments.
“This will help stabilize rents downtown. Might even reduce them because vacancy rates will increase because so many new products come online,” Escik said.
But on the west side of Salt Lake City, it’s a different story. This part of town has seen the biggest increase in rent. Over the course of a year, rent jumped 42% in parts of West Valley City.
On average, Salt Lake County landlords raised rents by $321 over the past two years, according to the report. On the Wasatch front, rents have increased by 10.5% per year between 2020 and 2022. The reason for the increase, Escik said, is that there is not enough rental inventory to meet demand. .
With rental prices becoming harder to pay, it is unclear whether prices will fall despite rising inventory.
Even with 245,000 units under construction, more units are needed to meet demand. Escik said about 31,000 units are needed to comfortably meet residents’ housing needs. However, this figure assumes little or no population growth.
And while apartment construction may be on the rise right now, Escik said that could quickly change as interest rates rise. It is expensive to build housing, especially large apartment complexes, and without capital investment or a safe way to retain profits, there is less desire to build.
“I think we’re going to see less housing being built over the next two years, unfortunately, due to market conditions,” he said.