Panel: Utah may need to change what ‘affordable’ housing looks like

An audience in Lehi listens to panelists discuss housing issues at the recent Utah Economic Summit. (Photo courtesy Rimrock Construction)

Utah’s housing shortage is a result of overbuilding. 

As odd as that might sound, real estate developers and builders at a recent gathering said Utah in recent years has built an oversupply of high-end homes, leaving the multifamily rental market unhealthy, prone to providing renters with concessions and flattening or lower rental rates. Studies indicate that the Wasatch Front faces a deficit of 37,000 units. 

“I’m not sure we’ve delivered what the market really needs,” Phil Dean, chief economist and public finance senior research fellow at the Kem C. Gardner Policy Institute at the University of Utah, said at the Utah Economic Summit in Lehi. “What’s been built is high-end stuff, and what we need is the entry-level, affordable stuff.”

Other panelists noted that while the need for affordable housing exists, the market is calling for housing with more amenities or better materials than were used in the past to keep units affordable.

Tom Henriod, CEO of Rockworth Cos., said economists for years have had “a rosy outlook” regarding the state’s population and job growth, which resulted in heavy investments, resulting in the oversupply.

“We’ve got to burn through some supply we’ve got,” he said. “We’re looking at probably burning through it by the first quarter of 2027, when it starts to feel a little bit better. … Before the end of next year, the beginning of ’27, hopefully we burn through a lot of this excess supply and we start to see rental rates start to increase again and concessions burn off.”

Dallas Hakes, mayor of Mapleton and owner of Lonestar Builders, said the state was not “oversold” to outsiders as much as “sold well.” Now the calls are for more affordable housing, but developers and builders are facing higher costs for land, city fees, labor and construction, he said.

“We’ve got to figure out ways to do things less expensively,” Henriod said. “If that is what the 37,000 wants, we’ve got to find a way to give it to them.”

Dean noted that the 37,000 are not homeless, but instead many are doubling-up in a household or are living in their parents’ basements. Those parents locked in favorable interest rates years ago and therefore are hesitant to move out. That has skewed the housing market and left it without its typical churn, he said.

“It’s a long-term thing to get out of it,” he said of people wanting to stay put for interest rate reasons. “I think it’s two decades before we grow out of the lock-in effect.”

Utah needs units with, say, two bedrooms and one bathroom, he said. But with economics calling for more units on an acre of land, that means higher density, which often faces local resistance, he said.

Hakes said the problems with absorption and concessions in the rental market likely will be in place until at least the end of 2027. “I think everyone that’s in the industry has felt enough bumps and bruises to try and make money doing development, based on all these factors and interest rates and everything else, that I think it’ll settle and maybe be status quo for a little bit . …” he said.

Mark Hampton, co-founder of Rimrock Construction, said he expects to be optimistic 18 months from now.

Hakes said he’s hoping for a higher absorption rate and a depletion of concessions. “When one or both of those indicators happen, I think that’s a good sign for our local economy here, specifically Utah County and Salt Lake County,” he said.

Dean said housing affordability remains one of Utah’s largest long-term economic risks. Nonetheless, Utah remains “very affordable for most of us,” he said, noting that 70 percent of Utahns are paying less than 30 percent of their income for housing.