July 19, 2007
Utah Economy
Part 4: The Affordable Housing Squeeze in Utah
by Janice Houston, CPPA Sr. Policy Analyst
Evidence from the 2005 American Community Survey
Introduction
Utah has seen a marked increase in housing values and housing
prices recently. This follows on the heels of a national surge in home prices
and valuation. At the same time, income and wages in Utah, when adjusted for
inflation, have been stagnant. While some Utah homeowners are enjoying the
benefits of greater wealth due to an increase in their home’s valuation, these
two factors are making home affordability around the state an issue for those,
such as first-time home buyers and low-wage earners, that don’t have a built-in
equity cushion.
While the rapid increase in home values and prices is a
fairly recent phenomenon in Utah, evidence from the 2005 American Community
Survey (ACS) done by the US Census Bureau suggests that even before the boom
many Utahns were struggling to meet housing costs. This article provides
details from the ACS regarding housing affordability for the metropolitan
counties of Cache, Davis, Salt Lake, Utah, Washington and Weber. All of the
data referenced in this article are available as a chart by
clicking here.
Single Family
Dwellings, Vacancy Rates and Homeownership
Approximately 70 percent of dwellings in Utah are single
family homes compared to 63 percent nationally. Davis County has the highest
proportion of single family dwellings at 76.7 percent while Cache has the
lowest at 65.4 percent. Cache County also has the lowest overall vacancy rate
of 4.8 percent. Both figures can be attributed to the presence of Utah State
University and the large student population where there is a high demand for
inexpensive apartments.
Salt Lake County has the highest overall proportion of
multi-family dwellings—almost 1/3 of all housing units within the county are
multi-family units. Of those, about 45 percent are large apartment or
condominium blocks that contain 10 or more units. Cache County has the lowest
density of large multi-family dwellings; only 22 percent are in large blocks of
ten or more units.
Mobile homes are not a popular option for housing in Utah.
Overall, only 3.9 percent of the state’s dwellings are mobile homes compared to
6.5 percent nationally. Within the metropolitan counties, mobile homes range
from a low of 1.9 percent in Salt Lake and Utah counties to a high of 7.2
percent in Weber County and 7.4 percent in Washington County.
Overall, vacancy rates in Utah are lower than nationally,
9.3 percent vs. 10.8 percent. As was mentioned above, Cache County has the
lowest vacancy rate among the metro counties at 4.8 percent. Washington County
has the highest at 15.6 percent due to the seasonality of vacation homes in the
area. For the counties along the Wasatch Front, the vacancy rate is
approximately 6.0 percent.
The percentage of Utahns that own their home is higher than
the national average, 70.6 percent vs. 66.9 percent. Among the metropolitan
counties, the rate ranges from a low of 63.7 percent in Cache County to a high
of 77.5 percent in Davis County.
When examining Utah’s Hispanic and Caucasian populations,
both have homeownership rates at or above their counterparts in the rest of the
nation. However, the difference in rates between the groups is still quite
large. A little over 73 percent of white non-Hispanic Utahns own their home
compared to only 50.0 percent of Utah’s Hispanic population. For most of the metropolitan
counties, the ownership rate among Hispanics is around 45 percent. The notable
exceptions are Cache and Washington counties. Cache has the lowest rate among
Hispanics (only 1/3 own their home) while Washington County Hispanics have the
highest rate of 65.0 percent who are homeowners.
So what do all these statistics mean? The social and
economic climate of the state encourages ownership of single family homes at a
time when vacancy rates are low and prices are climbing. While most of Utah’s
population, including a significant part of its largest minority group, are
homeowners, that dream may be harder to achieve as the next section will show.
The Convergence of
Income and Housing Costs
Overall, the median household income of Utahns in 2005 was
higher than the nation. For all dwellings, the median income in Utah was
$47,934 compared to the national $46,242. Most of the $1,700 difference between
the two groups comes from the incomes of renters. For Utah homeowners, the
median income was $57,529, about $300 less than the national median.
Additionally, the distribution of Utah homeowners’ income is
narrower than the national curve. Figure
1 highlights these differences. As it shows, a full quarter of Utah
homeowners had incomes between $50,000 and $74,999 and 58 percent had incomes
ranging from $35,000 to $99,999. This narrow distribution and the fact that
relatively few Utahns earn in excess of $100,000 suggests that a lot of
families of moderate means are going to have difficulty keeping up with rapidly
escalating housing costs.
Indeed, when monthly housing costs are divided by monthly
income, 25.4 percent of Utah homeowners in all income categories are paying at
least 30% of their income in housing costs every month. While this is a lower
percentage than nationally, the picture varies from county to county.
Washington and Weber counties have the lowest percentage of homeowners paying
in excess of 30 percent while Salt Lake and Utah counties have the highest. The
thirty percent threshold is the figure at which the federal government
considers housing costs to be unaffordable.
For renters, the percent paying at least 30 percent of their
monthly income is even higher, despite the fact that rents in Utah are lower
than the national average and Utah renters have a higher median income than
their counterparts across the nation. Overall, 41.6 percent of renters in the
state are paying at least 30 percent of their income for housing costs. Across
counties, the percentage ranges from 36.1 in Davis County to 47.4 in Utah
County.
When the data are broken down further, a full 62.7 percent
of Utahns with incomes under $35,000 have housing costs that are at least 30 percent
of their monthly incomes. For middle income Utahns, those with earnings between
$35,000 and $74,999, 24.0 percent have housing costs in excess of 30 percent.
Again, the percentages vary from county to county. Salt Lake and Utah counties
have the highest percentage of housing squeezed families. In Salt Lake County 67.9
percent of low-income residents struggle with housing costs over 30 percent and
in Utah County the percentage is 66.3 percent. For middle income families in
these two counties, 28.9 and 27.8 respectively have housing costs in excess of
the 30% threshold.
Mortgage Holders and
Housing Costs
The data on those Utahns with a mortgage suggests the
housing squeeze is even tighter than is documented above. First, a greater
percentage of Utah homes have a mortgage than nationally. Over 74 percent of
homes in Utah carry a mortgage compared to 67.9 percent nationally. Second, a
greater percentage of Utah homeowners carry a second mortgage and/or home
equity loan than the national average, 28.4 percent vs. 24.1 percent
nationally. There is no way to determine whether this tapping into equity from
rising home values is to boost a particular home’s value further or to simply
meet other expenses, such as credit cards. Either way, it means that a greater
portion of monthly income is going to meet housing expenses embodied in a first
and second mortgage.
When mortgage holders are broken into income categories, the
percentages of these homeowners that are paying at least 30 percent of their
income in housing costs increases significantly above those for homeowners
overall. Almost 86 percent of low-income homeowners statewide are at or above
the 30 percent threshold. For Davis, Salt Lake and Utah counties, the figures
are in excess of 90.0 percent. Even for middle income residents, the figures
are concerning. Statewide, 35.3 percent of homeowners with incomes between
$35,000 and $74,999 are paying at least 30 percent of their income in housing
costs. Salt Lake County has the highest percentage43.4 percent of
middle-income residents are at or above the threshold, while Utah County is not
far behind with 37.7 percent.
Policy Considerations
All of these figures suggest that Utah residents were
spending a significant amount of their resources to meet monthly housing costs
in 2005 prior to the latest upsurge in home prices in the state. The income
spent to meet this basic need is less income that will be spent on other goods
and services. Additionally, it may mean that more Utahns are living on the
financial edge and one major life event—an illness or sudden unemployment—pushes
them into financial insolvency.
So what, if anything, can and should policymakers do to
address these concerns? Zoning laws can be enacted and enforced to ensure that
as housing developments are built, consideration is given to units for low and
moderate income families. Higher density housing is the simplest way to meet
these needs but there are other creative financing mechanisms communities can
use. Low interest and non-qualifying loans for teachers, police and fire
fighters as well as other low paying “essential” workers can help these
families afford to live in the communities they work in. Investment in
financing mechanism like the Olene Walker Housing Trust Fund can also help
address the housing needs of the lowest income Utahns. Finally, policymakers
working in economic development and on planning commissions can wisely use
their incentive money to bring in employers that boost the overall wage rate of
the state’s workers.
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