Sep 12, 2023 - Real Estate

Salt Lake City's new apartment construction has skyrocketed

Data: RentCafe

As developers have ramped up construction compared to 2020, roughly 4,525 new apartment units are expected to be built in the Salt Lake metro area this year, according to a new report by RentCafe.

Why it matters: A housing shortage in the U.S. has contributed to the rising cost of rent and home purchases.

By the numbers: The number of new apartment units completed in the Salt Lake metro rose 20.8% between 2020 and 2022, per the report, which analyzed data from real estate intelligence service Yardi Matrix.

Zoom in: In 2021, Salt Lake County's rental market contained about 148,500 units, according to a University of Utah Kem C. Gardner Policy Institute report.

  • Of those, 3,000 units — about 2% — were vacant, leading "to the tightest apartment market in the county's history," researchers wrote.

What's happening: A surge in new apartment supply — 1.2 million units were completed during the pandemic — helped slow rent growth nationwide, but some parts of the country saw more housing being built than others.

  • The bulk of those new apartments are located in 20 metro areas, Salt Lake among them, where roughly 41% of U.S. renters live, per the report.

The big picture: Many first-time buyers feel priced out of the brutal housing market.

  • Nearly three-fourths of renters say they're renting in an area where they couldn't afford to buy, according to a new survey from RealPage, a real estate analytics and software company.

Yes, but: Around 89% of the units completed from 2020 through 2022 are considered high-end, per the report, and not the type of affordable apartments many renters want or need.

Reality check: Affordability isn't the only reason people rent.

  • "Many renters will eventually buy homes. But in their current life stage, most renters are content to be renters" and enjoy the flexibility that comes with renting, RealPage chief economist Jay Parsons writes on LinkedIn.

What's next: 1 million rental units are slated for completion through 2025, but higher costs and other headwinds could slow developers' pace in future years.

  • "Tightening of bank lending standards — combined with rising costs of construction materials, labor and land — has made new projects harder to pencil," senior analyst Doug Ressler at Yardi Matrix says in the RentCafe report.
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