Salt Lake City, Utah is booming. Companies are moving in and bringing out-of-state workers with them. They are competing alongside local startups and their workers. One of the inevitable results is an unprecedented housing boom that has builders putting up high-density options alongside single-family homes.
A recently released study suggests that Salt Lake City’s high-density housing is not having a negative impact on local prices for single-family homes. The study is straightforward enough. However, it doesn’t tell the whole story. If the same volume of high-density housing were being built in Park City, for example, the data might be quite different.
Accelerated Wasatch Front Building
Research conducted by the University of Utah’s Kem C. Gardner Policy Institute clearly shows a significant increase in home construction on the Wasatch Front between 2010 and 2018. Likewise, housing prices have steadily climbed over the last ten years. Most interesting is the heavier concentration on high-density housing during that time.
As you might expect, researchers noted how frequently owners of single-family homes voiced concern over new high-density development. Their concerns were always the same. They felt that high-density apartments and condominiums would reduce local property values.
Researchers say that this is not so. Not only has all the new high-density construction not lowered property prices, but single-family homes nearest the developments have also actually appreciated.
The Supply and Demand Equation
It is easy to look at the research and make blanket statements. It’s easy to observe what’s going on in Salt Lake City and assume that high-density housing doesn’t negatively impact property values for single-family homes. But there is more to it than raw numbers. At the core of all things real estate is the supply and demand equation.
Right now, housing in Salt Lake City is at a premium. The economy is booming, and companies are hiring. People are moving to the Wasatch Front in large numbers, and they all need housing. When demand is high and supply cannot keep up, prices rise. It matters not whether you are talking single-family homes or condominiums. High demand always boosts prices.
Head out to the Park City area and you will notice something entirely different. Towns like Park City, Sundance, and Deer Valley are enjoying their own housing boom as well. But most of the homes being built in that neck of the woods are luxury homes. They are vacation homes or primary residences for wealthier homeowners who enjoy skiing.
Sparano + Mooney, a Park City architectural firm that specializes in mountain modern architecture, explains that most of the new construction on the Wasatch Back is for very specific clientele. By and large, builders are not putting up a lot of high-density buildings because the demand is just not there. If they did start building them anyway, the units could put downward pressure on property values.
High Density and Housing Demand
There is nothing inherently less valuable about high-density development. It influences property values because it directly addresses the demand question. If you can get twice as many families into a high-density development as compared to single-family homes, you are able to meet a greater portion of the housing demand with fewer actual buildings. This tilts the equation in favor of supply and away from demand. What is the natural result? Lower property values.
It is true that Salt Lake City’s property values haven’t been negatively impacted by high-density housing. But before you jump to any conclusions, understand that supply and demand is the single biggest factor here. You could build yurts in Salt Lake City right now and property values would still go up. That will not change until supply and demand level out.