Salt Lake City’s apartment boom hasn’t led to higher vacancy rates. But it might soon.
Despite having about 18% of the population in the county, Salt Lake City accounts for almost half of the permitted apartment projects.
And while it seems impossible all those new buildings in the general Downtown area would be full, the vacancy rate in the thousands of newly built rental homes remains historically low.
“Really for the last two to three years I’ve expected vacancy rates to go up,” said Jim Wood, research and science director at the Kem C. Gardner Policy Institute. “This year I was just shocked. Project after project there was no available unit for immediate occupancy.”
“In 20 years of this survey, I’ve never seen anything like that,” he added.
Wood gave an update on the outlook of the state of homebuilding in the capital city and Salt Lake County to the City Council this week.
His message? The region remains thousands of units short of a healthy balance after more than a decade of under-building, but things would be even worse if not for the rampant and ongoing boom of big apartment projects clustered in Salt Lake City.
“The apartment market plays a really big role as a component of our supply,” Wood said. “What Salt Lake City has had in terms of development, I’d hate to think what the market would be like if we didn’t have the activity we have in Salt Lake City. And particularly downtown.”
Wood counted 34,544 permits for new apartment units issued in Salt Lake County between 2010 and 2021. Of those, 16,200 — 46.9% — were issued in Salt Lake City.
Many of those are focused between 700 East and 600 West, North Temple and 700 South.
By our informal count, builders have added or are in the process of adding space for more than 10,000 new residents in that general area.
Permitted Apartment Units from 2010–2021
- Salt Lake City: 16,200 (46.9%)
- Sandy: 3,319 (9.6%)
- West Jordan: 2,106 (6.1%)
- Murray: 2,076 (6%)
- South Jordan: 1,992 (5.8%)
- West Valley City: 1,869 (5.4%)
- Draper: 1,650 (4.8%)
- Total: 34,544
Source: Gardner Policy Institute
Among units either proposed or under construction, the capital city’s portion is even higher.
More than 60% of the 9,698 apartments Wood’s team counted as proposed or recently underway are located in Salt Lake City.
That should come as no surprise to anyone living in Salt Lake City.
Several skyline-changing projects have either recently broken ground or are slated to this year, adding an entirely new housing type that didn’t exist in the city before: luxury high-rises.
Other infill projects have filled gaps along streets throughout the city. Sugar House has been rapidly transformed into a walkable urban neighborhood. Central 9th has acted as a playbook for how a neighborhood can fit missing middle housing behind century-old homes.
More on the vacancy rate
If Wood had any good news for the council, it was buried by the bad: despite the rush of new supply, rents Downtown have risen while vacancy has remained low.
It costs far more to rent an apartment in Downtown Salt Lake City than elsewhere in the county, according to a Cushman & Wakefield report cited in the study.
It now costs $1,345 a month to rent a studio apartment Downtown (37% more than in suburban Salt Lake County). Two-bedrooms may cost $2,000 a month (73% higher than in the suburbs).
It’s easy to find examples of luxury projects that are opening and offering rents much higher, but it’s clear that despite beating the rest of the valley in supply of new apartments, the homes come at a premium.
Monthly rentals in Downtown Salt Lake City
- Studio: $1,345
- 1×1: $1,659
- 2×1: $2,000
- 2×2: $2,185
- 3×2: $2,862
- Overall: $1,810
Source: Gardner Policy Institute and Cushman & Wakefield
The near-term promises low vacancy rates as the market seeks balance between years of underbuilding to handle natural population growth plus a pandemic that shifted high-wage workers across the country.
“You’ll hear this number out there of something like 45,000 units that we’re short,” Wood said, referring to reports that demand for homes in the state exceeds supply by that amount. “That doesn’t mean we have 45K homeless people. It means we don’t have vacancy.”
“We’ve driven down vacancy rates to the lowest level we have data for,” Wood said.
But things could start to change starting in 2024, after thousands more homes come onto the market.
Wood’s report said the Downtown market could see a vacancy rate as high as 8%. A higher vacancy rate could ease upward pressure on vacancy rates, which may remain strained as first-time homebuyers are priced out of the local market by unprecedented demand and low for-sale inventory.
The suburbs — where policies are by and large preventing builders from keeping up with supply — will have a 3.7% vacancy rate.
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