Rental demand down in Salt Lake County

Rental demand down in Salt Lake County
Housing » Vacancies drive down rent amounts

By Lesley Mitchell, The Salt Lake Tribune
Updated:07/09/2009 07:40:57 AM MDT

Years of hefty rent increases in the Salt Lake area have come to an end.

Average rents in Salt Lake County have declined by nearly 2 percent to $756 since just January, according to a newly released report by Apartment Realty Advisors (ARA), a Salt Lake City company that tracks the rental market. The decline over just a six-month period is an abrupt turnaround from annual rent increases of 5.2 percent from 2007-2008, 8.8 percent from 2006-2007 and 5.1 percent from 2005-2006.

"Still, the decline is mild compared with areas such as Phoenix, Denver, and Las Vegas," said Carter Owens, a vice president with ARA, which tracks statistics for more than 70,000 apartment units along the Wasatch Front. "That's because of Utah's relatively solid economic fundamentals."

Utah's unemployment rate, for example, is 5.4 percent; the national rate is 9.4 percent. The state also is losing jobs, but at a lesser pace than most other areas of the country.

The decline in rents stems from a growing supply of vacant units. In Salt Lake County, vacancies -- the share of empty units -- have risen over the past year to 7.8 percent from 6.8 percent and a low of 4.5 percent in 2007.

For much of 2007 and 2008, tighter lending standards that made it difficult to buy a home helped fuel demand for rentals and pushed rents ever higher. But this year, historically low mortgage rates, home-price declines and several home-buying incentives, including an $8,000 tax credit designed for first-time buyers, have helped more renters to purchase homes. These purchases have helped reduce demand in the rental market.

Further depressing demand for rentals is Utah's lower job and population growth. In times of strong job and population growth, demand for rentals typically climbs.

The greater supply of rental units stems in part from the increased number of people who cannot sell their properties in the sluggish residential real estate market who instead are opting to take them off the market and rent them out. Adding to supply is a number of new units coming on the market as a result of an elevated level of apartment construction in recent years.

With the county's vacancy rate nearing 8 percent, some landlords, especially those with less desirable units, are having to work harder to fill vacancies. A vacancy rate around 5 percent indicates a tight rental market, one where renters may find limited choices in the price range and location they desire. With vacancies at current levels, renters have more choices and landlords are starting to have to offer incentives to fill empty units.

The shift in the multifamily market from rising rents to declining rents is welcomed by advocates for low-income Utahns. The substantial rental increases in recent years were hard on low-income families, said Laura Lee Duarte of the Salt Lake Community Action Program, which tries to help families find affordable rentals.

She said lenders have become more choosy in recent years, which has made it difficult for low-income families with bad credit or criminal backgrounds to even find a place to live. Those that were able to find a rental often had budgets squeezed by continued rental increases. Both of those issues should ease somewhat this year, according to the ARA report, which said more landlords are having to offer incentives and make certain concessions to get their units rented.

lesley@sltrib.com

Rental assistance
For help finding an affordable unit, including those with below-market rents for people with low incomes, go to www.hud.gov/renting/local.cfm and click on "Utah."