February is always an interesting time in the property management business. It marks the final month of our “slow season” and starts the clock on finalizing the implementation for any 2023 process changes ahead of the summer leasing season. In this month’s update, we will provide an update on the 2023 legislative session and outline a major housing policy announcement from President Biden, but first the headlines.
Headlines
January Jobs Report - Stunning, shocking, and unexpected are all adjectives one might choose to describe the January Jobs Report. Against analyst expectations of only 187,000 new jobs, January saw non farm payrolls explode by 517,000 jobs and the unemployment rate fall to 3.4%. In any other economic environment, a jobs number this far above expectations would be cheered, but investors are understandably weary of what January’s report might mean for the Fed’s interest rate trajectory.
Weekly Jobless Claims - Unemployment claims climbed to 196,000 for the week ending February 4th, a jump of 13,000 from the previous week and a 6,000 increase from the consensus expectation of analysts. If viewed in context with historical norms, it’s a low figure, but is about 3.6% above the 4 week moving average. All told, the labor market remains strong despite eight rate hikes in the past 11 months.
Consumer Price Index - January CPI data won’t be available until February 14th, but the figures will be anxiously anticipated following the shocker of a jobs report.
Fed boosts interest rates 0.25% - The Federal Reserve hiked interest rates by a quarter percentage point following the conclusion of their last meeting. The increase takes the federal funds rate to 4.5% - 4.75% and marks the highest it’s been since October of 2007. The good news is this hike was smaller than the previous two, but all indications point toward sustained increases until inflation falls dramatically. The Fed meets next on March 21-22.
2023 Legislative Update
Our friends at the Rental Housing Association of Utah were kind enough to provide us with an update regarding important bills during the current session. There were several new developments this week on bills of importance and a new bill that affects rental units in HOA’s:
HB 314 Domestic Violence Amendments Marsha Judkins, (R), Provo
STATUS: To be amended and to be heard in committee soon
We have been working with Representative Judkins on a bill that will expand on the work we as an industry started which gives victims of domestic violence a way out of a lease with a small cancellation fee. Currently law requires 45 days rent as the fee and applies to people who have a police report indicating they are a victim of domestic violence, or that have a protective order.
We saw language on this for the first time this week, and while the language needs some tightening up, we anticipate the amended language will:
- Reduce the amount of the fee from 45 days rent to 30 days
- Require the renter to give a 30-day notice and vacate within 15 so we have 15 days to turn the unit
- Allow prepaid rent to be counted towards the fee (for example if the renter gave notice on the 5th and had paid that month’s rent, if they were out by the 20th and paid 5 more days rent for the following month that would be sufficient)
- Add other types of protective orders to widen the number of victims who would qualify
We feel this bill is a needed protection for renters who are victims of DV but doesn’t hurt landlords. In fact, the language in here will actually be an improvement and add protections for landlords, particularly the requirement to have 15 days to turn the rental unit with rent being paid. The RHA will support this bill and expect it to be in committee on Thursday.
HB 316 RESIDENTIAL RENTAL AMENDMENTS GayLynn Bennion (D), Cottonwood Heights
STATUS: To be amended and to be heard in committee soon
This original bill did two things:
- It required all expenses in the contract be listed in the first page of the lease, or on consecutive pages
- It required 90 days’ notice of rent increase if the increase is greater than 10% or $100
We met with the sponsor to discuss her proposals. Just last year we required rental expense disclosure during the application process. The sponsor and renter’s advocates stated they felt like requiring the same things in leases was the natural best step. After meeting this week, we agreed that since we have only had 6 months with the last change, we would hold off on attempting to require statutory intervention in leases, for now.
On the 90-day notice issue, the sponsor related her goal was to prevent surprises and give tenants time to decide what to do if they receive a rental increase greater than they were expecting. Approximately 37 states require 30 days’ notice to raise rent, making Utah’s rule in the majority. While the rental housing industry does not believe longer than 30 days’ notice for a rent increase is necessary, we discussed possibly requiring 60 days’ notice when a lease is in place. That would mean notice for rent increases on month-to-month tenancies would still be 30 days. It would also mean that any month-to-month fees or lease escalations would be binding because they were clearly articulated, and the tenant was given plenty of notice.
Government Affairs Committee members debated the issue, and many noted that they already provide 60 days’ notice of rental increases. Others opinions indicated that requiring more notice would hurt renters in the long run. They noted with less flexibility to adjust rents at the end of term, that operators might instead add automatic rent increases into the lease (called escalations, which are very common in commercial leases) or raise month-to-month fees that automatically increase rent if the lease reverts to month-to-month.
We expect a modified bill stripped of everything except the 60 days’ notice language to be heard in committee this week. The RHA is likely to remain neutral on the issue, but a final decision has not been made.
Concerned rental operators are encouraged to attend our government affairs committee meeting on Wednesday at 2 pm at our office to learn more and share their opinion.
Un-Numbered House Bill on Garnishments Marsha Judkins (R), Provo
STATUS: Abandoned for this year, with an agreement to work on better language for next year
This bill would have added protections for bad tenants and other debtors who owe money and reduce the effectiveness of garnishments. It would have made it harder to garnish a debtor’s wages and would incentivize debtors to make sure their income stayed below a certain level of income so they could never be held accountable for any debt.
While it sounds consumer friendly (it is definitely anti-business), this bill would have been devastating for low-income renters because if it was harder to hold renters accountable for the money they owed, landlords would simply increase their deposits and/or rental criteria, making it more difficult for renters who make less than a certain income and would be difficult to garnish to find a place to rent.
After discussing the ramifications of the bill, Representative Judkins has pulled the bill this session. We committed to work with her over the next year to find ways to help debtors better understand their options and require better disclosures and communications.
Community Association Act Amendment, Un-Numbered, Wayne Harper (R), West Jordan
STATUS: Unknown
Several years ago the rental housing industry sought and received prohibitions on community associations (HOA’s/PUD) charging extra fees to rental unit operators. The community association community is seeking the ability to charge a $250 annual administrative fee to rental operators. A concession being offered is that the fee could only be charged in associations that allowed the maximum number of rentals in their community that would comply with HUD financing limits allow (35-50%). If allowing an annual fee to be charged (which would most likely be passed on to the renter in the lease) increased the number of rental units in community associations, it would help with rental supply and housing affordability. It could also create more opportunities for investors.
Un-Numbered Property Rental Amendments, Rep. Ken Ivory, (R) South Jordan
STATUS: Unknown language. Meeting with sponsor soon
Representative Ivory has asked to talk to us about potential proposals and we hope to meet with him Monday. We will provide an update once we meet with him.
Appropriations Issues:
The Social Services Appropriations Committee heard this week a funding request for $1 million for our section 8 guarantee fund. This week requests will be narrowed/whittled. Last year we only got half of what we requested. Stay tuned!
Other bills we are watching:
HB 80 Residential Renters Deposits, Rep.Cal Musselman
This bill, run by the sponsor without input from RHA, extends to 45 days the time for returning a renters deposit or providing an accounting of charges it was applied to. We are watching the bill and have not yet taken a position on it.
HB 98 Process Server Amendments, Rep. Andrew Stoddard
The statute of legal process server rules is modified regularly. The current proposal is to require a Special Functions Operator, which is basically an armed officer, to be present when use of force is authorized or there might be a breach of peace. The sponsor has not consulted with the RHA. Most eviction attorneys already do this. We will watch this bill and hopefully meet with the sponsor to determine what problem he is trying to fix. As a reminder, there were several fatalities nationally in 2022 during evictions, when tenants opened fire on officers and property managers who were doing their jobs.
Utah Real Estate Market
The median sold price of a single family home in Salt Lake, Davis, and Utah counties hit a fresh 12-month low in January at $536,000, representing a 2.5% drop from the prior month and our first year-over-year decline. High interest rates continue to cool demand and this is certainly reflected in the number of sold transactions. The 835 closed transactions we saw in January are also the fewest we’ve seen in the past year and fell over 28% from the previous month. If you are looking for a silver lining, we did see a 17.7% reduction in the average number of active listings, but those remain elevated with an increase over 300% from this time last year. It will be interesting to see how (or if) real estate values rebound with the upcoming spring selling season.
Median Sold Price* | Sold Count* | Average # of Listings* |
January: $564,500 February: $577,000 March: $600,000 April: $613,000 May: $629,260 June: $620,000 July: $600,000 August: $590,000 September: $591,750 October: $570,000 November: $550,000 December: $550,000 January: $536,500 | January: 1,177 February: 1,277 March: 1,740 April: 1,847 May: 1,897 June: 1,871 July: 1,517 August: 1,720 September: 1,582 October: 1,211 November: 1,111 December: 1,163 January: 835 | January: 957 February: 914 March: 1,102 April: 2,139 May: 3,054 June: 4,722 July: 5,314 August: 5,539 September: 5,874 October: 6,037 November: 5,754 December: 5,034 January: 4,143 |
Monthly Change: Down 2.5% | Monthly Change: Down 28.2% Year Over Year: Down 29.1% | Monthly Change: Down 17.7% Year Over Year: Up 333% |
* all graphs/data are for single-family homes in Salt Lake, Utah, and Davis Counties.
Utah Rent Report
The Utah rental market stats were equally disappointing in January with seven of the eight submarkets we track showing no gain or a decline in rental rates month-over-month. For context, it’s important to remember that the slow season for rentals is November through February so we wouldn’t expect to see blockbuster numbers during this time of year regardless of market conditions. With that said, we are still holding on to positive rent growth year-over-year but it may be only a matter of time until those numbers move into negative territory as well.
City* | Month Over Month | Year Over Year |
Draper Midvale Murray North Salt Lake Orem Salt Lake City Sandy South Jordan West Jordan | -1.4% 0.5% -1.4% -0.3% No data -0.7% -0.2% 0.0% -1.2% | 3.7% 3.2% 5.5% 2.9% No data 0.4% 5.3% 4.0% 1.0% |
*Pricing data provided by apartment list.
Industry Updates
White House announces Renter’s Bill of Rights - On January 25th, a number of actions were announced to outline the President’s housing agenda. Among the inclusions was a Blueprint for a Renter’s Bill of Rights which outlines 5 principles aimed to guide future policymaking. These include:
- Safe, Quality, Accessible and Affordable Housing;
- Clear and Fair Leases;
- Education, Enforcement and Enhancement of Renter Rights;
- The Right to Organize; and
- Eviction Prevention, Diversion, and Relief.
It’s important to keep in mind that these principles are currently non binding and do not constitute federal governmental policy, but they do encourage and empower federal agencies to further regulate rental housing in dramatic ways. If enacted, these principles have the potential to significantly impact our industry and organizations like the NAA and National Association of Realtors will be monitoring things closely. We will certainly keep you posted.
