Even though Gov. Spencer Cox and his office initially had their own ideas about what lawmakers should do about Utah’s housing affordability crisis this year, the 2024 Legislative Session ended with a different approach.

And the governor said he likes the new plan even more.

“I’m ecstatic,” Cox told Utah News Dispatch on the last day of the session. “It’s going to have far more of an impact than what I was (originally) hoping for.”

Rather than pump $150 million toward a program that Cox’s administration originally pitched with a goal to build 35,000 new starter homes by 2028, the Utah Legislature and the governor’s office worked together to pass a package of bills that focus less on subsidies and more on “free market” policies. They created a new slate of tools cities and developers can use to pay for infrastructure or other needs, hoping to pave the way for more affordable, single-family housing projects.

Lawmakers also opted to play nice and walk a fine line — drafting legislation without upsetting cities worried about losing zoning authority or local control while also balancing home builder and developer interests.

The governor layered the praise on thick in his speech to lawmakers after they concluded their session at midnight on March 1.

“You’ve done some incredibly innovative things that I believe will transform our state and lead the nation,” Cox said on the House floor. “You have passed the largest housing attainability package in the country.”

Cox said this year’s legislation is “going to make it possible to build homes again under $350,000, so that our kids and grandkids can live near us and not with us — something we’re all excited about.”

But will it?

For now, it’s unclear just how many homes these new tools will produce because it depends on how many cities play ball.

Acknowledging these tools haven’t been tried before in Utah so it remains to be seen how they will play out, both local and state officials say they’re hopeful they will make a difference because they say cities are eager to create affordable home ownership opportunities for their residents.

“We feel confident that the majority of cities want to do the right thing: they want to provide housing for their people,” said Steve Waldrip, a former state lawmaker that Cox appointed in December to be his senior adviser for housing strategy and innovation. He was a key player who worked with lawmakers to pass this year’s housing legislation.

He acknowledged that lawmakers’ approach this year largely trusts cities to act.

“It really is in their court to take advantage of this,” he said. “One of the unique things about Utah is people here want to do the right thing. … So we’re counting on that, frankly. On the fact that people will do the right thing when given the tools and opportunity.”

What the Utah Legislature did for housing

The 2024 Utah Legislature approved a long slate of housing bills — many that came from the state’s Commission on Housing Affordability — after months of negotiations with the Utah League of Cities and Towns, home builders and other industry stakeholders.

Instead of taking a more aggressive approach to force cities to zone for higher density or more affordable housing like at least one stalled bill could have done, lawmakers’ aimed to give cities more tools to create project areas that could leverage financing to encourage private developers to specifically build more affordable, owner-occupied, single-family homes.

They included:

• HB476 clarifies state code and places certain requirements on cities to accept and complete applications for residential development to create more certainty for both home builders and cities.
• HB465 provides flexibility for redevelopment agencies to use money for owner-occupied, income-targeted housing — not rentals — up to 120% of the area median income. It also encourages the body that’s overseeing development at the former Utah State Prison site in Draper, the Point of the Mountain State Land Authority, to use its land use authority to “increase the supply of housing in the state.”
• SB268 allows cities to create a new type of mixed-use project area, called a First Home Investment Zone, that can use tax increment financing (or future tax revenue from growth) to finance infrastructure or lower the cost of land and therefore lower the cost of housing. To create a zone, cities would need to adhere to a slew of requirements, like including an affordable housing plan in the proposal and making sure at least 25% of the zone’s homes are owner-occupied for at least 25 years.
• SB168 sets a statewide building code for modular homes and allows cities or counties to create Home Ownership Promotion Zones, which would enable cities to capture tax increment for up to 15 years to finance the development while also allowing them to “upzone” or increase density for smaller, single-family lots. It would require at least 60% of the zone’s units to be affordable and all of them to be owner-occupied for at least five years. Cities can use the tool for areas that are up to 10 acres and are zoned for fewer than six housing units per acre. If a Home Ownership Promotion Zone is created, it will automatically re-zone the lots to be at least six housing units per acre.
• HB572 allows the state treasurer to administer a new Utah Homes Investment Program, which would use $300 million from the state’s Transportation Investment Fund to offer low-interest loans to developers so long as they strike an agreement with cities to build an owner-occupied housing project with at least 60% of its units defined as “attainable.”
• HB13 allows developers of approved housing developments to create “infrastructure financing districts” that could bond to pay for infrastructure improvements, like roads, but the debt would need to be paid off before selling the homes.

Why lawmakers got ‘creative’

One of the most notable bills is HB527, which Waldrip helped craft with Rep. Robert Spendlove, R-Sandy. Waldrip said they decided to go this route after it became clear that “there wasn’t going to be $150 million available in this year’s budget or really anything close to it — from a cash standpoint.”

HB527 leverages $300 million from the state’s existing Transportation Investment Fund for a three-year program that will offer low-interest loans to developers building affordable housing developments. Developers would be eligible for the low-interest loans only if they execute an agreement with a city that requires the development to include no fewer than 60% of its units to be owner-occupied “attainable” homes, or homes that cost no more than $450,000.

While the bill defines “attainable” homes as costing no more than $450,000 to allow some flexibility in state code, Waldrip said Utah Housing Corporation will be setting county-by-county price “targets,” with a statewide target of $350,000. More expensive counties, like Salt Lake County, will have a bit of a higher target, Waldrip said.

Waldrip and Spendlove drafted HB527 after it became clear that legislative leaders would not be willing to shell out $150 million for Cox’s budget recommendation — something Waldrip quickly discovered heading into the legislative session after his first day on the job, which was the same day Cox and his administration unveiled his budget proposal.

“Everybody knew going in it was going to be a difficult budget year,” Waldrip said. While other priorities like homelessness needed cash, Waldrip said lawmakers could get more creative with housing financing.

Republican legislative leaders blamed this year’s tight budget on a cooling economy and the end of COVID-19 federal subsidies — while noting much of the money Cox recommended for both homelessness and housing programs was already earmarked for transportation dollars by legislators last year. They never budged, however, from prioritizing about $170 million in tax cuts, arguing it will keep Utah “competitive” with other states’ income tax rates and stimulate the state’s economy.

“So we started talking about what we can do,” Waldrip said, because there was plenty that lawmakers don’t have control over.

One element out of their hands was the nation’s high interest rates as the Federal Reserve continues to tamp down on inflation — something that brought U.S. housing affordability to its lowest point in decades, even worse than before the 2006 housing bubble popped, according to the Federal Reserve Bank of Atlanta.

Amid high interest rates, the U.S. saw three major bank failures last year (Silicon Valley Bank, Signature Bank and First Republic Bank), and as a result the Federal Reserve placed more lending restrictions on banks. “So all of a sudden banks were no longer able to lend out at the rate they had been lending out,” Waldrip said, “and credit was being cut off to a lot of (home) builders.”

Waldrip said he and lawmakers decided to zero in on the impact of this credit tightening “that hit largely our mid-sized, local builders,” he said. “They were getting squeezed because they could no longer get credit from their lenders. So their projects all got put on hold.”

“It became evident that if we could create some liquidity in the lending markets and create opportunities for loans to happen, then these builders could begin producing again,” Waldrip said.

And so that’s the direction they decided to take HB527, to allow the state treasurer to use $300 million from the state’s already existing Transportation Investment Fund to offer lower-interest loans — say around 3% or 4% — to eligible housing developers during a three-year pilot program. Utah lawmakers set aside $18 million to account for any loss in that account for offering those lower interest loans over the course of the program.

Will these bills actually make a difference with Utah’s housing crisis?

Dejan Eskic, a housing researcher with the University of Utah’s Kem C. Gardner Policy Institute who is also the chief economist for the Salt Lake Board of Realtors, said even though lawmakers maybe could have been more aggressive, he thinks their package of bills could help “move the football” when it comes to Utah’s housing issues.

Utah’s housing affordability crisis is on track to worsen as the state’s population continues to grow while its housing shortage is projected to increase to over 37,000 units this year, according to research from the University of Utah’s Kem C. Gardner Policy Institute, which Eskic co-authored.

Eskic noted lawmakers opted not to advance upzoning legislation like HB306. That bill, which didn’t get a public hearing, would have categorized starter homes as a “permitted use” in Salt Lake, Davis and Utah counties, as well as cities with populations over 15,000. Essentially, it would have required those cities to approve newly built single-family homes that are sold at a price that is less than the area’s median price for that type of home. It likely would have hit pushback from cities and counties wanting to keep more control over their local zoning authority.

“You can always move the needle a bit more aggressively,” Eskic said, but he credited lawmakers with focusing on something that’s been a big barrier for both cities and developers: the cost of infrastructure (roads and sewer lines, for example) that have stood in the way of making many already entitled housing developments financially viable.

“The infrastructure (focus) was really progressive,” he said. “We’re probably not even realizing what a big deal it could be down the road.”

Eskic also said establishing a statewide building code for modular, off-site housing construction could have big implications and help make those types of more affordable homes easier to build across the state.

“That could be a huge deal,” Eskic said.

Senate President Stuart Adams, R-Layton, on the final night of the session told reporters redevelopment agencies can already use tax increment financing to redevelop commercial properties — and now they’ll have the flexibility to use it for affordable housing projects “for the first time ever.”

“That far exceeds, I think, what the governor asked for,” Adams said, adding that those efforts, combined with other policy changes, will “probably move the needle in a big way for housing.”

House Speaker Mike Schultz, R-Hooper, also applauded lawmakers for “giving additional tools to cities to help create (new) opportunities for home ownership.”

While providing subsidies that would directly and more immediately lower costs for homebuyers (like the state’s new first-time homebuyer program that lawmakers put $50 million toward last year), Schultz said lawmakers wanted to focus on Utah’s “supply and demand” issue from a different angle this year — by incentivizing cities and developers to increase affordable housing stock through financing and planning tools.

Will enough cities take advantage of these tools to make an impact?

There’s a big question mark hanging over whether enough cities will actually take advantage of these new optional tools, and if they’ll actually result in enough lower-priced homes to make a dent in Utah’s stubborn housing shortage as well as lower the price of housing.

Time will tell, because these tools haven’t been tried before in Utah.

“I honestly don’t know,” Eskic said.  “Some cities will, and some cities will find every way to go around it.”

When pressed on whether cities will take advantage of these tools, given none of the bills contain teeth to force or require cities to use them, Schultz said, “We’re hopeful they do.”

“I’ve been told by several cities they’re actually excited about some of these things,” he said.

Schultz also acknowledged, though, that these are new tools and strategies, and it remains to be seen whether they will eventually help solve Utah’s housing crisis.

“Will it have an impact? I truly believe it will,” Schultz said. “Will it solve the problem? Yet to be seen.”

Cameron Diehl, executive director of the Utah League of Cities and Towns, which represents the state’s local municipalities, said many of Utah’s cities have been trying to play a part in solving Utah’s housing crisis, but they’ve hit roadblocks that they hope this year’s legislation will help break down.

Overall, Diehl said the League’s mayors and council members are “pleased at the emphasis on affordable home ownership and infrastructure funding.”

“The bills that passed this session were a result of collaboration and partnership to improve local planning and provide funding for infrastructure and target housing units that will be both affordable and available for home ownership,” he said.

As of November, 66 cities reported to the League that a combined 190,000 housing units were zoned for and entitled — but not yet built.

“The bills this year are trying to get to the root of that question — why are these units not getting built?” Diehl said. “In many cases, the reason they’re not getting built is infrastructure costs.”

Additionally, he said he’s “really excited” to see what happens next with HB572, the bill that leverages $300 million to provide low-interest loans to developers. Diehl said it also aims to target another key problem standing in the way of housing development: “wrenches in the financing market.”

“This is an effort to try to bring some local investment dollars to the housing market but laser focused on affordable, homeownership outcomes,” he said. “I’m hopeful it will work. We shall see.”

Waldrip said this year’s legislation was as a result of a collaborative balancing act, in which “everybody sacrificed a little.”

“The developers have to build a lower-margin product. They have to build something that they’re not going to make as much money on,” Waldrip said. “And the cities have to upzone a little bit in order to make those starter homes affordable. And the state has to come in a little bit with some lower-interest money.”

“The idea is everybody comes in a little bit and meets in the middle in order to achieve a common goal,” he said.

Rather than “hammering one side versus another,” Waldrip said, “this approach is a much more sustainable approach.”

“Because what happens when the city comes down hard on the cities one year, then there’s a natural reaction to that the next year. And the pendulum swings back and forth from extreme to extreme, and tends to create more uncertainty in the market. And certainty in the markets is really the thing that our businesses need in order to produce product.”

Waldrip said he and his office will be tracking which cities use these new tools — and the Legislature will decide if more should be done for housing next year.

Utah News Dispatch is a nonprofit, nonpartisan news source covering government, policy and the issues most impacting the lives of Utahns.

Newsletter