‘This scares me to death’: Utah official says novel approach needed to address housing shortage

Utah’s first affordable housing adviser started the job just weeks before this year’s legislative session, tasked with coordinating a set of policy proposals that had a slim chance of becoming law in an austere budget year for state lawmakers.

But Steve Waldrip believed the gravity of Utah’s housing crisis demanded unprecedented action on top of what had been done in previous years — even if that meant starting over after the governor’s recommended approach to incentivizing starter-home construction ran up against difficult revenue realities.

A novel legislative solution was presented Friday morning, with one week left in the session, following nearly two months of intense deliberations between the office of Utah Gov. Spencer Cox — where Waldrip serves as senior adviser for housing strategy and innovation — and state House and Senate leadership.

Utah bill would help finance affordable housing projects

The bill, HB572, sponsored by executive appropriations committee vice chairs Rep. Robert Spendlove, R-Sandy, and Sen. Don Ipson, R-St. George, functions as an alternative route to achieving some of the governor’s ambitious housing goals presented as part of his fiscal year 2025 recommendations which Waldrip inherited upon entering the position late last year, he told the Deseret News on Friday.

“The day I was hired was the day I found out about that initiative,” Waldrip said. “So it’s a pretty daunting task.”

In December, Cox unveiled his Utah First Homes program, calling on state lawmakers to allocate $150 million to five areas, including an additional $50 million for 2023’s First-time Homebuyer Assistance Program and $75 million for the state infrastructure bank to provide incentives for 35,000 starter homes by 2028.

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But — as legislative leadership soon told Waldrip — those funds would never materialize, having already been earmarked for transportation spending the year before, and considering 2023 revenues fell $50 million short of projections thanks to lower than expected income tax collections.

Waldrip confirmed on Friday, before final budget numbers were released later that evening, that neither the First-time Homebuyer Assistance Program or state infrastructure bank would receive anything like what Cox had envisioned.

“So rather than spend my time battling budgets,” Waldrip said, “let’s just step back: are there other avenues, and potentially better avenues, to accomplish what we want to accomplish without having to go to the legislature for an appropriation?”

The resulting compromise, HB572, would authorize the state treasurer’s office to administer a new Utah Homes Investment Program. The three-year long program would make available $300 million in public investment funds — out of the $30 billion currently invested in treasury bills, corporate notes and the federal home loan bank — to temporarily be used to help local banks and credit unions offer low-interest loans for developers building affordable homes.

“This is new for Utah. This is new for the country,” Waldrip said, noting that unlike models followed in other states, this one would be completely self-sustaining. The program would encourage banks and credit unions to finance smaller, more affordable housing development projects by giving them deposits at a lower rate then they can find elsewhere. This, in turn, would create a more profitable environment for homebuilders to construct these kinds of homes.

How serious is Utah’s housing shortage?

One reason why the state has a housing shortfall of 37,000 units, according to Spendlove, is because the economic environment has made banks reluctant to lend, shutting out smaller home builders who can’t afford high interest rate loans.

“What’s happening, is the market right now is freezing up,” Spendlove, the senior economist for Zions Bank, told the Deseret News on Friday.

This bill would hopefully change that, helping to avoid a reoccurrence of the housing crash of 15 years ago.

“What we’re trying to prevent is what happened in 2009,” Spendlove said. “We’re trying to prevent that kind of situation by providing that basic support to encourage financial institutions to lend and to encourage builders to build, specifically affordable homes.”

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This dire view of the stakes of Utah housing policy is shared by Waldrip, who routinely references a graph showing a dramatic drop off in new home construction in the state over the last few years since COVID-19.

“This scares me to death,” Waldrip said, pointing to the steep decline — rivaled only by the trend line from 2006-2009. “If we do that again, it’s going to be a lifetime, I mean, it’s a generation before we climb out of that hole.”

As it currently stands, the proposed program will only accept applications from financial institutions if development projects meet three qualifying requirements: at least 60% of the units must cost less than $450,000, house deeds must include a 5-year restriction requiring owner occupancy, and prospective buyers must be informed about last year’s First-Time Homebuyer assistance program.

During their joint presentation of the bill, Spendlove and Waldrip said the goal was to push out the new funding as quickly as possible over the next 20 months, with all deposits given to financial institutions needing to be paid back by June 30, 2027, when the program will sunset.

The experiment, which aims to incentivize the construction of 10,000 new homes between $250,000-450,000, will require $18 million in one-time appropriations to ensure the public treasurers investment fund receives the same return it would have received without the new housing program. But this expenditure will be more than made up for by the tax revenue gained by increased construction in the state, Waldrip predicted.

What are Utah lawmakers doing about affordable housing this year?

HB572 left Friday’s House committee hearing with a unanimous 8-0 vote of support, joining what Waldrip called “a suite of packages” meant to address housing affordability that state lawmakers have advanced in recent days.

A bill, SB168, requiring cities to allow modular home construction under new statewide building standards passed the Senate on Feb. 15 with unanimous support. It again received bipartisan approval from a House committee Friday morning.

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• Utah looks at modular homes to increase housing affordability in cities

• Lawmakers tackle housing shortage via regulatory reform, not new funding

Two other bills, aimed at removing regulatory barriers to affordable housing, passed the House with near-unanimous support on Thursday. One would enable city redevelopment agencies to help fund a greater price-range of owner-occupied homes. The other would remove some requirements and ambiguity from state code to improve cost-efficiency in construction.

All three bills are sponsored by Rep. Stephen Whyte, R-Mapleton, and Sen. Lincoln Fillmore, R-South Jordan, the co-chairs of Utah’s commission on housing affordability.

Waldrip said he has been in constant communication with both lawmakers, as well as House and Senate leadership, to make sure each of this year’s flagship housing affordability bills makes it across the finish line by March 1.