Affordable housing in Salt Lake County- perspectives from a developer

Most areas in the United States are struggling with the affordability of housing, and the State of Utah is not immune to this problem. In the planning profession, planners focus heavily on the facilitation of moderate-income housing measures (MIH) such as inclusionary zoning, accessory dwelling units (ADU), and higher density zoning. State legislation even backs planners' efforts through the SB 34, which enforces cities that meet a certain threshold to implement some of these measures that could help with this problem.

Affordable Housing in Salt Lake County- Perspectives From a Developer Patrick Ruiz March 2022 Table of Contents 1.0 Introduction 2.0 Literature Review 02 05 2.1 Nationally 06 2.2 Locally 07 3.0 Technical Assessment 09 3.1 Data Sources 10 3.2 Number of Total Housing Units 11 3.3 Housing Tenure 12 3.4 Vacancy Rates 13 3.5 Housing Affordability Gap Analysis 14 3.6 Housing Prices and Rental Rates 15 4.0 Implications for Developers 17 5.0 Interview Process 20 5.1 Methodology 21 5.2 Findings From the Interview 22 6.0 Concluding Thoughts and Final Discussion 30 References 34 Appendix 36 Table of Contents 01 1 Introduction Introduction 02 1.0 Introduction 1.0 Introduction Most areas in the United States are struggling with the affordability of housing, and the State of Utah is not immune to this problem. In the planning profession, planners focus heavily on the facilitation of moderate-income housing measures (MIH) such as inclusionary zoning, accessory dwelling units (ADU), and higher density zoning. State legislation even backs planners’ efforts through the SB 34, which enforces cities that meet a certain threshold to implement some of these measures that could help with this problem. However, there seems to be a lack of focus on how these measures are working in practice through the eyes of the developers. It also appears as if the planning community forgets to look at the restraints that might limit developers to increase the housing supply. Factors such as material costs, lack of space, and the lack of cohesiveness by planning efforts across the State might be a couple of limiting factors. To tackle this issue of affordable housing, collaboration on all fronts is needed, and this project looks at how to bring both sides a little bit closer to reaching this goal. For this project, the scope of the geographic area was limited to Salt Lake County due to time constraints. However, it is essential that moving forward, an in-depth look of developers from other areas along the Wasatch Front may be vital in tying this collaboration effort together. To help bring the planning and developer community closer together, this project will take multiple steps to decipher affordable housing and provide a rubric of suggestions into specific measures on how to mitigate this issue. To interpret the affordable housing issue within the region, this project created a housing tech assessment to determine the deficiency of MIH supply. Thorough research was conducted to use the most up-to-date data. However, some data sets are several years old due to the lack of new or incoming data from Covid restraints. In addition, research will provide a literature review about what factors contribute to housing issues at the local, state, and national levels. This lit review will also Introduction 03 identify intuitive practices that are being used locally or in other areas that might be useful. Lastly, the topic of what affordable housing means for developers will be dug into in hopes of closing the collaboration gap between planners and developers. Finally, this project focuses on the qualitative approach of acquiring precise data. To obtain qualitative data, the research sought out feedback from developers by interviewing different professionals in the field of residential development. Through this process, questions were formulated to determine whether developers think planners are doing an adequate or inadequate job of creating a community that endorses affordable housing and what they believe to be critical factors to limiting housing supply. The reason for this questionnaire is not to focus on developing new regulations or incentives to help with affordability. Still, it will look at the constraints on the development of housing, identify solutions from the perspective of a developer, indicate how well planning efforts are helping them supply housing, and suggest collaboration efforts that may have the most significant potential to allow for a greater expansion of the housing supply. Thus, this project strives to bring each side of the table closer to determine what current practices help or do not help. Introduction 04 2 Literature Review Literature Review 05 2.0 Literature Review Factors that are Contributing to a Lack of Affordable Housing 2.1 Nationally Across the nation, it has been hard for many citizens to obtain affordable housing. Of course, each market within the United States may have affordable housing crises at differing degrees. Based on a report by the Joint Center for Housing Studies of Harvard University (established in 1983), homeownership rates seem to be at a level rate. However, if you take a closer look at the numbers, it shows that age groups lower than 65 years have seen a decrease in homeownership over the last four to five decades. The numbers show a sharper decline for those that are younger (Airgood-Obrycki et al., 2018). The reason for this is a stagnate supply of single-family homes and the leveling off of multi-family developments. Factors such as high material costs, labor shortages of the construction type, and limited land supply can play a significant role in this lack of supply (Airgood-Obrycki et al., 2018). Simple economics knowledge informs us that if there is a low supply and high demand, it will cause prices to rise. To exacerbate the issue, incomes have not increased at the same rate as the economy. Thus, it is hard for those trying to buy a first-time home to meet the faster growth rate of home values. Consequently, a study from 2019 shows that deficient-income families or individuals are at a higher risk than most other incomes to be burdened with housing costs. For someone to be considered cost-burdened or severely cost-burdened, a family must spend more than 30 percent or 50 percent respectively of their monthly income (HUD, 2014). However, this study found that not only do deficient income families face this issue. It found that two percent of middle-class families in the United Literature Review 06 States face excessively burdened housing situations as well (Aurand et al., 2019). Despite these factors of increasing home values, it has never been cheaper to own a home as interest rates are at all time low; as of 2021, interest rates were hovering around the 2 and 3 percent ranges. At first glance, this should help the affordability of housing. However, since homes are so expensive, some experts believe this will only expedite the demand as higher-income households begin buying up these houses (Purviance, 2021). Thus, putting a strain and stretching out the much-depleted supply. This will only cause more demand and even higher home prices. 2.2 Locally As stated previously, many States, regions, and cities are facing the fact that their residents struggle to find affordable housing, but markets have differing degrees on which they meet this fact. Utah’s housing situation is a significant cause of concern as the demographics of the state show rapid growth at the domestic and migration levels. With a steady population growth comes with the demand for housing. Thus, the housing prices of the State tend to be trending upwards. Prior to the effects of Covid 19, the average annual rate of home prices was hovering around 6 percent for the State of Utah. Following the similar trends of the National dilemma, Utah’s income was not keeping up the same pace as with home prices. However, data showed that most households over the median income could afford homes at the market rate due to the low mortgage loan rates. While the optimism was high at this point, it was hanging by a thread because if the home loans rate raised significantly, it would put a lot of households in peril of buying a home or placing them in cost-burdened housing options. Even with these rates, it could not outweigh the high housing prices for those below who make under median income. Many of the lowest income earners can not purchase a home in Utah or have a higher chance of living in a cost-burdened situation (about 20 percent). Thus, providing living situations that would be unstable and causing more of a division between the poor and rich (Wood et al., 2018). A more recent report from the Kem C. Gardner Policy Institute staff (Wood and Eskic, 2021) shows the housing landscape in the mist of the Covid 19 pandemic. Unfortunately, it indicates that trends of the housing boom are not slowing down. In just one year, 2021 saw home prices increase roughly 28 percent. More staggering and concerning, almost half the residents in Utah can not afford a median-priced home. With such a drastic number, it doesn’t seem very easy to see any positives. The pandemic also Literature Review 07 generated circumstances that made it hard for developers to meet demand. For example, the supply chain to produce housing was significantly halted or disturbed. Additionally, the Federal Reserve did not do any favors for relaxing the demand for housing. Lowering the interest rates only exacerbated these trends and increased home prices. With such drastic updates, it seems complicated to see any positives. However, one key takeaway from this report is that trends show strong development in 2022 to help combat the strong demand and weak supply (Wood and Eskic, 2021). Literature Review 08 3 Technical Assessment Technical Assessment 09 3.0 Technical Assessment 3.1 Data Sources The Census Bureau, Ivory-Boyer Construction, Zillow, and RentData.org databases were the key sources from which the data was collected for the housing analysis of the community profile of Salt Lake County. Data directly collected from the Census Bureau was used for Salt Lake County’s housing assessment, such as total housing units (DP04 & B25003), tenured housing areas (B25003), vacancy rates (DP04 & B25003), and housing affordability gap analysis (B25118, B25119, & B25056). The Ivory-Boyer Construction Database helped collect data to conduct a supply and demand model for projected vacancy rates by providing historical building permits from Salt Lake County. The last two sources, Zillow and RentData.org, were used to provide data for the price of rentals and housing in Salt Lake County. Different datasets were utilized for this housing analysis as the American Community Survey (ACS) data and select permit data were organized by individual month and year. For the ACS data, 2014 and 2019 5-year estimates were used for the total number of housing units. To conduct the time series analysis of housing tenure, the ACS-1 year estimates were used from 2010 to 2019. This dataset also helped supplement the supply and demand model. However, the vacancy rates used for the base year came from the 2019 ACS 5-year estimate. Similarly, the housing gap analysis used the 2019 ACS 5-year estimate. 5-year estimates were chosen as the ACS data instead of 1-year estimates because they are more reliable and collect from a larger sample size (Census Bureau, 2015). The permit data collected was also organized by individual month and year (IvoryBoyer Construction Database). It was used to determine the three-year new supply by historical permit data. For the purposes of this project, data collection of permits was limited from 2010 to 2019. This source was used because it was the most accurate local data for Salt Lake County and the State of Utah, as the Ivory-Boyer Construction Database collects directly from the local county and municipality permitting entities. Technical Assessment 10 3.2 Number of Total Housing Units The total number of housing units is a crucial indicator if the local market is keeping up with the demand of the new number of households moving in. This is hard for developers to keep up with as construction labor and material costs continue to rise. The lower supply of housing units means less affordable housing options for the residents of Salt Lake County. Figure 1 depicts the average total amount of housing units for 2010-2014 and 2015-2019. Based on the data, the current supply is around 374,820 housing units, up by a 7.7% increase. This should be somewhat concerning as this pace of growth is slightly slower than the total population growth shown at this same time period (15.1%). Figure 1 Technical Assessment 11 3.3 Housing Tenure A housing tenure time series analysis of Salt Lake County was performed over the last decade to give a broader scope. This type of analysis gives us a more detailed look at the total housing units. For instance, it is essential to see how many occupied housing units are renter or owner-occupied. Higher rates of rental properties prove that municipalities in a county may have more affordable housing policies. It also shows that the population may be younger, less affluent, and racially more diverse compared to the surrounding areas (Crump & Schuetz 2021). Based on Figure 2, it can be inferred that Salt Lake County has a normal distribution of homeowner to rental rates compared to national trends. According to the most up-to-date study on the Nation’s rental housing, the rate of rentals hovers around one-third of the population (Anderson et al., 2020). In Salt Lake County, the distribution of tenureship plays in favor of homeowners, and the total amount of renters is exactly at average (33%) by 2017. The rental rates have steadily increased over the last nine years, whereas homeownership rates have dipped two percent since 2010. This can be assumed because home prices have risen, making it harder for households to own homes; thus, making renting a more popular option. Technical Assessment Figure 2 12 3.4 Vacancy Rates Since the housing unit increase continues to be low compared to the population growth and demand for housing, so will vacancy rates. Low vacancy rates are good for realtors, home sellers, and landlords. However, it is not suitable for first-time buyers and renters as it keeps the market competitive and prices of homes high. From the 1970s to 2010, the vacancy rate was steadily around 12% and kept housing rental prices affordable (Anderson et al., 2020). However, when the recession hit, this put a lag on the housing supply, and it still has not kept up to this point. Based on Table 1, Salt Lake County currently has relatively low vacancy rates at around 5.3% for homeowners and rental properties. Such low vacancy rates can strain households that live below Annual Household Median Income (AMHI). Furthermore, after conducting a supply and demand projection for 2022, further bad news looks to be over the horizon for these households. If the building rate continues this rate, the projected vacancy rate will be around 3.52% for homeowners and edge closer to the expected average during the recession in 2008. As for renters, it seems that the vacancy rate will drop down to a nonexistent rate of 0.73%. This means developers are not meeting the demands of multifamily units, and city planners should develop policies that endorse non-euclidian zoning measures to entice such developments. Table 1 Sources: Ivory-Boyer Construction Database & Census Bureau Table B25003 (2010-2019). Technical Assessment 13 3.5 Housing Affordability Gap Analysis Table 2 depicts the rental affordability gap within Salt Lake County in 2019, respectively. This data will help local leaders determine the housing affordability situation in their community. Income ranges are determined based on the Area Median Household Income (AMHI). Households that meet or fall below 80 percent of AMHI are considered low income (80% or less), very low income (50% or less), or extremely low income (30% or less) (HUD 2017). The United States Housing and Urban Development (HUD) defines affordable housing as costing 30 percent or less of a household’s income. The 30 percent or less calculation determined each maximum affordable monthly rent section of the table. As shown in Table 2, trends detail that just under half of the income brackets in 2019 have a deficit for affordable housing. There was a lack of rental unit supply at affordable prices for those earning 50% or less of the county’s median household income. However, there was not a vast deficit compared to the high AMHI range, and progress of affordable housing is needed to address this issue. In addition to lowerincome brackets having a lack of housing, households over 125% AMHI showed a deficit as well. However, this bracket of income saw the deficit on a larger scale. Due to their higher incomes, this may not be as big of an issue, as they have more options than lower-income households by renting at a lower rate or buying a house. Even though it is easier for people of higher income to withstand these deficits by renting cheaper units, it may put a strain on lower-income households by increasing the risk of overpaying on rentals within their price range. Table 2 Sources: Census Bureau 2019 ACS 5-year data, Salt Lake County Tables B25118, B25119, & B25056 (2019). Technical Assessment 14 3.6 Housing Prices and Rental Rates As shown in the previous subsection, Salt Lake County looks to have a deficit in affordable housing for quite a few of the income brackets. To exacerbate this issue, housing costs for buying a home or renting a property are rising. Across the state, residents feel the tension of affording a place to live as wages do not keep pace with the rising cost of living (McKellar, 2021). Figures 3 and 4 depict the same trends for the local municipality of Salt Lake County. Figure 3 shows that homeowners in Salt Lake County can expect their homes to appreciate in value. This is great for homeowners that are looking to sell. However, this can put a dent in future plans for the first-time buyer as it becomes harder to save enough money to make a down payment. Thus, keeping the vacancy rates for rentals low and keeping the costs of rental rates high as well. Figure 4 proves this trend concurrently. Housing prices have been increasing at a higher rate. Once it met a specific threshold, rental rates caught up as vacancy rates went down. Rental rates did go down in the middle of the pandemic, but this may be due to the economic woes experienced during this time of uncertainty. Technical Assessment 15 Figure 3 Figure 4 Technical Assessment 16 4 Implications for Developers Implications for Developers 17 4.0 Implications for Developers 4.0 Implications for Developers To face this issue of affordable housing, developers are a valuable piece in the puzzle as they directly affect housing supply and demand. The issue of affordable housing is described in its simplicity, that the more supply allotted by developers, the less chance of prices skyrocketing in rental rates and home prices. Through this housing production process, they are responsible for ensuring financing, initiating the planning process, making sure the construction requirements are followed through, and marketing and selling/renting out the housing projects (Jackson, 2018). With so much responsibility, they are burdened with many barriers to providing housing for communities. For instance, many land use and housing restrictions are not flexible enough for developers to supply such housing. Thus, stressing the housing supply stock and raising housing prices exponentially (Glaeser & Gyourko, 2018). To combat these externalities, federal and local help has been put in place to help fellow developers. Federal programs that supply tax credits such as The Low Income Housing Tax Credit ( LIHITC) and the Historic Tax Credit (HTC) are staples for supporting affordable housing projects. In addition, programs from Section 8 (vouchers) and Community Development Block Grants are also utilized. However, previous research has indicated that for-profit developers have a smaller financing gap and tend to use tax credit programs in comparison to nonprofit developers who tend to rely on CDBG programs (Bratt, 2016). In addition, cities across the county have implemented their own strategies as well. Some of these strategies are structured as financial or policy tools to help provide a variety of housing types, densities, and pricing levels. Tools include waved impact fees, TIF reimbursements, community land trusts, form-based codes, inclusionary zoning, and density bonuses, just to name a few (Kiani et al., 2020) However, the local strategies’ effort has not been consistent as some municipalities have placed affordable housing as a higher priority than others. For instance, Salt Implications for Developers 18 Lake City has established a Redevelopment Agency (RDA) to steer in front of these efforts. It is noticeably displayed based on the RDA development guide created for residents. In it, they state that their priorities include removing barriers that might slow down the process of supplementing such housing and promoting projects that endorse mixed-income and a variety of housing types (2019). Progressive priorities such as these will only help each side supply such housing for all. Since developers have a helping hand on this issue, why might they focus on such housing if market-rate projects look more desirable? Affordable housing projects have several benefits that would entice a developer. For one, its location in high urban areas means fewer upfront costs for implementing new infrastructure. Secondly, with such high demand, it will not take long for such properties to be bought or rented compared to market rate or premium projects. Lastly, these projects limit the scale and amenities that might come with premium homes or luxury apartments. Thus, putting a damper on upfront costs (Habitat for Humanity, 2021). Implications for Developers 19 5 Interview Process Interview Process 20 5.0 Interview Process 5.1 Methodology An extensive interview process was conducted to provide qualitative data. This interview inquired developers on topics such as the constraints or barriers on the development of housing, identified solutions from the perspective of a developer, indicated how well planning efforts are helping them supply housing, and suggested collaboration efforts that may have the most significant potential to allow for a greater expansion of the housing supply (Table 3). List of Questions Asked to Developers in the Interview Process How do you define affordable housing in Salt Lake County? How well is the planning community across Salt Lake County addressing affordable housing? What is the most promising tool at the state, county, or local level you have seen to produce more affordable housing? How well do you think the state legislature supports the efforts in producing affordable housing? What are the most significant barriers for developers to construct affordable housing? What strategies are out there for developers to help mitigate these challenging barriers? What do you consider to be the most significant influence on the cost of housing in Salt Lake County? What actions should be taken to protect the supply of affordable housing, long term? How do you envision a collaborative effort between planners and developers? If you had a magic wand, what would you do to help supply housing that is affordable for all in Salt Lake County? Table 3 Interview Process 21 Through this process, a total of 10 developers were interviewed. Each interview lasted between 30-45 minutes and provided significant attitudes and insight on the development process in Salt Lake County. Developers were selected through a networking process via the Masters of Redevelopment Program at the University of Utah or through snowball sampling. Snowball sampling is a recruitment process in which initial interviewees were asked and supplied recommended candidates who are experts within the field of development to interview. The pool of interviewees represents a diverse field of developers. Developers interviewed ranged from companies that are smaller to larger in size, long-established companies to recent start-ups, and ones who focus on affordable housing projects or compete in market-rate projects. The intent was to establish a wide variety of results and insight on the affordable housing situation. 5.2 Findings from the Interviews Defining affordable housing in Salt Lake County To developers, the definition of affordable housing can vary regarding certain dynamics of a geographical area. After these discussions, there seems to be a range as to where that threshold meets. Many developers analyze a neighborhood scale to determine what is affordable or not. For instance, one developer states that: We are flexible on where we pay in the AMI ladder. Okay, so sometimes we will use 50 percent AMI as a benchmark, sometimes we use 60 percent, sometimes we use 80 percent to 100 percent. So we will restrict rents, but we will just use different scales for different units. Some even expressed that this can muddy the waters and may play a part in why it is hard to combat such housing issues. Though most know that there is no magic number as to what is the exact threshold to meet for a housing project. However, it can be inferred that HUD defines a standard benchmark that most recognize. They all acknowledge that housing for households at 80% AMI is a reasonable standard to look at when first analyzing an area. Based on other market measures, it can be determined if units need to be reduced or increased to a different benchmark to reach affordability. Interview Process 22 In addition, most interviewees noted that the affordable housing definition must include how much of an individual’s income will be used towards housing. One developer states that “My broader definition of it (affordable housing) is that affordable housing should be a percentage of somebody’s income.” Most mention the defined percentage used by HUD that 30% or less of income should be used to pay for housing to be considered affordable. Others think that it could be on a sliding scale. For instance, those who make higher incomes may be able to pay for40%-50% of their income for housing, whereas those who make less may have to budget around 30% to sustain their housing arrangements. In comparison, developers and planners use the same definitions of affordable housing. However, it seems that developers tend to be more flexible with these definitions based on additional market trends. Thus, developments will be marketed as affordable housing even though they may be priced outside of the county’s 60% or 80% AMI benchmark. For example, say a developer put in a housing development located in a neighborhood with a lower median income than the surrounding county. They would then use 50% as a benchmark because they know the standard definition of 80% would be too high for the tenant they are trying to market for. This can also go the other way if they were trying to develop a project in a more affluent neighborhood. Thus, they would sell the affordable units at around 100%. Assessing Local and State approach at addressing affordable housing When questioning developers about how local agencies/departments and the State approaches affordable housing assessments varied. First off, when it came to local agencies and organizations across Salt Lake County, there is the sense of an incongruous plan on affordable housing. As shown in this quote, a developer states: I think, in general, they’re doing a good job to make an effort, and everybody has some individual programs I think are working really well. I’d say city by city; it probably is substantially different depending on what city you’re in. I think Salt Lake City has done a really good job, and they are very proactive, from a planning standpoint, as far as allowing density, as far as trying to push things that would help affordable housing. But then, as soon as you get outside of Salt Lake City proper, I think you run into a mixed bag. The biggest issue I see across the county is just coordination between all the different groups. Often, tax credit applications don’t match with funds that might be available for affordable housing, say in the county, and those things don’t match up. Interview Process 23 From this statement, it can be concluded that the Salt Lake area as a whole attacks affordable housing at a monocentric approach instead of a polycentric approach. Essentially, Salt Lake City is taking significant strides in providing strategies that increase affordable housing opportunities. However, this central urban core approach is sustainable. What is the county doing to help bring in a polycentric approach to improving central nodes in other cities (suburbs)? One developer states that “we do...regional planning really well” when it comes to developing general plans at a holistic approach. However, when it comes to practice at the municipal level, “planners have been reconciled almost to that administrative purpose of process” and struggle to elaborate on the overall housing strategies via local general plans and city plans. In addition, it comes across as if planners do not communicate these plans to local decision-makers as to what’s better later than now when it comes to particular housing developments, and how these will ultimately affect the general landscape for future generations. Introspectively others expressed that they think planning efforts have been too intrusive on the market and as one developer stated, “I see a lot of mandates...and what I would like to see more of a free flow on development, which ultimately I think would help solve the affordable housing issues.” All developers do not express this laissez-faire approach, but it could indicate a tension between the planning and developer relationship. Locally there is a mixed bag of reactions on how planning departments and organizations are combatting the negative externalities of the lack of housing supply. This sentiment is similar to the State legislature supporting the efforts in producing affordable housing. In general, developers see that the legislature is making strides on this front as one states: They have two bills actively being discussed this session that could significantly impact our unsheltered population and our ability to produce 60% AMI housing. They would amount to the largest housing push the State has been a part of and are great steps toward catching up with the problem. Unfortunately, some see these measures as “reactive” and may not be enough to offset the issues on hand. Thus, this approach of letting events set the agenda has brought animosity or lack of trust in the funding set aside from the State. For instance, the Olen Walker program established by the State to set aside funding for houses causes mixed Interview Process 24 feelings. One developer states that: It (Olen Walker program) is a good program. It’s just underfunded. But I know they had earmarked like last year a bunch of money that they thought could go there. But then, once the budget cuts happen, it’s always the first thing to get cut out...It’s a good program. It just needs some additional support. Other developers express this sentiment as they see reports and articles about a surplus that the State budget has, yet there is a significant deficit on affordable housing supply. They are confused about why the legislature voices, “housing is your (legislature) top priority” when they do not allocate this surplus to make positive change. In addition, developers are vexed by this priority claim on the housing issue. One quote illustrates this view: There are lots of things that happen at the state level that really never reach full completion. And it’s frustrating for developers...Legislation that passes but never gets funded, committees that are formed that never really accomplish anything or impact the overall affordability environment...At the state level, they have the resources to do a lot more. But I don’t think that they have the political will actually to do a lot more. Yet there are concerns; some express optimism, especially when it comes to previous legislation; as one developer states, “Most of the state legislators are in favor of it (affordable housing measures) than they were ten years ago, but I think today they are.” Even though these measures may be reactive, they believe more emphasis will take place on affordable housing as “they realize the market won’t fill that gap without their support...the legislature will continue to set goals for municipalities and then hold municipalities accountable to those goals.” These assessments of the local and State approach to addressing housing can be humbling. However, there are some positive takeaways on tools that were useful for developers, set aside by each entity. At the State and National levels, many of the developers appreciate the funding that has been allocated for projects. Tax credits and funding coming from Long Term Housing Tax Credit and Olen Walker Housing Loan Fund are their bread and butter. These tools are the “most accessible and frequently used” when funding affordable housing projects. They also expressed how some cities, particularly Salt Lake City, are more driven to promote these funding opportunities through certain initiatives. For instance, “Salt Lake City’s RDA probably has the most proactive affordable housing fund” and “they offer low-interest loans for buying land and Interview Process 25 for construction of affordable housing. And they have really pretty specific requirements for what you have to do to qualify for that.” In addition to funding tools, they realize that planners significantly influence housing with zoning. As planners actively change zoning codes to meet the cities, developers notice and recognize zoning reform efforts such as affordable housing overlay zones, transit station area (TSA) zones, and form-based codes. Significant barriers and challenges for developers Developers across the county are doing their best at mitigating the effects of rising housing prices by building more affordable units or increasing the supply in general at the market rate or above. From these interviews, there are some significant challenges and barriers that make it difficult to reduce the supply gap. The two overarching themes that were brought up were the demand for housing and the cost to supply. As stated here, this developer summarizes the nuances of demand and its effect on the landscape of housing: It’s demand. It’s awesome to have great job opportunities and people wanting to move to Utah. There are a lot of reasons why people would want to do that...But the downside of all that is that it’s put such a strain on our housing stock...And so you get burned at the stake if you tried to suggest something that slowed down the economy and people moving into the state, but the truth is we can’t keep up because of construction costs and land costs that are driven by demand. There’s so much demand for housing, and developers are buying up any property they can, and they’re competing against each other. And so the cost of land gets bit up...We were already behind on building housing, and now we have so many more people moving in, and we’re just getting further behind with all the supply chain things. We can’t keep up with it. As depicted in this statement, demand is the main component of the ever-so-rising prices. Fortunately, housing is not like the transportation system, and there is a premium price to pay for such resources. Thus, we cannot argue that supply will cause induced demand, and we should advocate for more supply through density bonuses and zoning reform. However, another factor causes significant blunders to the housing supply process. It is was one that both affects planners and developers alike. That would be NIMBY (Not in my backyard) advocates. One developer elaborates that “So I would just say the number one obstacle is existing residents and then city processes that get hijacked by those folks.” Interview Process 26 In addition to competing with outside forces such as high demand and NIMBY-ism, developers in the niche affordable housing market are also competing with other developers. For instance: For every project that we do on the affordable side, we’re competing against another different developer who is on the market rate side. And we have to be really pretty crafty and strategic when we buy land and look for opportunities that other people aren’t seeing because when we compete with market-rate developers, price-wise, we can’t compete with them. This exemplifies that the current policies and market we have currently incentivize market-rate developments instead of those targeting the population who make income less than the area median income. Of course, any increased supply is excellent, but more diverse housing options are needed. Lastly, many facets of society have been affected by this barrier, and the housing supply is not exempt. That being Covid-19 as it is has exacerbated the previously stated challenges. As one developer puts it, “The pandemic has destroyed our supply chain.” When land, materials, and labor are harder to come by, it only makes it an arduous task to supply housing. Solutions and actions to mitigate challenges and barriers After listing out the daunting barriers that many endure in the industry of housing, it seems like an insurmountable task to supply affordable housing. However, many developers have come up with both incremental changes and thoughts of radical innovations. Some developers have become proactive regarding NIMBY-ism as they will “hold neighborhood meetings, invite public comment, and do public outreach for comment.” These collaborations are not just limited to public outreach as well. Some developers have taken the initiative to collaborate with municipalities as well. As shown here: We’re doing a lot of creative partnerships with cities and towns as well. So the ones who are the most active and really want affordable housing in their communities have stepped up, and we’re doing creative land trusts. Interview Process 27 Creating partnerships such as these will bring less of a financial burden on both parties and bring more knowledge to the table. Furthermore, developers have thought about how the designs of their developments may positively impact housing prices. For example, one developer has begun noticing “movement around micro-apartments and co-housing.” Similar to ADUs, they have fabricated new developments to allow buildings to be easily retrofitted into smaller units. Thus, increasing supply in multifamily housing dwellings. This is not just limited to large multifamily projects as some developers have expressed “a wider variety of actual product types and more creative product types, whether it’s duplexes or townhomes.” In addition to more diversity of products, developers are also continually researching and utilizing new materials. One developer mentions that “There’s a lot of ideas out there about how to save costs on building materials or using modular construction or prefabricated.” These are a couple of incremental changes mentioned in the interview process. However, some had more thought provoking changes that may not be as quickly put in place without some drastic changes in our policies and housing system. Some thought, like planners, we should: One, incrementally up residential zone density, two, make sure we maximize the value of the regional infrastructure we have, and three cities are taking their economic development efforts and using that lens to streamline their entitlement processes for residential. These three points are very similar to what planners strive for when zoning for housing and writing for housing plans, such as the effort to increase density through zoning, supplying such zoning close to transit destinations, and making sure it is a part of the economic development as the economy is not solely reliant on job creation. During these conversations, some spoke of concern of past destain or stigma these projects of affordable housing receive. To help mitigate this, a developer mentioned that these projects should be diversely placed throughout our communities. “I think that 10% of all housing would be affordable for a new product... It doesn’t matter if it’s a big, rich subdivision or if it’s a starter home subdivision.” This housing process would diversify the portfolio of neighborhoods throughout the county and would not stratify the area with different socioeconomic nodes. Thus, this could lower the risk of the stigma associated with subsidized housing. Interview Process 28 Lastly, this mitigation takes a fundamental change in our society and how we look at housing. One developer suggested that: If you are sincere about affordable housing, I’m talking about really being willing to do what needs to be done. You’re going to treat housing like you treat how you fund the fire department or how you fund the highways. It is a broad-based financial support. Everybody participates in it. There is nothing about our community that doesn’t get better when we nurture housing affordability and housing stability. If the community is the winner, should the community be the ones who bear the burden part of the equation? All of us need to contribute to this. Today housing is seen as a commodity and not a public good. However, housing is similar to public goods such as roads, schools, and police/fire protection in that all residents theoretically benefit from the provision. That is why housing could be seen as a quasipublic good as some of the housing is subsidized for low-income families. However, this suggestion implies we have still not fit the bill with the current process until we all contribute to it comparable to other public goods such as roads and schools. Interview Process 29 6 Concluding Thoughts and Final Discussion Concluding Thoughts and Final Discussion 30 6.0 Concluding Thoughts and Final Discussion 6.0 Concluding Thoughts and Final Discussion Moving forward, this paper strives to help bring the planning and developer community closer together by suggesting some solutions to help mitigate this issue. Based on the interviews, a significant step to help with this issue is closing the gap between developers and planners to create a more collaborative atmosphere. For instance, both sides can take lessons from each profession. When developers analyze affordable housing measures, they bring a flexible approach to the numbers. The benchmarks of AMI and percent of income spent housing are set based on additional market trends and not solely set by HUD. If planners took this approach when analyzing the housing market, this would help move housing plans to more breathable documents. They will not become stagnate and obsolete within the next two to five years when demands and housing needs change. Thankfully for planners, there is a tool in place already to supplement this solution, called scenario planning. Scenario planning is a process to support decision-making by projecting multiple outcomes through differing forecasts, positive and negative externalities, and indicators (APA, 2022). This process can help give decision-makers options as to what fits each community. Thus, reducing the number of cookie-cutter policies across the county which might not feed the needs of the area. It will also help give more rationale to developers as to why the housing plan is the way it is. On the flip side, developers can take a page out of the planner’s playbook. Developers as a whole should take more initiative to combat NIMBYs by expanding their community engagement process prior to public forum meetings about their housing projects. As shown above, some have taken these steps forward, but it seems that this needs to be more of a constant pattern. Often, residents are taken aback when they initially hear of such projects through a public notice from the city. Thus, talks begin at a planning commission meeting where emotions are at their highest due to it being a public forum. These are not a format for productive conversations to increase the housing supply or negotiate favorable outcomes. Planners should also take a role in these Concluding Thoughts and Final Discussion 31 initiatives by bringing developers and neighborhood residents together to facilitate and promote the interests of both parties to build consensus in hopes of reducing the time for overhead costs and increasing the amenity needs and wants of residents. Another issue that seemed to be brought up is the lack of cohesiveness amongst municipalities on the level of priority in regards to supplying more housing. Salt Lake City is an example that has made significant strides with progressive housing policies through zoning policies and funding. However, some adjacent suburbs have not taken these same strides. These should be opportunities for economic growth. Planners and decisionmakers alike should recognize this as they update their housing plans. Salt Lake County can optimize the limited amounts of land for development and public transit opportunities through this polycentric model. Lastly, suppose cities really want to make this a priority. In that case, they should be willing to find funding that supports affordable housing, change codes that increase density, and expedite the process if certain projects meet a certain threshold of affordability—perhaps taking the lead such as Salt Lake City and implementing a department such as the Redevelopment Agency (RDA). However, such drastic changes will take some political will and shifting of budgets to implement strategies. Starting somewhere will make incremental changes that are needed throughout Salt Lake County. Through these changes on each side, collaboration may be easier to reach amongst both sides. Yet it seems more dialogue needs to happen between both stakeholders. Perhaps a county-wide housing summit should occur every so often where planners and developers alike can discuss changes across the market, new housing policies, and overall efficiency in the process. Through these discussions, constructive criticisms can be prompted. Either way, increased dialogue between both sides in a setting like this will provide more progress instead of a micro-level approach at a pre-development meeting in city hall. This project’s intention was not to reinvent the entire process. However, some interviewees pointed out that housing needs should be looked at vastly different and that incremental changes may not be enough to counterbalance the negative externalities. They suggest it should be treated and funded like a public good such as the fire department or the road system. If further thinking is continued like this, planners should be thinking ahead as to how this might come about. First off, developers and planners must be on the same wavelength and advocate housing to legislators if they want such a drastic change; without their support, nothing will get done. In addition, planners should think about the challenges that come with funding housing like this. For instance, how should it be funded? Should it be similar to how schools are invested in the State of Utah, by the State taking more of a burden funding this resource, or should it be the responsibility Concluding Thoughts and Final Discussion 32 of the local jurisdiction (Utah State Board of Education, 2022)? Also, how should we combat the effects of the free-rider impact? The free-rider effect is a powerful argument against providing housing as a public good. To summarize this concept, it incentivizes some individuals to depend on others’ contributions (money) to provide for the resource while reaping the benefits and not contributing their own part (OpenStax, 2016). It is a significant deferent to this method of supplying housing, and planners must strategize how to mitigate this negative externality if strategies transition towards this way of thinking. These details should be ironed out before making such a drastic change. Lastly, the main finding from this project is that continued work and dialogue should be continued. It should not be limited to planners and developers as they are not the only puzzle pieces to the whole picture. Further collaboration needs to occur with other stakeholders such as nonprofit organizations, housing authorities, legislators, and local decision-makers. As we all know, going down the same path will not help slow down the demand for new housing, and creating more mandates may only stunt the growth we see in the Salt Lake area. Concluding Thoughts and Final Discussion 33 References Airgood-Obrycki, W., Arck, M., & Baker, K. (2018). THE STATE NATION’S HOUSING 2018 (pp. 1-44, Rep.). Cambridge, MA: JOINT C E N T E R FOR HOUS I N G ST U D I E S O F H A RVARD UNIVERS I T Y. American Planning Association, S. (2022). Scenario planning. Retrieved March 11, 2022, from https:// www.planning.org/knowledgebase/scenarioplanning/ Anderson, C. (2020). AMERICA’S RENTAL HOUSING 2020 (pp. 1-44, Rep.). Cambridge, MA: Joint Center for Housing Studies of Harvard University. Aurand, A., Emmanuel, D., & Errico, E. (2019). The GAP A Shortage of Affordable Homes (pp. 1-28, Rep.). New York City, NY: The JPB Foundation. Bratt, R. (2016). Affordable Rental Housing Development in the For-Profit Sector: A Case Study of McCormack Baron Salazar (pp. 1-103, Rep.). Cambridge, MA: J O I N T C E N T E R F O R H O U S I N G S T U D I E S O F H A R VA R D U N I V E R S I T Y. Crump, S., & Schuetz, J. (2021, April 27). U.S. rental housing markets are diverse, decentralized, and financially stressed. Retrieved November 18, 2021, from https://www.brookings.edu/essay/us- rental-housing-markets/ Department of Housing and Urban Development, U. (2014). Rental burdens: Rethinking affordability measures: HUD user. Retrieved March 11, 2022, from https://www.huduser.gov/portal/ pdredge/pdr_edge_featd_article_092214.html#:~:text=HUD%20defines%20 cost%2Dburdened%20families,of%20one’s%20income%20on%20rent Glaeser, E., & Gyourko, J. (2018). The economic implications of Housing Supply. Journal of Economic Perspectives, 32(1), 3-30. doi:10.1257/jep.32.1.3 Habitat for Humanity, E. (2021, October 20). What does affordable housing mean for developers? Retrieved March 11, 2022, from https://europehousingforum.eu/what-does-affordable-housing- mean-for-developers/ Jackson, A. (2018). Barriers to integrating new urbanism in mixed-income housing plans in Chicago: Developer, housing official, and consultant perspectives. Housing Policy Debate, 28(5), 1-32. do i:10.1080/10511482.2018.1433703 Kiani, F., A. Dillon., Choi, D., J. Kim and F. Siddiq. 2020. “Affordable Housing Strategies: State-of-the Practice in Ten Utah Cities” edited by R. Ewing and I. García. Salt Lake City, UT: Metropolitan Research Center at the University of Utah. References 34 McKellar, K. (2021, June 27). The renter’s dilemma. Retrieved December 13, 2021, from https://www. deseret.com/2021/6/26/22463779/the-renters-dilemma-prices-rising-utah-renters- losing-choice-cant-pay-afford-rent-housing-eviction OpenStax Economics, Principles of Economics. OpenStax CNX. May 18, 2016 http://cnx.org/ contents/69619d2b-68f0-44b0-b074-a9b2bf90b2c6@11.330. Purviance, D. (2021). Low interest rates, inventories affect housing affordability. Retrieved March 11, 2022, from https://www.atlantafed.org/economy-matters/community-and- economic-development/2021/03/30/low-interest-rates-inventories-affect-housing-affordability RDA, S. (2019). BUILDING AFFORDABLE IN SALT LAKE CITY: AN AFFORDABLE RESIDENTIAL DEVELOPMENT GUIDE (pp. 1-28) (United States, The Development Agency, Salt Lake City). Salt Lake City, UT: Salt Lake City. U.S. Department of Housing and Urban Development (2017). AMI AND HOUSING AFFORDABILITY. Retrieved from https://metrocouncil.org/ Handbook/Files/Resources/Fact-Sheet/HOUSING/ Area-Median-Income- and-Housing-Affordability.aspx Utah State Board of Education, U. (2022). Financial operations. Retrieved March 11, 2022, from https://www.schools.utah.gov/financialoperations/propertytax#:~:text=State%20funds%20 account%20for%2063.99,school%20districts’%20General%20Fund%20revenues. Wood, J., & Eskic, D. (2021). The State of the State’s Housing Market (pp. 1-20, Rep.). Salt Lake City, UT: Kem C. Gardner Policy Institute and David Eccles School of Business. Wood, J., Eskic, D., & Benway, D. (2018). What Rapidly Rising Prices Mean for Housing Affordability (pp. 1-48, Rep.). Salt Lake City, UT: Kem C. Gardner Policy Institute and the David Eccles School of Business. Photo Credits Ayrton Sanguino References • Envision Utah • Nathan Brown 35 Appendix Capstone Interview Affordable Housing in Salt Lake County- Perspectives From a Developer To: -----------From: Patrick Ruiz Date: ---------Purpose of the Interview: Most areas in the United States are struggling with housing affordability, and the State of Utah is not immune to this problem. In the planning profession, planners focus heavily on facilitating moderate-income housing measures (MIH) such as inclusionary zoning, accessory dwelling units (ADU), and higher density zoning. In Utah, state legislation sets standards for addressing housing affordability and provision of accessory dwelling units (internal). However, there seems to be a lack of focus from planners on how these measures are working in practice through the eyes of the developers. As a graduate planning student (U of U), I am interested to understand more completely the issues affecting the supply of affordable housing in Salt Lake County. My interest is to contribute valuable research to the conversation, policies, and opportunities related to affordable Appendix 36 housing in Salt Lake County. My interview approach is to talk to those who work to provide housing in Salt Lake County. Potentially, a significant collaborative effort may be possible between all housing industry participants. I have identified the interview protocols and questions for your review before conducting the interview. Thank you for your participation in this research, and I look forward to meeting you. Respectfully, PR. Interview Protocols: The length of the interview will be 30 minutes (approx.). Interviews will be strictly confidential, as interviewees will be anonymous, known only by a numerical or alphabetical identifier. As the interviewer, I will comply with all University of Utah research standards, including strict confidentiality requirements, with all research materials stored on a locked computer and file cabinet until the end of this research. All electronic and paper files will be destroyed no later than July 1, 2022. The only information that may be published is the interviewee’s role and years in the housing industry. Roles in the housing industry are limited to the following categories: (public sector, private sector, non-governmental organization, advocacy organization/ group, other). All interview questions are focused on the affordable housing issues occurring in Salt Lake County only. Interview notes will be taken for research reference only and are strictly protected. The interview will be recorded (if approved by the interviewee). All interview materials, including field notes and interview recordings, will be destroyed by July 1, 2022. Interview Questions: 1. How do you define affordable housing in Salt Lake County. 2. How well is the planning community across Salt Lake County (City Planning Departments, SLCO County, WFRC, Envision Utah, etc.) addressing affordable housing? Appendix 37 3. What is the most promising tool at the state, county, or local level you have seen to produce more affordable housing? 4. How well do you think the state legislature supports the efforts in producing affordable housing? 5. What are the most significant barriers for developers to construct affordable housing? 6. What strategies are out there for developers to help mitigate these challenging barriers? 7. What do you consider to be the most significant influence on the cost of housing in Salt Lake County? 8. What actions should be taken to protect the supply of affordable housing, long term? 9. How do you envision a collaborative effort between planners and developers? 10. If you had a magic wand, what would you do to help supply housing that is affordable for all in Salt Lake County? Appendix 38