‘Broken incentive structures’ worsening Utah’s housing crisis

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Katie McKellar

(Utah News Dispatch) With the Utah Legislature’s 2025 general session around the corner, a big unanswered question is whether lawmakers will take more aggressive actions to tackle the state’s affordable housing crisis and whether they’ll use state preemption powers to do it.

The issue of Utah’s high housing prices is one that Utah Gov. Spencer Cox has deemed his top priority and a “moral imperative” to address. Speaking to a room full of local leaders and housing wonks at the Grand America in Salt Lake City during a conference focused on housing solutions Wednesday, Cox said his arms are wide open for solutions to a problem that experts say comes down to a steadily growing shortage of homes.

“I want to be very transparent, I’m (open to) everything right now,” Cox said. “I mean, if it’s an idea, and it can get me five more houses, I say do it.”

However, Cox also stressed the importance of working with local leaders and using state preemption powers sparingly. While the governor said he’s a firm believer in local control, he said “there are certain times and certain areas where the incentive structure doesn’t align the way it should,” and that may mean the state needs to step in.

“Everybody knows we have a problem. Everyone wants this problem solved. We just don’t want these houses built or these apartments built where I can see them. So that’s where we get this NIMBYism,” he said, referring to not-in-my-backyard attitudes that often result in pushback against housing developments. “So it does make sense, at some level, that you have to make the bad guy not the guy closest to it.”

Cox said city council members and planning commissioners wrestling with housing decisions have told him, “Hey, I know we need to do this (but) the minute I do this, there’s going to be a referendum, it’s going to get built anyway, and then I’m going to get voted out of office. And so that’s not very helpful, right?”

The governor said he’s not saying “we have to put as much density anywhere all of the time. That’s not what I’m saying.” He said housing planners can be “smart” and put higher density where there’s infrastructure to serve it, and “that’s how you keep the quality of life.”

Looking for ways to approve housing developments while improving quality of life is what local leaders should focus on, Cox said, rather than focusing on NIMBYism — which he said prioritizes people living in neighborhoods now rather than also thinking about Utah’s future residents.

“It’s all fun and games until your kids and grandkids are either living in your basement or in Iowa, and those are two really terrible options,” Cox said, which drew laughs from the crowd. He added “no offense to my friends in Iowa, but if you’re from Utah you don’t want your kids” living out of state. “That’s all I’m saying.”

Bottom line, Cox said when it comes to local housing planning decisions, the “incentive structure is broken right now.”

Cox did not paint a clear picture of what state leaders might do to take certain housing planning decisions out of local leaders’ hands, but he said, “We’ll continue to work with our cities and towns to do this.”

“But I’ve also said, like, if you don’t play ball, then it will be forced upon you,” Cox said. “So I think we have to hold that incentive out there at some level, and these are the debates we’re going to have.”

The Republican governor — whom voters in the solidly red state of Utah will decide whether to re-elect next week — said he’s a “free market guy” and the “only way to solve (Utah’s housing crisis is with free-market solutions.” At the same time, though, Cox said, “There is nothing free-market about the way we do housing in this country. There just isn’t. And we’re all kidding ourselves if we think there is.”

The governor said he doesn’t envision a scenario where “we’re ever going to get rid of all zoning laws and just let the market do what the market would do,” so he said ultimately state and local leaders “have to work within the constraints that are presented to us in a very practical way.”

Wednesday’s conference was hosted by the conservative-leaning think tanks Sutherland Institute and American Enterprise Institute and was sponsored by Orem-based Clyde Companies, an agency that supports several subsidiaries in construction, building materials and the insurance industry.

The conference included panel discussions and presentations that explored the complex and multi-faceted barriers that have aggravated both Utah and the nation’s housing crunch. Much of the discussion concluded that the U.S. and Utah simply need to build more homes, and due to land constraints and costs, smaller homes need to be built on smaller lots, but often local regulations and public outrage blockade higher-density projects.

Edward Pinto, co-director and senior fellow at the AEI Housing Center, gave a presentation on Utah’s housing pressures and how legalizing “light-touch density” infill — or allowing, rather than just single-family homes on a plot, but also duplexes or fourplexes or higher that still have the appearance or footprint of a large single-family home — could be “low-hanging fruit” in zoning reform and could help lower the cost of housing.

According to Pinto’s presentation, legalizing “light-touch density” in Utah could add 11,000 net new homes a year with a median value of $446,000, which is 18% below the median price of Utah’s existing single-family homes.

Another proposal that could be “low-hanging fruit” in Utah, according to Gabriel Kravitz, manager of The Pew Charitable Trusts, is allowing residential projects in commercially-zoned areas. He said that’s typically proven to be a noncontroversial move because commercial zones are usually located away from existing neighborhoods and there is already existing infrastructure in place.

Last year, housing experts at the University of Utah’s Kem C. Gardner Policy Institute projected that by the end of 2023, Utah’s housing shortage was expected to increase to more than 37,000 units. Steve Waldrip, Cox’s senior adviser on housing strategy and innovation, said Wednesday he predicts by the end of this year, that shortage will grow to closer to 50,000 units.

So what is on the table heading into January, when the governor’s administration and legislators are expected to work on yet another batch of potential housing bills, meant to increase the supply of more affordable homes for Utahns?

Based on Wednesday’s discussion, Cox’s comments and other public meetings legislators have held over the last several months, these are at least some ideas being considered:

  • Allowing more regulations on short-term rentals.
  • Legislation to incentivize more owner-occupied condo construction.
  • Efforts to fund and facilitate the building of infrastructure (like roads, water or sewer lines), the lack of which is currently standing in the way of already entitled housing projects.
  • The formation of a statewide housing plan to coordinate housing needs regionally.
  • Some type of “statewide overlay” with “upzoning” elements, or increasing zoning density on a wide scale throughout the state.
  • Policies to allow for more internal and external accessory dwelling units (or mother-in-law apartments. One lawmaker, Rep. Ray Ward, R-Bountiful, has drafted legislation that would make ADUs a “permitted use” on any residential lot in urban cities. He also has drafted legislation that would make affordably-priced single-family homes a permitted use.

Details, so far, are scant as state leaders work on their proposals.

When pressed on the statewide housing plan, the possibility of upzoning or other legislation he’d like to see come out of the 2025 Utah Legislature, Cox said he’s “not willing to comment publicly exactly because those discussions are happening right now.”

However, the governor did say he’s focused specifically on homeownership and helping build more affordable homes.

“What I want to see is more equity in the hands of more Utahns. That’s it for me. And bringing down the price of housing,” he said.

Cox added that he’s been told “by a lot of people, ‘Don’t do this. Don’t take this on. This will not end well for you.’ And they may very well be right.” He added that housing is a complicated issue with “thousands of different inputs.” Plus, he said, “it’s really easy to tell” if his administration succeeds or fails.

“Everybody will know if we succeeded or not by how much they’re paying for a house,” he said. “Does the median price of a house in Utah stay at $500,000 or more, or can we get it down to $375,000? That’s going to be the tell. Either we figure this out and we solve it, or we don’t, and I think it’s worth figuring out.”

Before concluding his remarks, Cox threw out one last policy issue to chew on, joking that afterward he would “run out of the room because it will piss everybody off.”

Speaking of “incentive structures,” Cox pointed to existing Utah law that encourages cities and towns to favor commercial projects over residential projects, because commercial revenue largely bolsters their tax revenue base.

“We have an incentive structure in Utah that says we’re going to reward cities and towns with retail sales,” he said. “That’s a conscious decision we’ve made. … We’ve decided that the thing that matters most if you need money to do stuff in your city, you should incentivize retailers to come in.”

Cox said it “doesn’t have to be that way.”

“We could say we’re going to reward you for having more rooftops,” he said. “That’s a decision we could make.”