What Arizona could learn from Utah's new approach to affordable housing
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As Arizona lawmakers and Gov. Katie Hobbs struggle to come to agreement on measures to try to increase the supply of housing in the state, one of our neighbors is taking a unique approach to solving its housing problems.
Utah Gov. Spencer Cox recently signed a series of housing-related bills. One of them, House Bill 572, will use money from a state fund to give developers low-interest loans.
To qualify, they’ll need to ensure that new developments include at least 60% of homes that are considered attainable. The law defines "attainable" with a dollar amount, depending on location. But, it’s no higher than $450,000 anywhere in the state.
Utah’s governor said he was "giddy" about the bill, which he called "perhaps his favorite" one of the session.
Steve Waldrip joined The Show to talk about what the new law will do. Waldrip is the senior advisor for housing strategy and innovation to Gov. Cox.
Full interview
MARK BRODIE: Do you share the governor's enthusiasm for the potential of this new law and some of the other housing measures he signed this year?
STEVE WALDRIP: Yeah, absolutely. I think that HB 572 creates a new opportunity for funding in a sustainable way. This is not a one time, typically with housing, we do one time funding, we, we dump money kind of into the black hole and, and it burns off and then we have to go find another bucket of money to dump in and, and that's kind of been the way we've done housing policy for a long time, both federally, and from a state standpoint, this creates a revolving liquidity fund that in theory can go on into perpetuity with opportunities to support developers and builders who are in cities who are willing to create the right type of housing, affordable, attainable and owner occupied.
BRODIE: I want to ask you about the affordable component of it because the, the law does specify sort of a maximum price that developers can offer at least some of the homes that they're building for given, you know, where they are in the state. It's a little more in the more expensive parts, a little less and, and some of the less. What was the thinking, and I guess what were the negotiations like, in terms of putting a specific number into the law which has been kind of a bugaboo in lots of other places?
WALDRIP: Yeah, I, I think we've tried to be very thoughtful during that process. We've engaged with a lot of developers, builders cities to try to understand how the market works. And the goal really is to not create subsidized homes. We want builders to build homes that are truly worth the amount that they're being sold for. And really the only way to do that is we have to build smaller homes on smaller lots so that they are more affordable.
And so that was the goal going in was how do we create something that, that puts the structure in place that that will end up with that result? And so by requiring 60% of the homes to be sold at that price, we know they can't be subsidized by the other 40%. There's just too much volume there. So that, that was one of the key components was, let's not subsidize what we're building, let's just build what truly costs that that amount.
BRODIE: Were the developers on board with this? Did you have to sort of sell them on the idea of building this kind of home with this kind of mechanism?
WALDRIP: Yeah, absolutely. And, and the best thing that I've heard from developers, lenders and cities is that they're all slightly uncomfortable and, and that's music to my ears because they should be slightly uncomfortable. We're asking each of them to take a step toward the center and meet each other in that space. And so while they are slightly uncomfortable, they've all you know, largely come back to the table and said, OK, this is doable. We need this from the cities and we need this from the lenders and the lenders are saying, OK, we need this from the builders and this from the cities and so it, it forces them to the table together to come up with a solution.
BRODIE: Are you finding that, that the cities are interested in doing this in having smaller homes on smaller lots within their boundaries?
WALDRIP: Yeah, we do. And, and the key to that really was there, there were two keys to that in this legislation. Number one was the fact that these are going to be owner occupied homes That gives the cities the opportunity to even in, in their agreements, create first rights of refusal for their employees, allow their teachers and their police officers and firefighters and public servants, all of those people can have an opportunity to, to purchase homes in their communities Because of what their city is doing, which is a, a big plus. And then the other piece is that these are mixed-income communities because only 60% are, are required to be in that attainable range. The other 40% can be used to create homes that, that are sold at a higher price with different income levels. And, and so creating those kind of cradle to grave communities is what the cities are, are looking for as well.
BRODIE: So I've read that Governor Cox has a goal for your state of having 35,000 new starter homes in the next five years. I'm wondering how far you think this bill will go to getting Utah toward that?
WALDRIP: Well, my crystal ball is semi functional. If it was, if it was fully functional, you and I'd be talking on my private island in you know, the Caribbean somewhere but, you know, it doesn't work that well. But I do think that this could provide in the thousands because it's a revolving loan fund because it, it kind of creates a new structure for cities and developers and builders to work together. I think we can get, you know, we've, we've looked at it and said we could probably get this up to 10,000 new attainable homes, new starter homes. So that's, that's a very, very good start on the 35,000 goal.
BRODIE: Right. So then does that mean that you see this, this new law as a tool rather than the tool?
WALDRIP: Correct. Yeah. There, there are other things that passed during this last legislative session and we're looking at other other programs and, and possibilities going forward. I don't think this is gonna be the silver bullet that that does everything. But I think it certainly begins the process of getting everybody to sort of, one of the keys is to get everybody to switch their mindset from, I need a two car garage, you know, four bedrooms and two baths is my starter home to, you know what I can, I can survive in what we used to build and, and delivered in the 1950s and '60s, which was, you know, 1,000 square feet with a carport and maybe a one car garage. And you know, changing that mindset I think will go a long way to creating the market that allows our younger generations and, and the working population of Utah to get into ownership.
BRODIE: Do you think that this type of approach could be used in other states? Like, is this something that a place like Arizona or, or other states could potentially use as a model?
WALDRIP: Yeah, absolutely. I think we have in, in almost any state, you have both strategic reserves and in operating funds. And the idea with this is just take some of those operating funds and, and divert them from going into what typically happens with those, you know, kind of cash operating funds. They go into treasury bills and they go into corporate bond issues and things of a short term nature. And we're taking that and saying, instead of putting those to work in New York, in Toronto and Tokyo and other places in the world, we're going to take those same funds and we're gonna put them to work here in our state. They're going to go into our economy, they'll, they'll create multiples of, of return for our local community and it, it's a net positive. So I think any other state could do the same thing and, and really help to, to you know, what we talk about is juicing the supply side of the equation, which is what we really need to do right now in our country.
BRODIE: All right. That is Steve Waldrip, senior adviser for Housing Strategy and Innovation for Utah Gov. Spencer Cox, Steve, thanks so much for your time. I really appreciate it.
WALDRIP: Thank you. I really appreciate the opportunity to share this story.
