Editor’s note: This is the third in a three-part series by Thomas Wright discussing Utah’s affordable housing crisis. Read the second part here.
Salt Lake City is expected to debate a proposal in November to allow zoning for row homes and tiny homes around Liberty Park to offset the home shortage that’s become even worse with the COVID-19 pandemic. Updating zoning laws to balance the needs of individual residents with population growth is a great way to impact housing availability and cost.
But even with more flexible zoning laws, municipalities are still impeding the affordable housing market through their fee structures. Until both are drastically changed, affording a home will continue to be unattainable for many Utahns.
Cities charge building fees, permitting fees, impact fees and more in an attempt to cover the costs of growth and infrastructure within their borders. They have the right idea that growth should pay for growth. But unless done prudently — to cover only the direct costs of the impact — fees will continue to rise every year, creating higher costs for the end user, whether that be a residential home buyer or a small business owner.
From 2007 to 2017, the Kem C. Garner Institute found the median permit and impact fees across Utah cities increased by 26% from $12,157 to $15,265. On top of that, the cost of developing raw land has increased by 40% during that same time period. These costs are passed on to the homebuyer, and if the fees are too high, then cities are only perpetuating the affordable housing problem for their own community members. COVID-19 has only made this worse with interrupted supply chains, rising construction costs, a skilled labor shortage and a hot housing market.
While development and building costs like raw materials and labor aren’t necessarily something a city can directly control, user fees and permitting are completely within their power to change. If a city with rapid growth has the ability to absorb some of the fees associated with a housing project that could significantly improve affordability, they should consider doing it.
In order to keep growth costs as low as possible for local governments, cities can make use of existing properties with underperforming land uses. For example, converting big box retailer parking lots to higher density housing. Cities can give those landowners a zoning variance to convert those oversized parking lots — which even at their peak they were too big. COVID-19 has proven that with our access to online sites like Amazon, we aren’t going back to the same demand for big box retailers. This land is already located on transit-oriented roads, and already enjoys robust utility infrastructure, which is perfect for converting to high- and medium-density homes.
When reviewing land use applications, cities should do everything then can to streamline the approval process. The value of money that suffers from inefficient approval processes is great. And the longer it takes, the greater the cost of the end housing product. It is important to remember, the housing you see being built today was approved years ago. Speeding up the approval process will simultaneously reduce cost and increase supply, both of which will benefit consumers.
For Utah cities that don’t have many zoning conversion opportunities, they can still restructure local zoning laws. Some state and local governments are opening up the housing market with drastic measures to position themselves in front of the affordable housing shortages. I’m not proposing Utah begin issuing one-size-fits all statewide mandates. But state leaders do have a role to play. They should communicate the vision to the public so that cities could go this route and upzone according to growth predictions, and charge fees accordingly.
State and city leaders have a number of options within their reach to grow housing availability and affordability within their borders. But it’s going to require taking some strategic policy making to put residents’ needs first and balance the costs of growth. Re-evaluating zoning laws, repurposing underutilized commercial and industrial property for mixed-use and residential development, accelerating the approval processes and keeping taxes and fees that affect housing costs low is a good place to start.
Thomas Wright is the CEO of Summit Sotheby’s International Realty, which has 14 offices serving all of Utah. He was formerly the Utah Republican Party chairman, Republican National Committee (RNC) vice chairman and a candidate for governor of Utah in 2020.