Should States Mandate Affordable Housing in Their Cities?

Should States Mandate Affordable Housing in Their Cities?

There is a move afoot in Salt Lake City to mandate that Utah municipalities get serious about building affordable housing. ‘Mandate’ might be too strong a word for some, but the law sponsored by a Utah County Republican ties state dollars to affordable housing. That’s a pretty strong mandate. Its leading some in the Beehive State, and elsewhere, to openly question whether or not states should mandate affordable housing within their cities.

The need for affordable housing isn’t questioned in Utah or elsewhere. Since the economy began rebounding a few years ago, it has become abundantly clear that the disparity between luxury and affordable housing is growing. What is not so clear is the best way to tackle the problem.

Utah’s Housing Bill

KSL.com reported earlier in February 2019 that Utah’s housing bill, known as SB34, is an attempt to nudge municipalities to work on affordable housing options. The bill creates an incentive for doing just that. Unfortunately, the incentive appears to be more like a threat.

The bill apparently gives municipalities 25 options for encouraging moderate-income housing within their borders. If local leaders fail to implement at least two of those options, they could be denied their portion of $700 million in state transportation funds.

Note that the transportation funds are not new money. It is money already being raised through state fuel taxes. It is money already being spent on infrastructure and transportation needs. So it’s not like state lawmakers are offering cities new money as an incentive. Rather, they are proposing to withhold money if municipalities don’t get on board with affordable housing initiatives.

Houses are Being Built

Opposing SB34 leads one to question how the affordable housing problem can be solved without such government action. Before you start thinking of an answer, keep in mind that houses are being built in Utah. It is just that they aren’t being built fast enough and at prices that moderate-income buyers can afford.

Luxury homes and condos are the hot thing in Utah right now, explains Salt Lake City-based CityHome Collective. So it makes sense that higher-priced homes are what builders will focus on. If state lawmakers go on to mandate affordable housing options in Utah cities, that will put the onus on builders to build less profitable homes. Will they be willing to do that?

You might have some builders willing to get on board as long as they can keep luxury homes and condos. But municipalities might also have to offer incentives to keep builders around. If that is the case, additional taxpayer dollars will have to be spent to achieve affordable housing goals. What has been gained at that point? Any extra money received from the state would be offset by additional spending on affordable housing.

No Easy Answer

History has shown that mandating affordable housing is rarely effective. It may help in the short term by temporarily boosting the housing supply, but builders will not voluntarily stifle their own revenues forever. If they cannot build the houses they want to build in a specific area, they will just pull stakes and go elsewhere.

On the other hand, building only luxury homes and condos continues to price a certain segment of the home-buying public out of the market. They are left to continue renting or wait until more affordable homes come available. Unfortunately, there’s no easy answer.

Should state legislators mandate affordable housing in local municipalities? That’s for voters to decide. For right or wrong, that’s just the way it is. And guess what? Things aren’t likely to change in the foreseeable future.