Utah Senate passes affordable-housing bill by 20-9 despite concerns it costs too much and isn’t tough enough on cities

(Francisco Kjolseth | Tribune file photo) Project Open, an affordable housing project northwest of downtown Salt Lake City. The Utah Senate passed SB34 on Wednesday encouraging cities to plan for more affordable housing in their communities.

The Utah Senate passed a bill Wednesday that would encourage cities to plan for affordable housing, even though senators raised worries the measure doesn't do enough and that it spends too much money.

After seeing several major revisions, SB34 — the 2019 Legislature’s most significant attempt thus far to address a statewide shortage of moderately priced homes — advanced on a Senate vote of 20-9 and moves to the House.

Sponsored by Sen. Jake Anderegg, R-Lehi, the bill would make a one-time $20 million contribution in 2020 to the state’s Olene Walker Housing Loan Fund, which provides low-interest lending to affordable residential construction, and then would kick in $4 million to the fund each year thereafter. SB34 also requires cities to take state-approved steps aimed at encouraging affordable housing to be eligible to receive investment cash from the Utah Department of Transportation.

The bill is the product of a dozen meetings by the state Commission on Housing Affordability, created by lawmakers last year to address rapidly escalating housing prices in Utah and a shortage of homes for those earning moderate incomes or below.

“I’ll be the first to say, it is not a silver bullet,” Anderegg, co-chairman of the commission, told Senate colleagues Wednesday. “This is not going to solve our housing crisis, but it is a really good step in the right direction.”

SB34’s spending piece has caused heartburn for some of the Senate’s fiscal conservatives, including influential Sen. Lyle Hillyard, R-Logan, who warned the bill’s budget allocation was only “a drop in the bucket” compared to the magnitude of the housing problem.

“I hate to step out in this area,” Hillyard said Monday of SB34. “I mean, once you start, how much money are you going to finally need? $200 million? $400 million?”

In his proposed state budget, Gov. Gary Herbert has asked lawmakers for a one-time $15 million payment to the Olene Walker fund and an additional $2 million yearly after that. The fund typically offers so-called “gap financing” to low-income housing developers across Utah who already have other primary lending sources.

The state-managed fund loaned $8.8 million in fiscal 2018 for housing projects worth a total of $132.7 million.

But SB34 also offers cities an expanded menu of nearly 25 strategies they can pursue to encourage affordable housing, ranging from waiving development fees, allowing so-called mother-in-law apartments and revamping aging homes to adopting zoning that encourages construction of high-density housing near transit lines.

The bill now requires cities to adopt at least three of those strategies as part of their state-mandated land-use and transportation plans to become eligible for cash from UDOT to invest in transportation corridors in their communities, known as TIFF money.

Cities with a transit corridor already within their boundaries would have to adopt four of the bill’s affordable-housing strategies to be eligible for TIFF money, estimated at about $700 million per year.

Modifications to SB34 came after a closed-door meeting Tuesday between the Senate’s GOP caucus and lobbyists for the Salt Lake Chamber, Utah League of Cities and Towns, Utah Housing Coalition and other advocates.

First-term Sen. Derek Kitchen, D-Salt Lake City, said Wednesday that by increasing the number of required steps for cities from two, state lawmakers were “raising the bar” and helping to shift cities’ focus toward housing “as a critical component of our long-term economic health.”

He said as the state’s population continues to grow, Salt Lake City was experiencing one of its tightest housing markets ever, with a vacancy rate hovering around 2.5 percent. Many other cities, he said, face a similar situation.

“This is a simple supply-and-demand issue,” said Kitchen, who championed affordable housing as a member of the Salt Lake City Council. “We’ve got to figure out how to pump more into the supply side.”

Anderegg said that in addition to bringing more affordable homes to Utah, linking municipal land-use planning with transportation had the potential of saving taxpayers millions of dollars by making road construction more efficient.

But Sen. Don Ipson, R-St. George, who voted against SB34, said that tying city compliance to receiving TIFF money was tantamount to “holding them hostage.”

Others, including Sen. Lincoln Fillmore, R-South Jordan, complained that even the revised version of SB34 appeared to do little, given that all but a handful of Utah’s more than 240 municipalities were already deploying some of the steps the bill recommends.

Fillmore said he suspected SB34 was being run for ulterior motives that weren’t being shared with rank-and-file legislators. “The intent of the bill is different from what is being publicly stated,” he said, a claim Anderegg denied, saying instead that he was an “honest broker” of work by the Commission on Housing Affordability.