There’s a new way in SLC to pay rent and save for a home at the same time

Mayor Erin Mendenhall calls it the “most innovative and equity-building housing model Utah has ever seen.”

(Francisco Kjolseth | The Salt Lake Tribune) Salt Lake City from the top of City Hall in April 2022. The city is backing a new program designed to help renters save money for a down payment on a home.

Tired of paying rent? Want instead to steer that money toward a down payment for a home of your own?

Well, there’s a new model, unlike any other in Utah, that is designed to help tenants do just that. And Salt Lake City is poised to kick in some cash to help get the program going.

The plan, announced in Mayor Erin Mendenhall’s State of the City address last month, would add to the growing tally of affordable units coming on line as the cost of living along the Wasatch Front continues to soar.

Mendenhall heralded the proposal — being pitched by the nonprofit Perpetual Housing Fund — as the “most innovative and equity-building housing model Utah has ever seen.”

“It’s millions of dollars,” she said, “that will go right into the pockets of families.”

Rental units would be subsidized largely by tax credits, and prospective tenants would have to meet income thresholds to qualify. The projects could be built just about anywhere, with no requirement that they be constructed on publicly owned land.

Letting renters build wealth

Chris Parker, who runs the nonprofit with co-director Ashley Atkinson, said the model would target the range of residents who can’t afford a home now.

The goal, he said, is to give renters and prospective property owners the kind of wealth-building power that was available to Utahns before the housing market exploded, pricing out many people.

“That sort of accident of when you were old enough or well-off enough to buy a home really shouldn’t dictate who gets to participate in their building appreciating or not,” Parker said. “So this tries to kind of bring that back down to where it used to be in Utah, historically, 10 years ago.”

By contributing $10 million upfront from federal pandemic relief funds, the city would be guaranteed 1,000 rental units and 500 for-sale condominiums. The rental units would be set aside for residents who make no more than 65% of the area’s median income.

The mayor said a funding proposal could land in front of the City Council as soon as month’s end.

Parker has 350 units in the works now, with groundbreakings due this year or early next year. Some of the new projects are still in contract, he said, but one major development is slated for the east side and another is planned for the west side.

“What we’re really trying to do with some of these initial projects is look at the entire spectrum of who cannot afford a home right now,” Parker said, “and try to find a solution for pretty much everybody to go ahead and start realizing some of the value from their real estate.”

How the model helps tenants

There are a few ways renters would be able to benefit financially from a Perpetual Housing Fund project.

After building expenses, operational costs and the maintenance budget are covered, the nonprofit would split the proceeds of a building between itself and the residents, with those tenants receiving a 75% share.

Instead of investors getting paid out each year with the building’s proceeds, that money would flow to residents annually in the form of a check.

Tenants would also get to tap into a building’s equity, earning a share of what’s made after a property refinances. Those proceeds would be split proportionately among each resident who has lived in the building.

“It’s not technically ownership,” Parker said, “but it behaves a whole lot like ownership.”

Residents also would be able to access a portion of their share of the equity early to spend on expenses such as a down payment on property, startup costs for a new business, or a medical emergency.

In partnership with the nonprofit Rocky Mountain Homes Fund, the Perpetual Housing Fund would set aside for-sale condos in its buildings. Residents would be able to use their accrued equity from living in a rental unit on a for-sale unit they would like to buy.

Parker said the model would allow the nonprofit to absorb all of the ups and downs of the market, leaving residents with reliable nest eggs.

Residents would get most of the benefits of ownership, Parker said, “without the red tape and the down payment and the credit reports and the liability, candidly, that ownership can cause.”

Addressing a need

Jim Wood of the University of Utah’s Kem C. Gardner Policy Institute said he’s never seen a model like the one being offered by the Perpetual Housing Fund.

Utah does offer a rent-to-own program through the Utah Housing Corp. in which a portion of rent paid by tenants goes toward a down payment on a home. That program is small, Wood said, and usually serves rural areas.

The Perpetual Housing Fund wants to add to the state’s existing inventory of 35,000 tax-credit units with thousands more over the next 15 years.

“So,” Wood said, “that’s a sizable chunk.”

Rachel Otto, the mayor’s chief of staff, said similar models have succeeded elsewhere, including in Denver.

“It has worked really well in other parts of the country where you have a lot of cooperative tenant asset- and equity-building programs,” she said. “It’s just, it’s unique for us. It’s different in Utah, for sure.”

The nonprofit would be its own developer, but Parker said his organization’s model is an open book for any other developer who wants to accomplish something similar.

He wants to see the approach normalized in Utah but acknowledged it won’t make developers any money compared to their other options. But, he said, it would help prevent Utah’s housing market from plunging into California levels of unattainability.

“We can’t,” he warned, “let that happen.”

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