Utah needs 41,000 units of affordable housing. Robert Gehrke explains how the state aims to help.

The Legislature significantly expanded a tax credit that has been called the most important source of financing for affordable housing in history.

(Francisco Kjolseth | The Salt Lake Tribune) Robert Gehrke.

For all the effort and money that has been put toward trying to chip away at Utah’s housing crisis, there is one piece of the puzzle that has been exceptionally difficult to solve: How do we provide affordable shelter to those people at the lowest end of the economic spectrum?

Currently, statewide, we have a deficit of about 41,000 rental units for individuals and families making less than half of the average income (individuals making $35,850 for an individual or $51,200 for a family of four in Salt Lake County).

If you think about it for a minute, the challenges to getting this kind of housing built are pretty obvious. Developers don’t want to build units that are going to bring in rents that are significantly below market because there’s no money to be made. The same is true for the investors for whom there is no upside.

For these folks, the only benefit, really, is a sense of accomplishment and maybe getting into heaven someday.

The disincentive is compounded when there is SO much money to be made on building complexes that charge the sky-high market rents.

But without a lot of fanfare this past session, the Legislature made a significant investment that will make a very real difference for hundreds of low-income Utah families and individuals.

It comes in the form of tax credits — and before you move on to a story sexier than tax policy, stick with me for just a minute.

In 1986, President Ronald Reagan signed into law a bill that created the federal low-income housing tax credit. The way it works is that a prospective builder can put together their proposal and receive the credits which they can then sell to investors who are looking for a break on their taxes.

It’s basically a mechanism to make investing in these projects a lot more attractive. And it has worked. Over the course of the program, more than 30,000 affordable and deeply affordable housing units have been built in Utah alone as a result of the program.

(Courtesy of TWIG Media Lab) A complete housing structure built by Volumetric Building Companies, a modular construction company on the east coast. VBC is one winner of the 2022 Ivory Prize, an Utah affordable housing competition hosted by Ivory Innovations at the University of Utah.

A 2018 study by The Tax Foundation called this federal program the single largest source of financing for affordable housing in the United States, and had, at the time, financed the construction of more than 3 million units nationwide.

During part of that time, the state has kicked in a small amount — about $1 million a year — which has made a small difference, but barely enough to notice.

This year, though, Gov. Spencer Cox and Rep. Stephen Whyte, R-Mapleton, pushed for upping the state’s investment to $10 million per year. And because these credits extend over 10 years, there will be another $10 million added next year, and the next year, and the years after that.

“Our Legislature and governor really stepped up,” said David Damschen, director of the Utah Housing Corporation, a nonprofit that administers state housing programs and incentives. “These new tax credits will draw significant private investment into desperately-needed housing supply, and give low- and moderate-income Utah families a fighting chance to survive this housing crisis.”

Once the money becomes available, nonprofit organizations looking to build deeply affordable housing — units catering to individuals making less than 30% of the average income (about $30,700 a year for a family of four in Salt Lake County) — are eligible for a more generous tax credit.

Developers looking at building affordable housing — aimed at the workforce earning less than 60% of the average income ($61,400 for a family of four) — can get an incentive that is a little less than half of that for deeply affordable projects.

Damschen said he anticipates that the investment, combined with the existing federal program, could yield 600 to 700 additional new housing units annually. Eligibility and rents charged at these units are capped for at least 50 years.

And these aren’t just housing units — these are hardest-to-provide units for the people in the state who need them the absolute most.

“Among the Utahns this will help are single working parents, young adults aging out of foster care, victims of domestic abuse, veterans, refugees, and the chronically unhoused, for example,” Damschen said.

Without these apartments, there would be almost no other alternatives for these Utahns. They could live with family members, in a shelter or on the streets.

With them, we have stability for individuals and families, housing for a low- to moderate-income workforce and an important stepping stone for people who have fallen on hard times and are struggling to get back on their feet.