Everyone agrees that Utah has a housing affordability crisis.
Analysis from the Kem Gardner Policy Institute shows that housing prices have been increasing 9.2 times faster than wages and that about 20 percent of Utah families with below median incomes are paying over half their income on housing. This puts too many Utah families one financial mishap away from becoming homeless.
In parts of the state with high levels of population and economic growth this problem is much worse. Data from the Harvard Joint Center for Housing Studies shows that between 2006 and 2106 the number of low income households in the Salt Lake City metro area increased by 4,387, but the number of housing units low-income families can afford decreased by 9,093 units. This makes finding an affordable place to live feel more and more like winning the lottery for low income families — particularly for families with children who need an apartment with more than one bedroom.
Demographic factors are beginning to make this crisis created by economic factors even worse than it is now. The largest generation in the history of our county, the baby boomer generation, is now aging out of the labor force. Between 2007 and 2017, the share of the population over 60 living in rental housing, as opposed to owner-occupied housing, increased by 43 percent. As more baby boomers move from employment to fixed retirement incomes, the number of seniors who are competing to rent a dwindling supply of affordable housing units will continue to increase.
This escalating crisis makes it troubling that the Utah Legislature finished its general session for this year on March 14 without increasing state funding for producing and preserving affordable housing. A bill that was produced by the Utah Housing Affordability Commission would have provided $20 million in one time funds and $4 million in ongoing funds to address housing affordability. This bill passed in the Senate but then had its funding stripped in the House after an unrelated tax reform bill failed.
If legislators feel it is unwise to address Utah’s housing affordability crisis until major tax reform is passed, then future tax reform proposals should include the creation of a major, ongoing, funding source for creating and preserving affordable housing.
One option can be found in Tax Equalization and Reduction Act, the tax reform proposal sponsored by state Rep. Tim Quinn that did not pass during the session. This bill included a 0.075 percent tax on all real estate transactions, other than refinances, that was anticipated to raise about $18 million in new revenue every year.
It makes intuitive sense to use money generated from a tax on real estate transactions to help address structural problems in the real estate market. This is why many other state and local governments use real estate transfer taxes to fund efforts to address housing affordability.
Utah’s Housing Affordability Commission and brand new Tax Restructuring and Equalization Tax Force should both spend time this spring and summer studying how a real estate transfer tax dedicated to preserving and producing affordable housing could benefit our entire state.
Bill Tibbitts is associate director of the Crossroads Urban Center, Salt Lake City.