Monday, January 6, 2014

Strategies and resources for affordable housing in Utah

photo of student apartments
The demand for housing will affect its affordability.
Logan has a higher demand for high-density rental
housing than other Northern Utah towns.
By Dr. Lucy Delgadillo

Affordability is the ability to pay for housing related costs without jeopardizing other non-shelter necessities.  A commonly accepted standard is that a household’s monthly housing cost should not exceed 30 percent of its net household income.

The concept varies from community to community because one of the main assumptions in housing is that it’s local in nature and it is interrelated to other socioeconomic factors.  For example, the local housing market in Logan (with its demand for high density rental housing) is different than the local housing market in Smithfield (with its demand for home ownership).

To provide affordable housing, one needs to consider:

1. The demographics of the place, including the employment or unemployment rate;
2. The demand for housing (whether for rental units or for home ownership, or housing for veterans or for senior citizens);
3. The actual supply of housing (in current inventory);
4. The tools or best strategy to address the housing affordability problem;
5. The creation of partnerships between the community, private sector and government to implement the strategy.

If the goal is to encourage home ownership, this can be done several ways:

Creating affordable lending products: These include mortgage loans that have lower than the market interest rate because the interest rate is subsidized. The Utah Housing Corporation does this.

Promoting sweat equity programs: Would-be homeowners help construct their own homes as a way of reducing cost of the home or gaining credit for a down payment. Families work together as a group to build approximately 65% of their homes. This labor not only acts as the down payment, but can also substantially reduce the price of the home. In Cache Valley, the Neighborhood Nonprofit Housing Corporation does that.

Providing grants to new homeowners: These can be used either for closing costs or for a down payment. An example is the Welcome Home Own in Logan, which is a $7500 subsidy that turns into a grant that is fully forgiven if the home remains owner-occupied after ten years. 

Assisting with down payments: If cash at closing is a challenge, the Utah Housing Corporation also provides down payment assistance mortgages—a second mortgage for down payment with an interest rate 2 percent higher than the first mortgage.

If the goal is to protect low income renters from displacement, here are some strategies:

Assisting renters or landlords: This can be achieved by preserving publicly assisted housing, or by providing subsidies directly to the landlords in the form of housing vouchers. 

Creating new rentals: This can be done by providing low income tax credits to developers, which is another goal of the Utah Housing Corporation.

photo of Lucy DelgadilloRegulating the private housing market: Also called rent control, this strategy limits the amount a landlord can raise the rent. This has demonstrated to be somewhat effective but it’s also controversial.

Dr. Lucy Delgadillo is an associate professor in the Family, Consumer, and Human Development department at Utah State University. She is currently serving her second term as a member of the Utah Housing Corporation board.

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