Urban areas around the country are struggling to come up with enough affordable housing to meet demand. From Sacramento to Boston, local leaders are pleading with builders to help them out while affordable housing advocates are calling for more public housing. There are no easy solutions. In Utah, two solutions being encouraged by state and local leaders are infill and auxiliary dwellings.
Infill is the process of rezoning and re-purposing unused urban land for housing. These days, it is often pursued in concert with moves to change zoning so as to allow high density building projects. As for auxiliary dwellings, they include built-in in-law apartments and separate, independent structures built on top of existing yard space.
Both strategies are seen by politicians as a way to address affordable housing by giving homeowners extra space they can either rent out or offer to aging parents. But the two strategies inevitably lead to more houses packed into the same amount of space. You end up with higher density in areas that were originally intended to keep people spaced out somewhat.
No Guarantee of Affordability
Infill and auxiliary dwellings are the talk of much discussion in Salt Lake City these days, according to local real estate brokerage CityHome Collective. The city is dealing with an unusually high housing demand thanks to a locally strong economy that has companies looking to relocate there. With employment high and economics strong, the demand for housing is outpacing supply.
Unfortunately, local residents are discovering that infill and auxiliary dwellings do not necessarily guarantee affordability. A project currently being discussed for the Avenues section of the city is a prime example. The builder’s plans seem to suggest that a fair number of the homes to be built on the 3.1 acre parcel could have sale prices of between $500,000 and $1.2 million.
If buyers were to rent out their auxiliary spaces, critics say monthly rents would likely not be below $1500. Such rates would exceed the standard for affordability in Salt Lake City. And that is even assuming buyers would rent out the spaces. If you are paying that much for a new home, how likely are you to bring in renters?
Between a Rock and a Hard Place
Builders find themselves between a rock and a hard place. New home construction is a business like any other. You build according to what the market dictates. And if the market wants high-end homes with luxury amenities, that is what you build.
Your average builder could concentrate on modest, affordable homes as well. But there has to be a reason to do so. There have to be enough buyers willing to buy as well as opportunities for builders to meet their margins. Therein lies the problem. The costs of building – especially those that go beyond materials and labor – make building affordable homes less profitable. Thus, it is hard to convince builders to do so.
Taxes are another big issue. Cities are historically known for having higher taxes than towns, villages, and rural areas. And like it or not, property taxes factor into affordability. Buyers capable of affording higher taxes can also afford more expensive homes. City politicians do not mind because more expensive homes generate more tax revenue.
The dual concepts of infill and auxiliary dwellings only feed the cycle. They encourage more densely packed neighborhoods boasting more expensive houses with high tax bills. Meanwhile, people looking for affordable family homes with more reasonable taxes are left wanting. In the end, the problem is more about policy than anything else. Change the policy and you change the outcome.