Utah in danger of losing hundreds of affordable housing units in next few years

Utah in danger of losing hundreds of affordable housing units in next few years
(Sydnee Chapman Gonzalez| The Utah Investigative Journalism Project. Complexes across the state are aging out of a federal subsidy program–likely worsening Utah’s affordable housing crisis)

The following story was reported by The Utah Investigative Journalism Project in partnership with KSL.com, The Standard Examiner and St. George News.

MILLCREEK — Ivette Vickory loves her Millcreek apartment, but seeing her rent nearly double since she moved into the complex in 2009 has been hard to stomach.

Then she found out rent could rise even more as her low-income complex exits a federal program that subsidizes low-income housing.

“That means next year, who knows what these apartments are gonna go for,” she said. “I would love to stay, but I cannot go out of here (paying) $1,400 and everywhere else is already up over $2,000. How will that make sense for me? It’s already hard at the price that it is here right now.”

Vickory and her husband plan on leaving their three-bedroom apartment and the city they’ve called home for 30 years for a one-bedroom house in Maine.

Several weeks after Vickory spoke with the Utah Investigative Journalism Project, her complex manager sent out a letter to residents announcing the transition off the federal program and clarifying that all rents won’t suddenly increase to market rate. The manager later shared the letter with the project. Vickory did not respond to a request for an updated comment.

“The owners of Millcreek Meadows do not wish to ’empty out’ the property,” the May 10 letter reads. “They would prefer to gradually adjust the rents and/or sell some of the units as condominiums. This process will take time, and the owners of Millcreek Meadows do not want to displace anyone without giving them time to find new housing, or having the opportunity to purchase their unit.”

It’s unclear whether Utahns in similar affordable units will be as lucky. Several hundred affordable units in the state are set to age out of Low-Income Housing Tax Credit by 2029. Those expirations, in turn, mean there’s no guarantee rents will stay affordable.

“We can’t afford to lose a single unit, let alone that many,” said Claudia O’Grady, vice president of the Utah Housing Corporation. “That’s really where this hurts the most is on the individual household level. It’s just devastating. … The tenants will receive notice that their rent is going to increase and they really just don’t have a lot to stand on legally. They have to try and find another affordable unit.”

That loss will be a hit to the state as a whole, which already has a stressed housing market. The Beehive State saw a 42% decline in rentals under $1,000 from 2012 to 2022, according to data from Harvard’s Joint Center for Housing Studies. And large portions of the state’s urban renters are spending over a third of their income on rent.

Steve Waldrip, the governor’s senior housing adviser, said there is a huge need for housing in every income class.

“The lower you go on that income strata and socio-economic strata, the more dire our housing situation becomes,” he said. “Across the country, you can trace the price of housing and the incidents of homelessness. They just run in parallel in almost every state in the country.”


Kept in the dark?

The expiration of these affordable units has come as a surprise to many tenants and local governments — but the writing has been on the wall for decades.

The Low-Income Housing Tax Credit program, which gives developers tax incentives to develop and rehab affordable housing, requires owners to keep rent affordable and reserve a portion of the units for lower-income households during at least a 30-year period.

A large number of properties are hitting that 30-year mark.

That includes just over 800 units in Utah, according to records from the Utah Housing Corporation, which oversees the program in Utah. Over 75% of those 800 units will expire in the next two years.

There is no required time frame for owners to notify tenants that they will be converting to market or leaving the program, although the Utah Housing Authority does encourage owners to notify tenants as early as possible.

It's a harsh reality residents of Holladay Hills in Millcreek found out last year. Residents received a notice in November that the property would go off the Low-Income Housing Tax Credit program at the end of the year. Residents were told management would not be renewing any leases and that the 130-unit complex would be converted to market-rate apartments.

"It is important to note that we will not be renewing any lease agreements," management wrote in the letter. "Upon the expiration of your lease and provided with sufficient notice according to Utah state law, you will be required to vacate the apartment home."

"It took the city by surprise. It took quite a few of us by surprise. But I guess if anyone was paying attention, they should have seen the signs of it," said Renters Justice Coalition cofounder Francisca Blanc, who helped advocate for the residents. "I think the biggest issue is accountability — who's responsible?"

Sarah Saadian of the National Low Income Housing Coalition, which focuses on expanding and preserving affordable housing, said public awareness and access to information about expiring tax credit properties is an issue across the country.

"I don't know of any states that are doing a really good job of publicizing which properties are at risk," Saadian said. "It's extremely important for state entities, nonprofits and city governments to know far in advance which properties are most at risk of converting to market rate so that they can step in with preservation strategies to help keep those properties affordable in their community."

O'Grady said while the Utah Housing Corporation shares information about expiring Low-Income Housing Tax Credit properties with anyone who asks, it has not posted the information on its website. She added that the Utah Housing Corporation is open to the idea and will look into it.

Waldrip acknowledged that the state's renter protections have room for improvement.

"Part of the challenge is balancing the opportunity for good economic activity against protecting those people who are being helped by those federal and state dollars," he said. "Where there are federal and state dollars involved, obviously we feel an obligation and a responsibility to make sure that the people that are benefited by funding programs are protected. So that's definitely something we can do better at."


Weighing their options

Aging out of the Low-Income Housing Tax Credit program doesn't automatically mean a property owner will convert their units to market rate. They can also sell the property, keep units affordable or apply again for the tax credit program.

One report found that 61% of sampled former Low-Income Housing Tax Credit properties remained affordable but that zero remained "deeply affordable," meaning they were affordable for renters earning less than 30% of the area median income.

Over half of Low-Income Housing Tax Credit households earn less than 30% of the area median income. In Utah, that's a $32,550 income for a family of four.

Reentering the housing tax credit program can help offset the cost of renovations, such as a new roof or updated air conditioning units. But converting to market rate is often the most enticing option in a hot real estate market.

"Utah is experiencing a huge demand for rental housing, and many of its communities are growing really quickly. In that environment, a for-profit landlord could find that they could rent at a much higher rate if they convert to market rate," Saadian said.

Vickory's landlord, for example, is currently renting her three-bedroom apartment $768 below fair market rate for a similar unit in the same ZIP code, according to data from the U.S. Department of Housing and Urban Development.

Who the owner is also influences whether rents rise to market rate. Saadian said for-profit owners are more likely to jump to market rates, while nonprofit and mission-driven owners often try to find ways to keep the property affordable.

The Utah Housing Preservation Fund added that in-state owners or individuals are much more responsive to talks about preservation than out-of-state corporations.

"I feel that a lot of times they care just a little bit more about their tenant base and it's less about a return," said Lukus Ridd, who manages the Utah Housing Preservation Fund. "For property owners that are for-profit, we really wish that there was an incentive to help them to keep it affordable. Unfortunately, at the end of their time period, it's more of, 'I wanted to make money off of this.'"

Tracking down who owns the 19 expiring Low-Income Housing Tax Credit properties, however, proved to be a bit difficult.

About half of the property owners listed with the Utah Housing Corporation had expired business registrations or were registered under lawyers or anonymous registered agent companies. Others were listed under LLCs that were created specifically for that property. Two properties are condos, with each unit belonging to an individual owner.

A Utah Investigative Journalism Project comparison of business registrations, county parcel records and open source documents like online real estate portfolios suggests that four of the 19 expiring Low-Income Housing Tax Credit properties are owned by nonprofits or mission-driven organizations like housing authorities. Five of the properties also appear to be owned by out-of-state investment firms and real estate groups.

The Utah Investigative Journalism Project attempted to contact all of the property owners about their plans for the affordable units, but most did not respond. One declined to comment.

Ray Andrews, the majority owner of Oquirrh View Apartments in Tooele, said they will likely apply for more tax credits to rehab the apartments and keep them affordable once the property ages out of the housing tax credit program in 2025.

He added that affordable housing projects like this are generally difficult to make profitable but that the increased equity from the Low-Income Housing Tax Credit program is a great incentive to put projects back into the program.

The Lowell Apartments in Salt Lake City are owned by the Utah Nonprofit Housing Corporation, which plans to keep the property affordable as part of its mission to serve low- and very-low-income households.

The property is still in pretty good shape, said the nonprofit's development consultant, Marci Milligan, so it likely won't be resubmitted for the housing tax credit program. Instead, the nonprofit might apply for tax credits for other properties in its portfolio that need renovations.

"Every project is a little different. … That one was done as new construction and we've managed and retained it," Milligan said. "A lot of for-profit owners, what you'll see in the marketplace, is they will defer a lot of maintenance, whereas we strive to keep the maintenance current all the time so that the project is just taking care of itself and you don't have any big surprises."

Looking for solutions

Utah has taken some steps to prevent the loss of housing tax credit units, such as eliminating a federal loophole that allows owners to exit the program early and opting for a long affordability period.

Of the state's approximately 33,500 Low-Income Housing Tax Credit units, around 10,200 have a 99-year affordability period, while 16,000 have a 50-year period that the state has opted for since the mid 2000s, according to O'Grady.

And although experts say almost a quarter of such units across the country will age out of the program by the end of the decade, only 2.4% of Utah Low-Income Housing Tax Credit units will expire in the same period.

"Utah is faring much better than most states in terms of the number of units that we're losing," said O'Grady. "Nationwide, we are seeing states lose affordable units because the (affordability) period is expiring and that's just a sort of a function of the way the program was built."

The Utah Housing Corporation has a team that works with Low-Income Housing Tax Credit owners, including incentivizing them to rejoin the program. But advocates say there's much more to be done.

One solution popular among housing advocates is requiring housing tax credit property owners to agree to give first refusal rights to nonprofits and others committed to keeping the units affordable.

"We might not be able to scoop up all the properties today, but at least the new properties that are developed in the future would have a better chance of staying in the affordable world, rather than becoming a market-rate project and kind of losing the value of the money that the state or the federal level has put into a project to keep it affordable," Ridd said.

But nonprofits and others committed to affordable housing may be hard pressed to come up with the funds to purchase the properties.

Take the Utah Housing Preservation Fund, a public-private partnership founded in 2020 to preserve affordable housing. The fund is currently at $165 million, including over $57 million of state funds, which falls far short of the estimated $1 billion needed to purchase the roughly 5,000 affordable housing units the fund says are at risk of being lost in the next five years.

Ridd estimated that the fund currently has the capacity to preserve an additional 1,300 units beyond the 768 units, including about 100 Low-Income Housing Tax Credit units it's already purchased.

Ridd and others believe creating a broader coalition of local governments and housing authorities, nonprofits and other organizations will be the key to preserving more affordable housing.

Salt Lake County, for example, is currently examining how to balance its housing funding between preserving existing units and creating new ones.

"The money that we get is not really enough to purchase a building and to preserve them, but it could certainly be used as the capital stack in conjunction with other funding, like the Utah Housing Preservation Fund, to keep these units affordable," said Mike Ackerlow, the county's director of Housing and Community Development.

Milligan, the Utah Nonprofit Housing Corporation consultant, said the maintenance and long-term sustainability of Low-Income Housing Tax Credit units hasn't been given the attention it deserves at a statewide level.

"Everybody manages their own portfolios, but I think on a statewide level, we have to be smarter about what subsidies will be needed in the future and what kind of focus needs to be put on rehab in order to sustain all these units we're building," she said. "They're really important, but I don't think we do good long-term planning for how we refinance."

Waldrip added that the kinds of deals that make Low-Income Housing Tax Credit and other affordable housing projects viable can be difficult to pull off.

"That's why those deals are so dang complex and why so few people do them — because they are massive amounts of brain damage to get all of those financing pieces to line up and stack up appropriately and to get a lender that understands it all," Waldrip said. "It's not a very easy way to make money if you're a developer because there's a huge learning curve on the front end just to understand what all of those pieces of capital look like and how they have to match and fit together to make the project viable."

Harsh realities

At the end of the day, however, the fate of Low-Income Housing Tax Credit units is up to the owners. In the case of the Millcreek complex that aged out of the program last year, both the city of Millcreek and Utah Housing Corporation unsuccessfully encouraged the owner to keep the units affordable or find a buyer who would be willing to do so.

Renters who find themselves in that situation should contact their local housing authority, or if they have a housing voucher, try to find another rental on the open market, said O'Grady.

Millcreek and Renters Justice Coalition stepped in to help renters at Holladay Hills find new housing. Some of them moved to a nearby Low-Income Housing Tax Credit complex that expires at the end of the year.

The Utah Investigative Journalism Project met one such renter who was unaware the complex's affordability period was ending. She expressed teary-eyed frustration and a feeling of helplessness at the news but declined an interview.

Blanc, who has advocated for better renter protections, wants the state to research and take action on preserving Low-Income Housing Tax Credit and other affordable units.

"The political ideology in our state on the policymakers' level, especially at the Legislature, is that government has no business in housing. And my argument towards that is that it's the government who provides tax credits for the wealthy," she said. "We need to hold partners accountable. If a corporate owner receives tax credits to provide affordable housing, that should not just be a free hand, there should be responsibilities involved in that."

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