One of Utah’s major sources of loans for affordable housing projects — the Olene Walker Housing Loan Fund — is running low on cash and isn’t expected to get a new infusion until next summer.
The dip in reserves reflects increasing demand for less expensive apartments in a state where rents in many areas continue to climb.
According to one of the fund’s top managers, it’s also being driven by rising construction costs and a shifting picture for other subsidies that has more developers seeking loans to make their projects pencil.
“We haven't spent all of our money, but we are spending a lot faster than we normally would,” said Jonathan Hardy, director of housing and community development at the state Department of Workforce Services.
Board members for the fund doled out roughly $9 million in loans in mid-July, leaving them about $5 million to lend for the remainder of the state’s fiscal cycle, which ends July 1, 2020.
“We gave almost all our money away in one meeting,” said Kip Paul, a board member and vice chairman of investment sales at Cushman & Wakefield, a Salt Lake City real estate brokerage.
Hardy said the remaining balance “is not a lot compared to what we expect to see the rest of the year." Developers, he said, are facing rising costs for labor, building materials and available land.
“We have more demand for funds than we have available supply,” Hardy said. “We’ll have to do some extra prioritizing.”
(Rick Egan | The Salt Lake Tribune) The Fifth East Apartments under construction, at 430 South 500 East in Salt Lake City, Thursday, Aug. 8, 2019. This project also received a loan from the Olene Walker Housing Loan Fund, and will have 75 units of permanent supportive housing, with many of its dwellings serving low-income residents, the homeless and those coping with mental illness.
The Olene Walker Housing Trust Fund — named for Utah’s 15th governor and first woman to hold the office — is known for gap financing, with its loans of up to $1 million helping low-income housing projects survive small shortfalls.
Its recent drop in cash on hand comes while Utah is struggling with a lack of affordable housing, as escalating home prices push many would-be homebuyers to the sidelines and rising monthly rents are squeezing household budgets.
Officials estimate Utah currently lacks roughly 45,000 dwellings affordable to those earning below-average wages, particularly those at the lowest income levels.
The Olene Walker fund has contributed to the construction of 19,286 residential units in Utah since it was created in 1992, according to state financial reports.
In light of the state’s housing affordability gap — which some have dubbed a crisis — state Sen. Jake Anderegg sponsored a bill earlier this year to give the fund a one-time infusion of $20 million and $4 million annually. But the money was stripped out of the bill in the last days of the legislative session.
“It was a missed opportunity,” Anderegg said.
The Lehi Republican is also co-chairman of the state Commission on Housing Affordability, created in 2018 to study Utah’s housing shortage and ways to address it. He said Thursday he had already opened a bill for the 2020 legislative session seeking new cash for the Olene Walker fund a second time around.
“It is a very effective use of money,” Anderegg said. “If we can better articulate real numbers of who we’re helping and how it's going to help them, our chances of getting funding this year will improve greatly.”
(Scott Sommerdorf | Tribune file photo) Former Utah governor Olene Walker, addressing a luncheon in the Capitol Rotunda in January 2008 about the Olene Walker Housing Loan Fund. She was also accepting the 1st annual "Spitfire Award" presented by the Utah Housing Coalition. Walker, who died in 2015, was considered a champion of affordable housing.
The fund loaned out $8.9 million in all of 2018, spread over 14 projects in nine counties, for construction worth a total of $132.7 million. That helped bring 779 new or refurbished apartments on line, accessible to tenants earning between 25% and 60% of the state median incomes, according to the fund’s latest report.
The board gave out $8.6 million at its July 18 meeting, funding 12 projects over the course of three and a half hours.
Along with money from repaid loans, the Olene Walker fund draws its cash from periodic contributions by the Utah Legislature, as well as money from the federal Department of Housing and Urban Development and other sources.
Tara Rollins, executive director of Utah Housing Coalition, which advocates for low-income residents, said the fund has proved especially crucial in developing so-called “deeply affordable” housing, accessible to tourist workers and others earning close to minimum wage.
“It’s been doing exactly what we need in addressing the lowest incomes,” Rollins said.
Developers who seek loans from the Olene Walker fund typically also rely on what are called low-income housing tax credits, which one top Utah housing advocate has likened to a down payment for many affordable housing projects.
Awarded to states by the U.S. government, the tax credits are in turn given out to developers of qualifying low-income housing projects. Developers then sell the credits to investors looking for federal tax breaks, as a way to lower project costs and keep resulting rents more within reach.
Rollins noted that the next round of low-income tax credit awards to Utah projects will take place in early October. Many of those recipients could be in a position to make new loan requests to the Olene Walker fund well before the fund gets replenished next July, she said.
“Those projects usually have to be coupled up with Olene Walker to make them go,” she said.
At the same time, President Donald Trump’s new tax plan — also known as the 2017 Tax Cuts and Jobs Act — lowered corporate tax rates in a way that has reduced the value of low-income housing tax credits to some investors.
“We still have lots of buyers out there, but they're not as willing to pay as much as they did,” said Grant Whitaker, president and CEO of the nonprofit Utah Housing Corporation, which helps award the credits.
Those funding challenges aside, one board member for the Olene Walker Housing Loan Fund said she saw additional demand for loans as a positive sign that more cities, housing authorities and developers were pursuing affordable projects, particularly in rural areas.
“We’re seeing a lot of very worthy projects,” said Nicole Cottle, who is also an assistant city manager in West Valley City. “I’d love to have extra money, but I do really feel confident with where we are.”
