SLC mayoral race: Would it really cost 18 times more for the city to build its own housing than to invest in private ventures?

It marked a notable moment on an issue where the top candidates for Salt Lake City’s top office diverged in their policy proposals.

During an Oct. 4 mayoral debate, co-sponsored by The Salt Lake Tribune, KUER and PBS Utah, an audience member asked how the candidates would make Utah’s capital more affordable to young people.

Former Mayor Rocky Anderson, who wants to return to City Hall after more than a decade away from public office, said the government should build and control housing to protect rents from rising with the market.

[Read more: SLC mayoral race: Should Utah’s capital build government-owned housing to improve affordability?]

Mayor Erin Mendenhall, who is seeking a second term, touted her administration’s investment in housing, then pivoted to offense.

“We’ve actually shown that to invest by ourselves, as Mr. Anderson is proposing, would cost us 18 times more to build new units,” she said. “On retrofits, it would cost about eight times more.”

So, where did she get those figures? Time for a little math. Grab a pen and a napkin (or your cellphone. After all, it is 2023).

How the campaign did the calculations

The Mendenhall campaign took the city’s affordable housing investment under the mayor’s administration (about $55 million) and divided it by the rough number of units (4,000) created by projects that used those investments, arriving at a city investment of $13,750 for each unit. Campaign aides then took the city’s estimated minimum cost of building a unit of housing ($250,000) and divided it by the city investment of $13,750 to arrive at about 18.

On the cost of retrofit projects, a popular strategy for getting deeply affordable housing on line relatively quickly, the mayor’s campaign looked at the past four projects in which the city invested and added up both the total construction cost of each project and the total number of units across the developments. The campaign then took that total cost ($66 million) and divided it by the number of units (491) to get a total cost of about $134,400 per unit.

The city invested a total of $8 million across those four projects, so campaign staffers divided that investment by the total number of units to arrive at a city investment of $16,000 per unit. The total cost of a unit (roughly $134,000) is about eight times more than the city’s investment in each of those units. Mendenhall’s campaign included the failed Ville 1659 project in those retrofit calculations.

It’s a long-winded explanation — sorry — but now you know.

Anderson, Mendenhall spar over the benefits

Mendenhall’s 18x figure depends on how much the city has invested in affordable housing. If her administration had invested less than $55 million but received the same number of affordable units, the mayor could have argued that Anderson’s approach is even more costly.

At a per-unit cost of $250,000, Mendenhall argued at an Oct. 23 debate, Anderson’s plan would cost at least $1.5 billion to build the “modest” estimate of 6,000 affordable units the city needs.

Such an investment, she said, would have a hard time getting support from the City Council and from voters on a ballot measure. Her way, she says, is a better bang for the city’s buck that takes advantage of private money.

For his part, Anderson argued that Mendenhall’s calculations ignore the fact that the city would own the housing and receive revenue from controlling the rents.

“It’s like a fifth grader would have put their calculation together,” Anderson said in an interview.

The former mayor has said Mendenhall’s plan puts too much public money in private developers’ pockets and results in units that, in many cases, are only temporarily more affordable than market rate.

By controlling rents, he contends, the city could provide housing that is affordable in perpetuity. (Anderson has said he also would be open to working with a nonprofit housing developer to lead the charge on his plan.)

Mendenhall’s administration, he noted, didn’t make its investment all at once.

At the Oct. 23 debate, Anderson said he would pool resources from the philanthropic and business communities and all levels of government to help pay for his housing plan. Anderson has said his funding plan would also call for issuing bonds and borrowing money.

“The city is not going to be the main funder, as usual,” Anderson said. “We’re going to convene the parties. The Legislature, if we had a decent mayor, they would come to the table.”

What experts say

Andra Ghent, a University of Utah finance professor who serves on the planning commission and has contributed to Mendenhall’s campaign, has said the biggest hurdle with Anderson’s proposal is the cost.

“If you could come up with a billion dollars to build these buildings and then not generate market rents on them, great, have at it,” she said. “It’s just sort of like, how are you coming up with the money for this plan?”

She said the amount that property taxes would need to be raised to pay for such a plan with government funding would be “astronomical,” and even if an administration were to build thousands of units and receive revenue on rents once they are completed, the city would likely not collect enough money for it to be considered a reasonable return on the investment.

For government-run housing to be built at any sort of reasonable cost, she said, developments have historically been built with a large number of units in one location, which concentrates poverty.

“The sense is that it’s better to build scattered-site affordable housing, or integrating a few units of affordable housing within a market-rate development,” she wrote in an email, “rather than concentrating low-income housing in one place.”

Stephen Goldsmith, who served as Anderson’s planning director and is backing the former mayor’s bid for another term, said the upfront cost of housing isn’t as daunting as it may seem because units could be built incrementally. Chunks of units, he said, could come on line with the adaptive reuse of old buildings.

Goldsmith said it’s a misunderstanding to think public housing would be built all at once and can lead some to think it’s a pie-in-the-sky proposal.

“Twenty here, 100 there, 30 here, 10 there,” Goldsmith said. “That’s the way we do this.”

Anderson, who insists he is pursuing mixed-income housing, has envisioned a new “Urban Village” between the Rio Grande Depot and the Utah Transit Authority’s intermodal hub adjacent to downtown. His proposal calls for five or more densely populated apartment buildings ranging from 10 to 25 stories or taller.