I want to take advantage of Salt Lake City’s new affordable housing law

This post was written by a Salt Lake City resident who asked to stay publicly anonymous for the time being. Their identity and location were verified by Building Salt Lake. If you’d like to contribute a piece to Building Salt Lake, write to info@buildingsaltlake.com.

Our family of 4 lives in a lovely house between Liberty Park and Sugar House. Even more so than others in Salt Lake City, we have a giant backyard: our property is almost ¼ acre. (We have a garage, some grass, some fruit trees, and a sandbox, and then we do our best to garden, but with modest success.)

The property to our west has even more space. The long-time owner passed away recently, so we’ve been exploring the idea of buying the property, doing a much-needed remodel of the existing house, and then using the new Affordable Housing Incentives (AHI) zoning changes to add some units in the back, with everyone across both properties getting shared access to the backyard garden, the grass, and the sandbox. (And—who knows—maybe even a hot tub!) Here’s a photo of the two backyards from the back (north) side… so much space! (In the back center of the photo is a dilapidated garage that needs to be torn down.)

Our goals are to (1) build some community, (2) showcase that there are beautiful ways to add density, (3) do our part to address housing and homelessness issues, (4) make some money… or at least not lose our shirts; and (5) make sure the house next door doesn’t get torn down and/or turned into a monstrosity. (I’m absolutely not against density, but here’s a photo of a single-family house in our neighborhood that got an “addition” consisting of five apartment-style units built over a four-car garage, plus the original house is rented separately; this is right next to the Macey’s grocery store so that neighbor doesn’t mind, but the neighbor on the other side presumably isn’t too thrilled with it, and I would hate to have this looming over our house.) 

I haven’t yet been able to convince myself (much less my spouse!) that these five goals are achievable, and then beyond that would be talking to our neighbors and making sure they’re not going to be upset. (In part because of all that I’m writing this without divulging our address.) But I was asked to share progress-to-date with Building Salt Lake, so here goes!

Affordable Housing Incentives and other zoning issues

Salt Lake City has a new program going into effect April 30, 2024. The Affordable Housing Incentives zoning changes (see the ordinance, plus these FAQs) allow properties on our block (zoned R1/5000) to have up to 4 units on each lot. For lots with an existing building, one of the units must, for at least 30 years, meet affordable housing standards in terms of a maximum sale or rental price. 

The maximum rental price seems pretty straightforward: Rent, including utilities etc, must be no more than 30% of income for those with incomes at 80% of AMI (Area Median Income). The AMIs differ based on the rental unit’s household size, defined as the number of bedrooms plus one. For a family of four, the FAQs say that median family income in 2022 is $102,400, so 80% of AMI is $81,920, and 30% of that is $2,048 per month. 

The maximum sale price is more confusing to me: annualized housing payments must be affordable to those with incomes at 100% of AMI, which I assume means there’s a limit on monthly mortgage payments, but it’s not clear to me how to factor in things like downpayments and credit scores. Selling the unit would be easiest for us (since we have no experience as landlords) so having more clarity from the city about how to calculate the “affordable homeownership” limits would be helpful. 

Other zoning requirements that are particularly relevant for our project include (to the best of my understanding): 

  1. One off-street parking spot per unit on the lot. 
  2. Buildings (measured from the eaves, not including covered parking) cannot cover more than 40% of the lot. 
  3. Any new buildings must meet setback requirements: 20 feet from the back of the property, 10 feet from one side (you choose which side), and 6 feet from the other side. 
  4. There are height requirements as well, which is not particularly relevant for our project since we’re looking to fit into the neighborhood (and not obstruct the neighbors’ views and sun) by having single story buildings with daylight basements, which matches most existing buildings.

The best idea I’ve been able to come up with… 

…is captured in the schematic below. Our property is on the right and is 50’ wide; the neighboring property, on the left, is 56.5’ wide. Both are 212.5’ deep. 

Starting at the bottom (the south end), the idea would be to:

  • Remodel and add an addition to the existing house. We could either do this ourselves and then sell at a later date, or (ideally) we would just do the land entitlement and then sell the house as-is (with the approved plans for the remodel and the addition) to somebody else to complete or modify as they see fit. FYI the measurements shown of  ≈2200 sq.ft. (for the existing building) and ≈450 sq.ft. (for an addition) are for the exterior of the building, relevant for zoning requirement #2 above. The interior is about 1500 usable sq.ft. (not including a height-challenged basement area), so an addition would bring this to maybe 1800 usable sq.ft., or perhaps 2100 sq.ft. if you add a more usable basement area under the addition. 
  • Add three off-street parking spots, possibly covered. I’ve learned that parking takes up a huge amount of space, especially since cars are not allowed to back out: they have to be able to turn around, so a “hammerhead” design like the one shown seems like the best way to do it. I’ve put 3 Costco sheds (10’ x 7’) in front of the parking spots, both because they provide some “garage” space for bikes and tools and such and because they would help block the light and sound from cars. FYI I also explored the idea of putting the parking in the very back of the property, which is attractive because the required setback areas can be used for driveways and parking, but then you have a longer and wider driveway, and the parking becomes inconvenient for the existing building; it just didn’t seem worth it. 
  • Add a building in the back with two units. The exterior measurements of the building would be about 2100 sq.ft., so the interior (usable) space on the main floor would maybe be 800 sq.ft. on the south unit (the “affordable” unit) and maybe 900 sq.ft. on the north (“free-market”) unit. With matching fully-usable daylight basement areas the usable interiors would be 1600 sq.ft.on the south (“affordable”) unit and 1800 sq.ft. on the north (“free-market”) unit. Note that in R1/5000 zoned areas the affordable unit and the free-market unit do not have to be “comparable”, i.e., the affordable unit can be smaller. Also note that all this is getting pretty close to the limit under zoning requirement #2 above: with 2100 sq.ft. of exterior space on the new building and 2650 sq.ft. of exterior space on the existing building (including the addition) that’s a total of 4750 sq.ft. of exterior space, which is just shy of 40% of the square footage of the lot. (To get on my soapbox for a moment: The parking requirement has been the biggest constraint that seems kind of extreme to me—especially with back-up cameras, why do cars need to be able to turn around??—but the 40% requirement is a close second.)  
  • Have a shared outdoor area. Legal easements could presumably give everyone access to shared areas, including garden space, the sandbox (not shown in the drawing, but the top picture shows some colored buckets; it’s near our existing garage), and some grass. Maybe there could even be a shared outdoor dining area and/or a hot tub.

The finances

As hinted at above, the easiest way forward (and the ideal for us) would be for us to just do land entitlement: we would get the relevant permits for both the remodel of the existing building and the new building, we would get the legal easements set up, and then we would sell one or both sites with the relevant permits and let someone else build / remodel / sell / etc.

If we can’t do that, I’ve been thinking about the relevant variables as follows:

A. How much would the existing property sell for, as-is?

B. How much would the front half of the existing property sell for, as-is, but with approved plans for a remodel and addition, and with a legal easement to the shared outdoor area? (The key calculation here is A – B: how much value is lost by replacing a giant backyard with a shared outdoor area and adding some neighbors? Note that neither A nor B includes the cost of remodeling the existing building or the cost of the addition because these costs are essentially locked-in and have to be paid by someone no matter what. They would ideally be paid by the new owner—who would get a correspondingly lower price—but they could also be paid by us, in which case the new owner would pay a correspondingly higher price. Either way it arguably comes out in the wash.)

C. How much would it cost to build the two units in the new building in the back? At $200 per sq.ft. and 3400 sq.ft. of usable interiors this would end up at $680k. (Apparently that’s a reasonable build price, maybe even an underestimate, but as a non-zillionaire I’m gulping a bit…. yikes!)

D. How much could the south (affordable) unit in the new building at the back be sold or rented for? (Since this is the affordable unit, it has to meet the AHI requirements above.)

E. How much could the north (free-market) unit in the new building at the back be sold for?

    So our financial costs are A + C (existing property, new building), and our financial gains are B + D + E (existing building, affordable unit in new building, free-market unit in new building). 

    Other thoughts

    1. We welcome feedback and comments. (And bids! From developers, or from folks who might want to live in a place like this, especially families with young children who could play with our 9- and 5-year olds!) Please reach us through Building Salt Lake
    2. Perhaps we could save money by cleverly arranging the remodel of the existing building and the construction of the new building, i.e., having concrete delivered at the same time for both, or taking advantage of any digging for new water/sewer pipes. 
    3. Perhaps we could take similar advantage for any construction needs for our existing house (on the right), e.g., if we need a new water/sewer connection to the street for our existing house then we could do it at the same time as the work on the neighboring property. (And if we want to have an option to build an ADU in the back of our property then perhaps we could easily put in pipes for that too.) 
    4. Maybe we could save money (and/or do something interesting) by not having a natural gas hook-up and instead going all-electric, using a heat pump, induction stoves, solar, etc?
    5. Since the AHI rules allow us to have up to four total units on a lot, I looked at putting three new units on the neighboring property. But this would require four parking spots, and that really squishes the space available for the new units. Plus it’s maybe too much density.
    6. I also considered the possibility of adding one unit at the back of our property, but then we’d have to provide one additional parking spot on our property (very difficult given the current layout), plus we’d have to abide by setback requirements between the two lots, so for example we couldn’t have a new building that crossed the property line. So…
    7. I also considered the possibility of legally combining the two lots into one lot. But I was told that then the AHI zoning rules would apply to the new lot as a whole (!), meaning we’d only be able to have 4 units total, including the two existing buildings.
    8. The City has been super-helpful in helping me examine various options. Extra shout-outs to Seth and Ben in the Planning Department and to Jena, parking expert in the Transportation Department. There’s also a Development Review Team that provides feedback on projects, and I have a meeting scheduled with them in 2 weeks. Very impressive for a policy that doesn’t even officially start for another month… and all at no cost!
    9. Some friends have been kind of taken aback by the idea of sharing a hot tub with other people: “What if they have sex in the hot tub?” Perhaps this is a real concern, but when I’ve visited friends elsewhere who have hot tubs I’ve enjoyed their hot tubs without wondering whether anybody had been having sex in the hot tub, in the same way that I’ve stayed in friends’ guest rooms—and AirBNBs and hotel rooms—without wondering whether anybody had been having sex in those places! More generally…
    10. The idea of a shared backyard area doesn’t seem that wacky to me, but it’s definitely not standard. It would require some thought (e.g., what about dogs?) and some legal work regarding easements, and there’s the important financial issue of how it would affect the value of all of the properties involved, both now and in the future. But I’ve got to believe that it’s possible to have relations with a few close neighbors that are, well, neighborly: we don’t have to go all the way to co-housing and singing “Kumbaya” together, but obviously this would work out best if everyone was friendly and considerate in sharing what is in effect a little private park. So: the legal and financial issues here are real and deserve attention. But I am also constantly reminded of the Far Side cartoon (from Feb 27, 1984) that features a man and his son in their backyard, with fences all around them, with the man commenting on a sparrow up in a tree: “And now, Randy, by use of song, the male sparrow will stake out his territory … an instinct common in the lower animals.”

    Do you have ideas for this would-be home-builder? Send thoughts, questions or ideas to info@buildingsaltlake.com.