Missing middle much? SLC’s Affordable Housing Incentives may spark a gentle density revolution
Today is the last day to register for our Building Salt Lake Events Missing Middle Housing Discussion and Tour on Saturday, June 10. Space is limited!
Gentle density. Hidden in plain sight. Adding variety, and thus affordability, to the existing housing stock. And illegal in most cities.
The disappearance of missing middle housing, this interpretation goes, began with the rise of Euclidean zoning (named after a Supreme Court case, not the geometrician), which spread across the country from the Progressive Era (1900-1920) onward. Separating uses—industrial from residential from commercial from institutional—became chapter and verse in the suburbs.
It caught on in cities, too, where removing multi-family housing from the zoning code in white neighborhoods helped maintain the color line de facto when exclusive racial covenants became illegal.
In Salt Lake City, the great downzone of 1995 attempted to excise many commercial and residential uses from “established” neighborhoods. Fourplexes, corner businesses, small office buildings became non-conforming uses. No new ones can be built.
While “preserving neighborhood character,” the downzone likely didn’t help affordability or walkability, top priorities public officials at city hall for over 15 years now.
Affordable Housing Incentives is the latest ordinance in Mayor Mendenhall’s set of housing reforms to be delivered to the City Council for a vote. Together with the rewriting of the regulations for RMF zones (RMF-30 has passed, -35 and -45 are still in the Planning Division), the future for missing middle housing in the city may be bright.
Unless the market has other plans.
Current conditions
Very few zones in Salt Lake City currently allow missing middle housing. Especially where it makes economic sense to build it.
While legal in dense mixed-use zones, high land values exclude any housing type but those that offer the greatest return on investment (“efficiency” in development terms). Small 2-3 story buildings aren’t part of that equation.
Recent reforms have legalized row houses, cottages, duplexes, triplexes, and fourplexes in only two lower-density multi-family zones, FB and RMF-30.
Yet those housing types are absent throughout all other residential zones. Even townhomes, phrased “single family attached,” are legal only in SNB, SR-3, RMF-30, -45, -75, RB, MU, R-MU-35 and -45, R-MU, and RO. They’re excluded in all of the R-1 and Foothill zones – areas which make up 80% of the area were residential projects are allowed in the city, Building Salt Lake estimates.
Why isn’t more MM being built, especially for-sale homes?
The most salient problems are regulatory – almost all residential zones forbid rowhouses, townhomes, cottages, duplexes, triplexes, and fourplexes. But the scarcity of for-sale missing middle housing is also driven by market and legal imperatives.
In the few zones where they’re allowed (with the exception of FB and RMF-30), parking and setback requirements hobble key missing middle housing types. Townhomes (single-family attached), which are easier to finance and sell than condominiums, require one off-street parking stall per unit and a 20-foot setback from the street.
Condos, notoriously shaded by concerns with financing burdens like mandatory pre-sales and a 10-year tail of developer liability for construction flaws, are classified as multi-family and suffer fewer parking and setback requirements.
Yet the scarcity of for-sale multi-family housing types condominiums can also be attributed to the basic mechanics of a housing market where rent growth is robust. It simply pays a lot more to sell a whole building of rental units to a single buyer than each individual unit to separate owners.
Darlene Carter, CEO of CW Urban (a BSL sponsor), one of the city’s most prolific townhome developers, told us, “That being said financing and or liability are not still the reason why large scale condos are not being built. The reason is the ‘value’ of a multifamily building based on NOI [net operating income] and cap rates is much higher than the ‘market rate’ on a for sale project.”
“Up until the last 6-12 months apartments always worked, so if someone can get them they would do so.”
Jarod Hall of di’velept design (also a BSL sponsor), offered the following explanation of the market forces that are keeping for-sale missing middle product off the market: “We don’t really see many small apartment buildings just because there isn’t the efficiency of scale and those units cost more per unit than in a bigger building.”
He added of equal importance, “If a group has the money to be able to qualify for a long term loan they will always make significantly more money holding long term than selling right after they are built.”
The promise of the city’s proposed Affordable Housing Incentives
When asked about the lack of new townhomes, Jon Lee, a SLC Planning Commissioner and Founding Principal of DOT Architecture, pointed out similar regulatory and market impediments as Carter and Hall. As a solution, he directed us to the Affordable Housing Incentives legislation, which was forwarded to the City Council with a positive recommendation by the Planning Commission in April.
“Although it doesn’t necessarily create more for sale product, it creates more diverse housing and more economic opportunity for landowners, homeowners, and neighbors to become both developer as well as property managers/landlords. This can help provide a fabric of attainable, more affordable housing while allowing regular people the chance to create financial freedom through investing in their own property.”
The purpose of the new ordinance is to stimulate the building of new affordable housing by offering density bonuses and more housing types to developers, whether owner-occupants or other investors, to make a small number (5-20%) of the new units affordable (ranging from 30-80% AMI).
The density-bonus incentives are also aimed at preserving the existing structure on the lot.
Some of the new housing types proposed for current R-1 single-family zones.
It would apply to all residential zones citywide. Depending on lot size, duplexes, triplexes, and fourplexes would be legal in R-1 districts – if the affordable housing requirements are met.
Building Salt Lake will provide more in-depth details of the latest Affordable Housing Incentives ordinance when it gets scheduled by the City Council.
The April 26 discussion at the Planning Commission heated up when Chair Andra Ghent (who voted No) claimed that the ordinance was “effectively inclusionary zoning, [and] there is extensive research on the effect of inclusionary zoning and it’s not good for affordability.”
Planning Nick Norris objected to her framing, responding that “this is the actually the opposite of inclusionary zoning.”
Norris further emphasized, “I think it’s important to remember the original intent of this project was to make taxpayer dollars go further than they currently are and are currently restricted,” apparently referring to the state’s ban on inclusionary zoning mandates.
A positive recommendation passed 8-3 out of the Commission. The City Council is yet to agenda a discussion and vote.
While nominally called “Affordable Housing Incentives,” it’s clear that the increases in density and housing types proposed may bring back missing middle housing in Salt Lake City.
