City government, not the free market, will regulate both the new and resale price of some homes here under a new affordable housing ordinance.
The ordinance was passed recently in response to a state mandate that every city in the state include an affordable housing element in their general plans. Salem's ordinance is considered a leader and could serve as a model for other Utah communities, a city spokesman said."This gives the young buyer, the elderly or the disabled the ability to buy a home in a nice area without breaking them," said Mayor Randy Brailsford. It requires that homes built under the ordinance to be owner-occupied, shutting out investors. The single-family homes can't be rented.
Among the plethora of rules governing new affordable housing units built under the ordinance is a note on the plat that limits both the new price and the resale price during the first 30 years to a level affordable to someone who earns 80 percent of the median income for Salem.
The median income is $26,900, said Paul Hair, city recorder. Also, people who buy the homes new must keep them for five years before they can resell them, the ordinance reads.
Financing is limited to affordable housing programs, including the Utah Housing Finance Agency, which also excludes investors.
While the ordinance targets buyers shut out of the housing market, some Realtors are less than enthusiastic.
"We like to see the market govern itself," said Dale Johnson, president of the Utah County Association of Realtors. Affordable housing is a double-edged sword, he said. A regulated price may be less expensive now, but that could change if the market drops.
"We're encouraged from the standpoint that cities are recognizing they need to make some concessions on lot sizes, impact fees and other demands so a builder can build a marketable lower priced home without cutting quality," Johnson said.
But he added that the Realtor trade group gets concerned when government puts certain parameters on home buying, including how long a person has to stay in a home and to whom he must sell it.
"It seems to take away private property rights," Johnson said. "You have to sell to the same type of buyer who fits in that exact category."
If a buyer failed to meet the requirements he couldn't make the purchase.
"That creates some concerns with us," he said. "We recognize the need for concessions on the front end but also recognize the bad news on the resale and the salability of it."
Additionally, said Andrew Jackson of the Mountainland Association of Governments, if prices rise dramatically, these homes won't keep pace because the price is tied to income. That's considered good news for people shut out of the housing market. Jackson helped formulate the plan, along with Brailsford, a Salem developer and an engineering firm.
Ordinance requirements should also keep the area "nice" for at least 30 years, Brailsford said. "We don't want a nuisance area 15 years down the road."
Houses built on "affordable" lots must have at least 900 square feet finished and 600 square feet unfinished. Each house must have stucco, rock or brick wainscoating across the front.
The rest of the finishing - even the pitch of the roof and the landscaping - is also subject to regulation. The homes must have at least two bedrooms and a two-car garage or carport. The development review committee will oversee approval of plans before the city will issue a building permit.
The ordinance requires builders to scatter the affordable housing lots throughout the subdivision. They can't be next to each other, across the street or on a corner. "That puts pressure on the developer to make these homes look nice because he's going to want to sell the lots next to it (for the regular price)," Brailsford said. The affordable homes would sell for less than $100,000, but be appraised for about $130,000 when the new owners move in, he said.
The ordinance also prevents builders from putting up more expensive homes first. During construction an affordable housing unit must be built for every two regular homes constructed, the ordinance said.
While the ordinance is now in effect, no developers have stepped forward to build the first project. But Brailsford said several developers are considering it and may use it in future phases of projects now under construction.