Updates to A Solution to Affordable Housing

Although The Point is well introduced in the first two Salt Lake Tribune articles discussed in the January 29th. 2024 UPDATES, much remains to be learned about the details. With that in mind, I will express some initial thoughts and speculation concerning how The Point might benefit from the ideas in “A Solution to Affordable Housing”. I believe the fact that this 600-acre project will be built in phases over many years on state-owned land and will receive a $165 million state infrastructure contribution opens up exciting possibilities for making a significant contribution to providing quality affordable housing for Utah residents and a blueprint for similar projects throughout the country.

It seems the Innovation Point Partners who hold the 99-year ground lease on the 98.5 acre central core phase do not expect to realize the affordable housing potential or even recognize the real housing needs this project can satisfy with a little added flexibility looking beyond phase one. Consider the possibility that the entire 3,300 new housing units planned in the initial phase could be affordable. If developers move away from defining affordable housing as being affordable to someone making 60 – 80 percent of the area’s median income and move toward defining affordable income as being housing that costs no more than 30 percent of owner’s or renter’s income. Directing sales efforts to employers who may have an interest in locating within The Point or owners of businesses who currently operate or plan to operate within easy commuting distance of the development, the developers could target specific affordable housing needs for employees now suffering from cost-burdened housing, no matter what their wages are now. Compounding the inadequate response to providing affordable housing as noted by the Tribune Editorial Board, is the fact that a key group of wage earners has not been considered – a costly omission that will have a negative impact on developer profits and the long-view public interest. Those forgotten wage earners are the workers who will build the homes, the high-tech office towers, public amenities, and future phase infrastructure as construction moves forward for many years. First completions will generate the need for a new army of maintenance and support personnel who will also need affordable housing.

Consider the possibility of utilizing some part of the 500 acres planned to follow phase one which will also benefit from the $165 million infrastructure improvements made possible by the state. This would create an opportunity for the type of housing described in Chapter 14 of A Solution to Affordable Housing. It may even open up a path to recruiting the rapidly expanding company manufacturing the homes discussed in Chapter 14. If the workforce can be assured of affordable housing and easy commutes to construction sites, they will be more productive and have less impact on initial residents, office workers, retail employees, and their customers.

Based on the current rumors surrounding the possibility of NHL, MLB, and NBA stadiums of the future, it is a pretty safe bet that the signature elements of phase one based on public input do not see such huge sports facilities as suitable substitutes for the 3,000 seat entertainment facility or a good neighbor for the other elements listed. If such projects have potential in distant corners of the project site, they would have major construction labor demands.

I must admit to very limited knowledge of any project of this scope to be built on 600 acres of land owned by the state and made available to private developers under terms of a series of 99-year ground leases. My first impression is that this unique project may lend itself to accelerating sales and construction schedules and lower the cost of production. It also seems very compatible with 15-year employer/employee partnerships functioning as sub-leases. Although my 99-year crystal ball is a bit foggy, I expect that early product will not be a perfect fit for the residents and businesses at some point in the future. Individual employer/employee partnerships would be well suited to repurposing an aging housing stock to accommodate the demographics that evolve in something like 15-30 years in order to capture the benefits of new design and technology.

My research in writing A Solution to Affordable Housing included a 12/20/2022 Atlantic Magazine article by Jerusalem Demsas entitled “The Homeownership Society Was a Mistake”. When the article was published it made a well-reasoned argument that it was impossible to reconcile the need for homes to increase in price to build homeowner wealth while remaining at prices that stay affordable for new owners and renters. The article cautioned that advice that amounts to “buying low and selling high” makes little sense when the asset in question is the home you live in. It contended that people should not assume they can buy at the right time, in the right place, get a fair deal on financing, and not be excessively vulnerable to market fluctuations The personal example I included in Chapter 12 can be criticized for containing almost all of the best-case elements of success outlined in the Atlantic article, but it was included as a warning that success was a matter of some skill and lots of luck.

Since the problems and possible solutions put forth in my book are intended for the real world of the lenders and landlords we see today, they only apply to the development of single-family homes that developers at The Point intend to sell outright, land included, following phase one. I would expect the housing built on 99-year ground lease property to offer the possibility of a lower rate of home price inflation ( a test of the old saying “land appreciates, buildings depreciate”). Adjusting the employer/employee partnerships to keep partner benefits balanced is certainly possible as long as employers charge rent of no more than 30 percent of an employee’s wages together with a “no renter abuse” lease, and employees expect no cost of living raises. The underlying message is that The Point may be able to shift away from understanding housing as an investment for those who occupy or build that housing, and toward treating it as consumption. Employees of businesses in The Point and neighboring communities should be offered housing that is worth the use they get out of their homes. Policymakers should focus on making possible affordable and diverse housing types able to satisfy the needs of people at every income level and stage of life. If The Point can deliver quality housing that provides shelter, access to good jobs, and education, in a safe and healthy community, sustainability will be assured.

The previous UPDATE provided a summary of the Salt Lake Tribune’s description of The Point, a 600-acre repurposing of the old Utah prison site in Draper. In a 12/17/2023 article entitled “Keep an eye on The Point, so that it lives up to its promise“, the Tribune Editorial Board provided their opinion of the risks that may endanger the outcome envisioned. That cautionary tale was introduced by pointing out that Walt Disney’s original vision of the EPCOT center was to be a futuristic community for people to live, work and play. We forget that EPCOT stands for Experimental Prototype Community Of Tomorrow. Now six decades later EPCOT is regarded as a huge success, but as an amusement park rather than the city of the future,

The Tribune Editorial Board calls for the Utah legislature, the city of Draper, the news media and the public to provide transparency and oversight to make sure the public benefits being promised stay in place. They see those benefits as a long-term boon for the area and for the state of Utah, environmentally and economically. They caution The Point of the Mountain State Land Authority to make sure that any desire for short-term private profit never overpowers the long-view public interest. They also recommend that the substantial profit envisioned from state investment should be put into more affordable housing or other public needs. They see the high-tech office component as something to be cautious about and point out that what this part of Utah needs most, far more than any more glass towers or business incubators, is way more affordable housing. The Editorial Board also recommends the managers of the Point not poach businesses and institutions from other parts of the Wasatch Front. They single out the current speculation that the Utah Jazz NBA team may be looking to replace the 32-year-old Delta Center in downtown Salt Lake City with a new venue, those cautionary statements are already moving into the spotlight as Utah is working to attract Major League Baseball and Major League Hockey.

A 1/25/2024 Salt Lake Tribune article by Andy Larsen entitled “Jazz owners unveil bid to build new arena, bring NHL team to Utah”, says that the Smith Entertainment Group has formally submitted its bid to bring major league hockey to Utah: those plans include building a new arena forecast to cost hundreds of millions of dollars and designed for professional and Olympic hockey, After two years of discussions, the NHL has recognized Utah as a legitimate candidate for either an expansion franchise or being a landing spot for a relocated one. Utah is the youngest state in the US with a median age of 32. The state has a second Olympic bid nearing final approval for the 2034 Winter Games and a long-standing reputation as one of the greatest sports capitals in the world. Utah’s young population has a reputation for being passionate sports fans and is seen as being very receptive to major league hockey and baseball. The Smith Entertainment Group enquired about putting an arena at The Point and was told by The Point they could follow the process in place to gain consideration. The Tribune Editorial Board was informed of that discussion and in the near future the Board’s recommendation that professional sports belong in or near downtown Salt Lake City is sure to be tested.

Two articles in the Salt Lake Tribune provided public details of The Point – a 600 acre multi-use, smart growth, energy-efficient repurposing of the old Utah prison site in Draper. The Point joins two other micro-communities that are underway along the Wasatch Front that feature higher-density housing and public amenities – Daybreak in South Jordan and Utah City in Vineyard in Utah County,

A feature article on 11/29/2023 entitled “$2.3 B deal fuels next step for The Point in Draper“, by Tony Semerad and a follow up article on 12/13/2023 by Shannon Sollitt entitled “Housing, trails,retail: Backers aim to pack a lot into The Point“, explain what the project is and why it’s unique. On 12/17/2023 the Tribune Editorial Board published an article entitled “Keep an eye on The Point, so it lives up to its promise”. In this UPDATE, I will use the initial two articles to explain this project further. In the second UPDATE I will use the Tribune Editorial Board’s comments to point out their cautionary message.

The Point is unique because it will be built on state-owned land and is based on years of public input. The legislation that created The Point of the Mountain State Land Use Authority (POMSLA) was based on a years-long study of the area and the project’s signature elements include:

* Providing more transportation.

* Allowing higher-quality amenities and more open space and recreational trails.

* Ensuring sustainability.

* Providing an affordable housing component.

* Including green streets and car-free pedestrian zones.

* Building high-density housing in the central downtown area and single-family housing in the later stages.

The 600 acre project will start construction of the 98.5-acre central core first phase in the spring of 2024 and will include:

* 2.3 million square feet of high-end office space including an Innovation District devoted to fostering research and commercialization of new technologies

* Hotels.

* Retail shopping districts located along the Jordan River featuring 16 acres of open space and a 10-mile trail system plus a 3,000 seat entertainment facility. 

* Up to 3,300 new housing units, of which 400 would be affordable-priced for people who make 60 – 80% of the area’s median income. 

* A new FrontRunner station will be built which would provide a 15-minute train ride to and from Salt Lake City.

* Phase one will also lay down critical backbone infrastructure for the sites on the remaining 500 acres including water, sewage, electricity, gas, and telecommunications. The Utah legislature has devoted $165 million toward that vital infrastructure.

Utah state leaders have chosen private-sector development partners – a consortium of companies called “Innovation Point Partners”.to begin the initial 98.5 acre phase one. The top-notch developers chosen for the project in 2022  include Lincoln Property Company (Dallas), Colmena Group (SLC), and Wadsworth Development Group (Draper).Innovation Point Partners has a 99-year ground lease on the land and the state will retain ownership of the land with the exception of the single-family homes that the state and developers plan to sell outright, land included, After 99 years, ownership of the buildings will transfer to the state. That deal takes the cost of land in Phase One out of the equation for developers. There is also an idea being discussed that would have private developers pay the equivalent of their property taxes to the city, county, and school district, even though as state-owned land, it technically won’t owe property tax. Such a scheme certainly requires further investigation; however, details were not cited in the Salt Lake Tribune articles.

After more than a year of negotiations, the mayors of Draper which encompasses the site and nearby South Jordan welcomed the kickoff with praise for the years of well-planned public input and the benefits they expect for both communities.