Perspective: Little nudges might bring big benefits for Utah's housing market

Yahoo

28-01-2025

Gov. Spencer Cox offered a clear-eyed vision of Utah's priorities in his 2025 State of the Union address. He has rightly highlighted lack of affordable housing as the most pressing problem facing the state. With its growing population, the pain is felt across the board, but is especially keen for young families who are finding it particularly difficult to get on the property ladder. To meet their needs, Cox proposes building 35,000 starter homes under $400,000, complemented by a raft of supporting initiatives, some of which were passed during last year's legislative session.
One of those bills passed last year addressed an issue which caught my eye: the First Home Investment Zone Act, allowing new zoning regulations to facilitate the construction of starter homes, and allowing cities to insist any public investment be contingent on the zone only allowing projects where 50% of the homes are deed-restricted to remain owner occupied for 25 years. This restriction is important, for there has been a growing trend of large Wall Street investment firms scooping up such new construction to turn them into rentals, charging exorbitant rents in the process.
Investment firms have robustly moved into the single-family housing market in addition to their traditional interest in multiple-family dwellings. Approximately 1 in 5 homes is bought by an investment firm now (in some areas, it's 1 in 3), and homeownership rates are dropping. In the 1970s, homeownership stood at about 63%; among young adults, it's now down to 37%, and that's not necessarily by choice. Investment bidding, cash in hand, on housing has driven up prices dramatically.
So the deed restrictions on the starter homes Cox is hoping to build are an excellent step in the right direction. But what about existing homes? Is there some good way to nudge things toward owner occupancy there, so that the state and its families will be better off?
In this legislative session, that nudge may well be HB151, entitled Home Sales Amendments, crafted by Rep. Gay Lynn Bennion, D-Cottonwood Heights. In a nutshell, the bill — which only applies to single-occupancy homes — proposes very little, but that little could make a real difference to Utah families. It states that for the first 30 days when such a home is put on the market, a would-be purchaser would be required to sign an affidavit of intent to occupy (unless the seller incurs an exigent circumstance). It would also prohibit bulk sales of foreclosed single-family homes, which are overwhelmingly sold to investors. After those 30 days, that affidavit requirement would terminate.
Asked why she is sponsoring the HB151, Bennion says, 'Young people in Utah really want the Legislature to start this conversation. I know of a young couple that lost bids on 12 homes in Salt Lake County to investors before finally being able to purchase a home. Another young couple finished professional school out of state and want to move back to Utah. They found a home for around $450,000, but an investor outbid them and then offered the same home for sale a month later for $570,000. Realtors are seeing the frustration in the market, and want more of an even playing field for families.'
Jen Cottam, a real estate professional with ERA Brokers Consolidated and an advocate for sustainable growth and home ownership, is one of those realtors. Cottam sees the problem every day:
'The Utah housing market is in crisis, particularly for first-time buyers and families looking for affordable homes. Between 2018 and 2023, Salt Lake County lost over 10,600 owner-occupied homes to rentals. Cities like South Jordan have seen almost exclusively build-to-rent developments over the past two years. This imbalance favors investors and large institutions, leaving Utahns struggling to compete for home ownership. The consequences are far-reaching: reduced civic engagement, declining family stability and financial insecurity. Renters in the U.S. have a median net worth of $10,400 compared to $400,000 for homeowners, according to the Aspen Institute. This wealth disparity threatens long-term economic equity for Utah families.'
When asked specifically about HB151, Cottam commented:
'This bill is very moderate and seeks to level the playing field by giving individual buyers a window to purchase single-family homes before investors can step in. In a strong sellers' market, it is the first-time homebuyer that struggles the most. They have difficulty when it comes to competing with offers that waive inspections, have non-refundable earnest money, and waive financing and appraisal contingencies. It's a pragmatic step that helps give Utah families have a fair shot at home ownership.
'(The bill) actually corrects a market distortion. Investors hold significant competitive advantages — access to cash, economies of scale, and minimal barriers — that ordinary Utah families cannot match. This bill is a step toward ensuring the market works for Utahns, not just for institutions.'
Ray Colledge, an associate broker with 29 years in the Utah real estate market, agrees: '(The bill) gives those getting a mortgage an opportunity to make an offer without competing with a cash buyer ... I believe it is a crisis (and) measures need to be taken to equalize fairness. I believe the two most urgent issues facing Utah are the shrinking Great Salt Lake and the housing affordability crisis.'
Some may wonder if sellers might be hurt by the bill. Cottam disagrees: 'Sellers will still get market value for their homes, but the buyer pool is temporarily prioritized to benefit families seeking primary residences. This is a small adjustment with a big impact. In addition, this legislation is creating an awareness for sellers to consider helping families over investors. If they have circumstances where waiting is going to negatively impact them, then they do not have to comply with the waiting period.'
Both Cottam and Colledge believe that HB151 advances Cox's agenda on housing affordability for Utah families. Cottam notes, 'Gov. Cox has been vocal about the challenges of housing affordability and declining home ownership rates. This bill aligns perfectly with his priorities and his vision of preserving the Utah way of life. I believe he should support this bill as a meaningful step toward addressing the housing crisis.'
Behavioral scientists have, in recent years, advocated such small 'nudges' like HB151 to get people to stop and think more about the decision they are making. Nobel Prize-winning economist Richard Thaler, along with Cass Sunstein, wrote an entire book about 'nudges' and how noncoercive alterations of a decision maker's environment could create significant changes in behavior. The key task for policymakers is how to gently alter the context for the decision, making some often-overlooked information more salient for the decider, or providing additional time for the decision to be made. HB151 is a textbook case of just such pro-social nudging.
As a social scientist, I could even see other nudging initiatives that might help the Utah housing market tilt more towards families than Wall Street investors. Bennion's legislative research found that 'Some states, such as Idaho, require as part of their purchase agreement that the buyer disclose whether they intend to use the home as their primary residence.' This is for the purposes of determining whether the state property tax homeowner's exemption benefit is applicable. There is no reason a similar requirement for disclosure to the seller up front during the purchase process cannot be required in Utah. Another initiative that has been used by numerous municipalities across the country is endowing cities with the 'right of first refusal' to purchase run-down or foreclosed homes to strengthen particularly fragile neighborhoods. These cities then renovate the home to code and sell it on to first-time homebuyers, often with purchase assistance.
As Utah tackles its serious housing crisis, the type of creative 'nudging' exemplified by HB151 deserves the governor's and the Legislature's attention and support. HB151 — track the bill this session; contact your state representatives about it. Give Utah families a little bit more of a chance to buy their own home.