A Utah City Combats a Water Shortage and Rising Housing Prices

A Utah City Combats a Water Shortage and Rising Housing Prices

At the same time it addresses an insufficient water supply, the town of Oakley is determined to provide affordable housing and protect its rural character. Credit: Town of Oakley

Oakley, Utah, located in an arid valley roughly 40 miles east of Salt Lake City, was incorporated in 1934 to become eligible for a Works Progress Administration project to develop a municipal water system. Oakley is a city of 1,800 residents, many of whom live in homes on large lots and farms. Households fleeing expensive cities during the COVID-19 pandemic induced a rapid spike in housing demand, and remote workers and people seeking vacation ranches created a real estate market boom at the same time that Oakley was experiencing a megadrought, stressing the city’s limited water supply. In 2021, the city issued a moratorium on new development until it could secure a larger water supply.

Oakley’s moratorium, adopted as Ordinance No. 2021-06, prohibits the city from issuing building permits for structures that require a new connection to the city’s water system or an extension of an existing connection. The law also prohibits installing new landscaping that would require irrigation using city water. Enacted in May 2021, the moratorium initially was intended to be in place for 6 months while the city constructed a multimillion-dollar, 2,000-foot-deep well that would double the city’s water supply. Oakley was unable to complete construction in 6 months, however, and the council extended the moratorium indefinitely. City officials anticipate completing the well in late 2022.

Even before the onset of the pandemic, housing prices in Oakley were rising so sharply that few houses were affordable to workers in Oakley and nearby vacation areas. Stephanie Woolstenhulme, Oakley’s city planner, does not believe that the moratorium has significantly increased the cost of housing because, absent the moratorium, developers likely would have built only a few large houses. Nevertheless, the city is committed to lifting the moratorium as soon as a reliable water supply is secured.

Moreover, city officials have adopted policies to increase the supply of housing and encourage diverse housing types. Although the city is proud of its rural character, the 2021 Oakley City General Plan calls for increased density in certain parts of the city, with the highest density in the mixed-use city core. The plan includes policies to permit various housing types, including accessory dwelling units, cottage homes, and permanent tiny houses. The plan also calls for allowing up to 20 percent of housing units to be in multifamily structures, even though nearly all residents currently live in single-family detached houses and most of the city is zoned as agricultural residential or rural residential. Multifamily residences should be arranged in clusters that are compatible with nearby structures and that protect environmental resources. The plan also identifies strategies to require or encourage residential and commercial developers to provide housing units affordable to low- and moderate-income households.

Oakley subsequently revised its zoning code to comply with the affordable housing objectives of the new general plan. The code requires all residential, commercial, and mixed-use developments to include affordable housing, exempting 8 lots in residential developments and 5,000 square feet in commercial developments. Residential developments are required to include 15 percent of their units as affordable; the number of units that must be provided is adjusted by a factor, referred to as affordable unit equivalents, that takes into account the size of the affordable units such that smaller units are encouraged. Commercial developments must provide affordable units for 15 percent of employee housing demand, with the assumption of 1.5 workers per household and 1.2 jobs per worker. The ordinance acknowledges that the 15 percent requirement is subject to change based on the findings of periodic housing needs assessments. When the calculation of required units results in a fraction of a unit, the developer must pay a fee for the partial unit.

Affordable housing can be studios or one- to four-bedroom units as well as deed-restricted accessory dwelling units; dormitory and single-room occupancy units can be affordable housing in commercial and resort developments. Affordable units are restricted to households earning less than 80 percent of the area median income (AMI) and having wealth less than 4 times AMI. The affordable units in each development must vary in size, type, and price to accommodate households of varying income levels below 80 percent of AMI; in developments with more than 10 affordable units, no single target income level can account for more than 75 percent of the affordable units. Affordability must be maintained for 60 years, and the city may extend the affordability period in 10-year increments. In addition, the city council may waive development application and permit fees for the affordable units. The city council may also allow developers alternatives to constructing the affordable units onsite. Developers may request payment of a fee in lieu of onsite construction, donation of land, offsite development, purchase of existing units, and transfer of development rights to the Village Mixed-Use zoning district.

The city’s affordable housing policies are based largely on Summit County’s inclusionary housing standards for the area near Salt Lake City. To implement Oakley’s policies, the city can work with the county to provide affordable housing outside city limits. For example, developers’ in-lieu fees can go toward projects in Summit County if no eligible development is being proposed in Oakley. Although Oakley does not yet have any developments large enough to be subject to its new regulations, Woolstenhulme explains that some higher-density residences are being discussed.

Click here to access the text of Ordinance No. 2021-06 and information about the moratorium. Find more plans, regulations, and research that state and local governments can use to reduce impediments to affordable housing at HUD User's Regulatory Barriers Clearinghouse.

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