A lack of affordable housing has been a well-identified problem in Wyoming over the last decade, and state legislators have proposed a novel, new solution for the issue.
The Legislature is now exploring ways to build affordable housing on state lands by offering private developers new development opportunities on leased or sold land potentially priced below market value.
“The purpose of developing state properties is because we have a shortage of low income housing,” state Rep. Bob Nicholas, R-Cheyenne said at the Regulatory Reduction Task Force meeting on Thursday.
On Thursday, the Task Force advanced a draft bill that clarifies that state lands may be leased for residential purposes in Wyoming and may be leased or sold at potentially lower-than-market rates to do so.
“We have the ability to do real estate transactions, and if that helps further an affordable housing effort- great,” Office of State Lands and Investments Deputy Director Jason Crowder said at the meeting.
The Problem
Nicholas mentioned how studies have found that Laramie County will need 5,000 new home units in the next 5-12 years and that 10,000 to 15,000 homes will likely need to be built in southwest Wyoming in the next 5 to 10 years to handle population growth.
“We also know that the private market is not in a position to build those and to be economically viable, particularly for low-income housing,” he said.
Nicholas clarified that it’s not a lack of land available that’s the problem, but the market for low-income housing itself, which is usually seen as not cost-effective for home developers.
Teton County has been the home of the most affordable housing issues in the state, with astronomically expensive prices making it mostly impossible for middle and low-income earners to buy homes on the private market.
The state governments of Colorado, Washington, New Mexico and Utah have all enacted various forms of affordable housing on their state land through private-public partnerships.
How It Works Now
In regards to the potential of using Wyoming state lands for affordable housing, Kelly Lower, a research analyst for the Legislative Service Office, explained that this could take place through land sales, trades or leasing of state trust lands.
In Wyoming, every piece of state land is eligible for sale or exchange, Crowder said, but it’s up to the Board of Land Commissioners to decide if they will let it go forward.
Land exchanges or trades in Wyoming are typically guided by the question of whether it will improve manageability of the land.
Sales must be conducted at a public auction with the land sold to the highest bidder.
Leases of state land can be made for as long as 75 years but the land must be used for commercial, industrial or recreational purposes. The draft bill would add and clarify that residential development is an acceptable use of state land.
The bill also specifies that the Board of Land Commissioners may consider buying lands from the federal government in areas suitable to be leased for residential development as long as that development is for affordable housing.
Crowder clarified that he believes state law already allows this type of use on the land, and that the Legislature doesn’t need to do much to address this issue in order for it to happen.
“We have houses, we have cabins, we have people living on state lands currently,” he said.
Hurdles And Workarounds
Under the Wyoming Constitution, the Board of Land Commissioners is required to manage the lands in a way that generates the most “proceeds” possible for the state.
The draft bill attempts to address the “proceeds” clause, clarifying that the development of affordable housing fits this constitutional requirement as it is in the public interest of the people of Wyoming. This would allow OSLI to work around the current definition of proceeds as just being the highest amount of returns possible.
“That’s how we circumvent that constitutional requirement,” Nicholas said.
He believes a bill like this would need to be passed into law for the development of affordable housing to be allowed on state land.
“We understand the issue and we’re intentionally addressing it so that it’s not going to be misunderstood after we pass the language,” Nicholas said.
Nicholas said he believes the bill is covered under the state Constitution because it helps the poor, a purpose loosely protected under the Constitution.
“The priority is not the beneficiary, it’s the purpose of providing housing to low incomes,” Nicholas said. “We’re changing the balance basically.”
Under the bill, if state lands were to be sold or traded, they would be done with a prioritization for affordable housing. Crowder clarified this would only occur if this use was identified as a potential use through the application process by the applicant.
But Nicholas criticized the fact that the original version of the bill didn’t specifically define affordable housing as for low-income people, which he said fell short of its desired intent.
Mike Martin, chairman of the Wyoming Community Development Authority, disagreed and said making a change like that could make the bill too restrictive as there are a number of different housing projects that can fall under the affordable housing umbrella, such as workforce housing, which are not specifically designed for just poor people.
The bill was amended to include both low-income and affordable housing.
Completing The Deal
Lower said banks typically require some form of long term commitment when considering approving a loan for a builder who does not own their land. The bill approved by the Task Force bumps up the maximum lease time to 99 years, as certain bills brought before the Legislature in the past have already attempted to do.
It doesn’t specifically address private-public partnerships, which are typically the most common source of affordable housing projects.
Nicholas said OSLI has offered to sell and exchange land to the City of Cheyenne for development and also offered to retain land for the city until it is ready to move on it. Crowder said a transaction like this has never occurred for affordable housing in Wyoming, but some transactions have taken place for landfills.
Where the state also runs into limitations, Crowder said, is for long-term leasing and leasing with the agreement that the land will be sold sometime down the road.
Another major roadblock is the fact that builders who lease land can only be compensated for a certain portion of profits if the state were to sell the land to a private buyer down the road.
“That’s one of the major limitations for people coming and creating these developments on state lands,” he said. “If that land is ultimately to be sold with the improvement on it, they’re going to be limited what they can get in return. The light at the end of the tunnel becomes very small.”
Crowder said the best approach for the state has been to allow the private purchase or exchange to come first, which allows the developer to easily do whatever they want with the land. One example of this occurred with a land exchange in Cheyenne, for a parcel south of Laramie Community College, where houses are now being built. The land the state received, Crowder said, is immediately ready for future development with roads accessing it.
Nicholas said based on conversations he’s had with Cheyenne Mayor Patrick Collins, in order for a deal like this to transpire and be seen as cost effective for a developer, something must be given up for free.
Crowder agreed and cited the example of a 160-acre parcel of state land in northeast Cheyenne that would need a sewer line for development to be realistic.
“Unless we as the state land office or somehow the state Legislature appropriated funds, or the City of Cheyenne appropriated funds to get that sewer line up there, the land remains vacant,” he said.
Renny MacKay, president of the Wyoming Business Alliance, believes infrastructure issues like these are hugely significant and negate any potential gains made by lowering regulations on housing projects.
Rep. Bob Davis, R-Baggs, suggested an entirely different approach to the committee by offering more state grants for the construction of affordable housing projects.
The affordable housing bill will be considered by the Joint Corporations, Elections and Political Subdivisions Committee at its next meeting at the end of the month.
