Utah Homes Investment Program Case Study
Investing in Homeownership: Public Investments in Starter Home Development
Under Governor Spencer Cox, the State of Utah has set an ambitious goal: build an 35,000 additional new starter homes by 2028 beyond what the market had been providing historically. In order to achieve this goal, the Governor launched the Utah First Homes initiative, a suite of new programs and activities meant to spur starter home construction. This includes appointing a state “Housing Innovation Advisor,” $50 million for downpayment assistance, and the $300 million for the Utah Homes Investment Program for starter home construction.
Recognizing the magnitude of the need, and that downpayment assistance would be insufficient to spur the creation of the number of starter homes needed in Utah, the Governor and his team looked to other sources of funding to kick-start housing development. Turning to the State Treasurer, the Governor’s team realized that they had a source of low-cost capital available to them, literally sitting in the bank.
The Utah Homes Investment Program was thus born. The Utah Homes Investment Program reallocates $300 million from the Transportation Infrastructure General Fund and directs it towards development of starter home development. Since the $300 million would have been earning interest in the Transportation Infrastructure General Fund, the state appropriated $18 million to cover the forgone interest that would have been earned on the $300 million had it been invested by the state Treasurer.
Homes priced under $450,000 are defined as “attainable homes” for the purpose of the program. This is compared to the median home value of a single-family home in Utah of $540,000, according to Zillow data. In 2025, the legislature expanded the program to make condominium developments eligible for funding from the Utah Homes Investment Program and enabled the Utah Housing Corporation — the state’s housing finance agency — to make loans through the program as well. This latter change is meant to address the strict lending requirements associated with Federal Housing Administration loans for condo developments.
To administer the program, the Utah State Treasurer partners with qualified financial institutions, including credit unions, to make loans to developers for eligible projects. These are projects where at least 60% of the homes that will be built will be sold at a price point under $450,000, and where those homes will have a deed restriction that requires owner occupancy for at least the initial five years. To make the Utah Homes Investment Program reach a greater population, developers are also required to provide information to prospective homebuyers about Utah’s First-Time Homebuyer Assistance Program.
In today’s interest rate environment, construction loans are often in the double digits. However, the Utah State Treasurer is able to access funding at the “federal funds effective rate,” that is, the rate at which the Federal Reserve sets interest rates. In order to encourage developers to build during a time of high interest rates, the loans offered to developers by the qualified financial institutions must be priced at no more than 1.5 percentage points above the federal
funds effective rate, lowering the cost of a new construction loan to 7 percent or less. In order to encourage financial institutions to offer these loans, the interest paid to the State of Utah is 2 percentage points below the federal funds rate, essentially guaranteeing a 3.5 percentage point spread for those lenders.
The program is already making a measurable impact. The first project to use funding from the Utah Homes Investment Program broke ground in late 2024, with 275 units expected to sell for less than $400,000. As reported by the Utah News Dispatch, the program is having the intended effect, with the developer opting to build smaller, more affordable units, in lieu of pricier units, in exchange for the interest rate subsidy provided by the State.