With borrowing costs remaining high, a Trump Administration threatening new tariffs, and state leaders keen on shaking up housing and homeless policy, development in Salt Lake will see significant impacts in the new year. While we don’t have a crystal ball or a seer’s stone, here’s some of what we’ll be expecting in 2025.
Interest rates – borrowing costs to remain high
Given that the Federal Reserve cut rates by a total of 1% from September to December 2024, predictions for cuts in 2025 are modest, perhaps two instances of .25% – a lot less than borrowers would like.
Currently at 6.7% for a 30-year fixed loan and 6.1% for a 15-year mortgage according to Zillow, 2025 rates are expected to stay well above 6% for a typical 30-year mortgage. Wells Fargo predicts they won’t fall below 6.3%, and Fannie Mae expects them to remain above 6% in the new year. The average rate held by borrowers currently is 4%, says Investopedia.
New housing inventory is up, as high mortgage rates create a huge drag on sales. As a result, Housing Wire is forecasting another year of housing starts in recession.
Commercial rates for residential multi-family loans, typically lower than mortgages, are finally below 6%, coming in at 5.7% at year’s end. Loans for industrial, office, self-storage and medical sit at 6.97% – and thus will remain well over 6% for the year.
The era of cheap money may be over. How much of a drag it puts on development in this new normal for debt markets will start to shake out in 2025.
Policy changes in DC – increased construction costs and tough times for HUD
During his first term, President Trump presented budgets that cut Housing and Urban Development (HUD) funding by close to 20% year-over-year, doing away with some programs entirely, including Community Development Block Grants. Those deep cuts were not successful.
Any future DOGE-ing of established HUD programs to other federal departments is also not likely to pass through a Senate needing 60 votes for passage, according to the housing justice website Shelterforce.
If Trump’s threats to build a wall of tariffs between the US and key trading partners Canada, Mexico, and China are realized, construction costs for certain inputs will rise.
Builders will be hit with “major price hikes” for crude steel and MEP components from China if the threatened extra 10% blanket tariff is imposed on Chinese goods, predicts Construction Dive. Iron and steel have come down in price from recent highs, but those wins will get wiped out with new tariffs.
Data centers and construction materials manufacturers will be especially affected by electrical parts bottlenecks.
Even products supplied by domestic manufacturers are likely to increase in price, as international competition lessens. Analysts point to the supply-chain issues that arose just five years ago during the COVID-19 pandemic.
Opportunity Zones, which offer investors tax-free growth in designated areas if they hold the property for 10 years, have been a huge driver of residential construction in the city since the 2017 legislation was passed. They will expire in two years (at the end of 2026), and will need to be renewed by Congress.
A new Granary District ever-ready to hatch
How many people need to live in an area for it to become an urban neighborhood, bubbling away with activity that makes it a place to be, to live, work, and play in?
As its 20th century single-story makers- and warehouse spaces continue to give way to multi-family residential projects, the Granary will take major steps in its development as a place.
Six large residential projects will be under construction in 2025 that will, when filled, add more than 1700 units and ~3000 new residents to the area. Some of the buildings also provide ground-floor retail space.
Take a look at our recent photo essay of projects under construction, which includes Granary sites toward the bottom of the article.
Here are projects currently under construction, or starting this year, in the Granary:
•Roers’ The Hendry, 326 W 700 S (348 units)
•Blaser Ventures’ Pickle & Hyde, 741 S 400 W (139 units)
•Lake Union’ Partners’ G3, 634 S 400 W (184 units)
•Woodbury’s (formerly Urban Alfandre) West Village, 425 W Montague Ave, has applied for building permits, likely summer construction start (500 units)
•Urban Alfandre’s Pacific Yard 704 S 400 W (292 units)
•Lowe Property Group and Blaser Ventures’ Silos1 (286 units)
State housing policy: regulatory changes may rain down Capitol Hill
Following a statewide housing audit released in November that recommended a state-level plan with targets for housing production, actors on Capitol Hill have been discussing how to implement changes that will move the needle on Utah’s housing shortage.
While pitched resistance from certain legislators and the Utah League of Cities and Towns will surely engage, the Governor’s Office and allied electeds are determined to push ahead with code changes at the state level. One proposal is to make legal statewide ADUs on all residential lots and the building single-family detached structures on small lots. They would apply to municipalities with populations over 65,000.
One of the audit’s recommendations is that “the Legislature should consider options to increase zoning density on a wide scale within the state.” According to reporting by Utah News Dispatch, that may mean mandating zoning that allows missing-middle density near town centers.
The chances for change during this spring’s session are heightened by the fact that the proposals are merely regulatory, without requiring funding. Sweeping change, however, will require overcoming resistance to the “I don’t want an ADU next door” sentiment of Utah suburbanites. For the new legislation to be strong enough to give housing production a real boost statewide, Governor Cox will likely need to spend significant political capital.
Homelessness will get worse before it gets better
Lawmakers on Utah’s Capitol Hill have made clear that they want a redirection of public policy toward homelessness.
“Housing first” is out. “Tough love” is in.
A week before Christmas, the Governor and House and Senate leadership sent a letter to the Salt Lake City mayor chastising the city for “escalating public safety challenges” and demanding the city submit a “comprehensive safety plan” by Jan. 17 (the Friday before the 2025 Legislative session starts).
State leaders have tipped that they are considering a forcing a number of get-tough measures on cities which receive homeless service funding from the state. As reported by the Deseret News in December, they include enforcement of no-camping ordinances, designating homeless shelters as drug-free zones with enhanced penalties for drug use and possession, banning safe-injection sites and limiting clean-syringe exchanges, and raising the second conviction of hard drug possession to a third-degree felony.
During last year’s session, lawmakers appropriated $25 million for a centralized homeless facility with 600-1200 beds, a major step away from the smaller, “homeless resource center” approach embraced by the city when Mayor Erin Mendenhall was a city councilor.
A site is yet to be determined, and the $25 million is likely inadequate for the purchase of land (projected to be 30 acres) and to build the facility itself. Not to mention ongoing operations costs: policymakers envision not only an emergency shelter, but drug treatment, strict rehabilitation regimens, job training, and ongoing case management. That kind of support will far eclipse the mere $18.8 million requested for 2025 by the Governor in December.
All indications for the new year point increased arrests for non-sanctioned camping and related offences, even though the county jail is consistently full, and according to the Sheriff, “not designed to house the amount of folks who suffer from mental health issues.”
Until the state constructs its mega-campus and funds it sufficiently to keep people from living on the streets, expect Salt Lake City’s homelessness issues to grew more acute, even if state leaders succeed in making them less visible.
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