2023 brought the end of the apartment boom, pretty much everywhere. Is the Salt Lake City market going to weather the storm? Are those long-term growth predications still accurate?
Keep your clicks here. We’ll be watching these trends and others in 2024.
Declining rents, growing vacancy rates
Salt Lake City was a top-5 market in the country for rent increases just 18 months ago.
Good news for renters, not so much for investors. But it seems like every advisor you talk to is bullish on the long-term prospects for multifamily housing growth in the Salt Lake City metro.
Vacancy rates at midyear 2023 didn’t look so bad. At the end of June CBRE had them at only 5.3%, but by November RealPage reported that number up to 6.6% for the Salt Lake-Ogden-Clearfield area. That’s over a percentage-point higher than the national average at the time, 5.8%.
We will definitely be eyeing rent and vacancy trends in the New Year. Should you worry?
Perhaps. If the 1000s of new apartments delivered to the market this year suffer slow absorption in 2024, vacancy rates at 10% may threaten investors’ confidence in the longer-term Salt Lake City multi-family outlook.
Yet the housing shortage isn’t going away, as University of Utah researchers have continued to document. The current housing construction contraction is likely to increase the region’s housing shortage.
Borrowing terms are improving – interest rates for commercial loans for multi-family products are currently between 6.25-7.5%.
With the widely-held belief that they will continue to decline, we’re not expecting many new projects with financing packages in 2024 until that happens.
But like everyone else in development, we’ll be watching and hoping.
The good news is: makers gonna make.
We’ve noticed that the pre-development pipeline in the City’s permits portal is far from going dry.
While big projects seeking the final round of entitlements are getting rarer, there’s movement enough in applications like lot adjustments and zoning- and master plan changes. The interest in big projects has not gone away.
We’ll likely be reporting on more RMF-30 rezoning applications, as the recent city rewrite of the rules for that zone aim to spur missing-middle housing types.
In Central City, near the 400 South Transit Corridor, 1970s and 80s office buildings are getting rezoned to TSA-UN-C, currently the most intense of the city’s transit zones. We’ll keep you up to date on that movement.
ADUs and 4-plexes sweep the city!!
Probably not. But there’s progress: by October Salt Lakers had requested permits for more ADUs than in any previous year. At that point the city was on track to triple the number of permits issued in 2022.
Thanks to the vision and courage from leaders at City Hall, all single-family homes citywide can now build an ADU.
We’ll be watching the city’s annual report for 2023 in Q1 of the New Year.
In April of this year the City Council made changes that allow bigger and taller ADUs without regard to the size of the primary structure on the property, and with smaller setbacks required from adjacent properties. They also removed the conditional use requirement, so that permits can now be issued by right instead of having to go to the Planning Commission. Off-street parking requirements are also waived for ADUs if near streets with transit or bike lanes.
Affordable housing incentives legislation grants new density rights to property owners who include affordable units in their new construction. New housing types have been approved (attached homes, cottages) that may spur up to four units being built on previously single-family-only zoning.
Depending on who you ask, affordability requirements are either too lax or too demanding on developers. If in one of the city’s lowest density residential zones, half of the new units need to affordable to people at or below 80% AMI.
If an existing structure on a property is included, then that requirement goes down to just one unit.
We’ll be on the lookout for any new permitting with affordable incentives attached. The new ordinance doesn’t go into effect until April.
Meanwhile in small-scale infill news, the RMF-30 rewrite, allowing more density and dwelling types than previously in that zone, has already been producing some projects on both the east and west sides.
Perhaps in response to ADU legalization and Affordable Housing Incentives, neighborhood historic preservationsists have been busy on the east bench creating more local historic districts.
The larger Yalecrest National Historic District, previously designation, contains a patchwork of Salt Lake City-recognized local districts, development in which falls under the purview of the Historic Landmark Commission.
That means that street-facing alterations and additions, as well as new builds, must comply with nationally-approved and locally-adopted historic design guidelines.
While not a method to stop four-plex development with affordable units, a local historic designation would make teardowns difficult and make new construction conform with the historic design guidelines.
Three new local districts are on their way to the City Council and Mayor for approval. Activists in Laird Heights, Princeton Heights, and Upper Yale Heights have been negotiating a 13-step process that includes a vote of property owners. We’ll be watching to see if they get approved and if any more are on the way.
Sears (IHC) Lake
The zoning change application for 754 S. State St. from Intermountain health care system is a big ask. D-2 to D-1 means building height isn’t limited to 120 feet. Our sources estimate the upzone is worth $39 million.
Because Intermountain insists that the hospital design will be “urban,” the Planning Commission recommended approval and the City Council is keeping the proposal warm.
Word says the city is waiting for conceptual site plans from the healthcare nonprofit’s architects before considering voting on the upzone. We’ll let you know the plans as soon as they drop at the city.
Meanwhile, enjoy Intermountain’s vacant lot and large hole on those 9 acres between 700 and 800 South on State.
Policy from City Hall
Visions for the Ballpark site (post Bees moving to the south valley), rezoning in that area, as well as a new plan for the south end of Ballpark are all in the works.
What will the first leg of the Green Loop look like (200 E)? We’ll be watching and letting you know.
MLB, NHL developments
And finally, who knows which way these winds will blow. Major-league hockey and baseball in Salt Lake City? Keep your eyes focused here.
We broke the news that MLB was seriously considering a bid from Salt Lake City. We scooped not only local news outlets, but ESPN.
While the Tribune and Deseret News have sports reporters, keep your stadium development eyes on buildingsaltlake.com. We were the first to tell readers that the Bees were seriously considering not returning to their home on 1300 South.
Recently, we mentioned that Atlanta is making noise about building a development for another NHL team, perhaps pipping SLC to a major league hockey franchise—even after the southern belle’s two failures on ice.
The success formula for major league sports investment is currently rooted in RE development. For news on major league sports expansion in Salt Lake City, y’all come back to buildingsaltlake.com in 2024.
Interested in seeing where developers are proposing and building new apartments in Salt Lake, or just want to support a local source of news on what’s happening in your neighborhood? Subscribe to Building Salt Lake.