How one of the largest deeply affordable housing projects in Utah fell apart

A plan to create 197 deeply affordable units in Salt Lake City evaporated. What will happen to the millions of taxpayer dollars committed to it?

(Francisco Kjolseth | The Salt Lake Tribune) Ville 1659, one of Utah’s largest proposed deeply affordable housing projects, remains closed and fenced off at 1659 W. North Temple, Tuesday, Oct. 3, 2023. After months of delays, the rights to lease the property are under contract to be sold.

The proposal sounded promising enough to attract millions of dollars of public investment.

In September 2022, state officials committed nearly $4 million in federal pandemic relief money to Ville 1659, the shuttered Ramada at 1659 W. North Temple that has in the past served as a winter overflow homeless shelter.

By December, Salt Lake City committed another $2 million grant with the hope of having apartments available by spring. A month later, the city’s Redevelopment Agency signed off on a loan of more than $1.8 million.

Now, after months of delays, the project that once promised 197 deeply affordable units to chip away at Utah’s homelessness crisis has fizzled.

“My main reason for moving on from this property,” developer Keith Warburton said, “is I think we have a better opportunity somewhere else.”

Warburton said he is under contract to sell the rights to lease the property, and he is setting his sights on other potential projects.

“My general feel is that it’ll be better for me, it’ll be better for the city and it will be better for the state,” he said. “It’ll be better for the property and neighborhood, as well.”

About a month ago, he said, it became clear that he needed to back out of the development.

Salt Lake City did its best to make the deal work, but the project’s unraveling, Warburton said, stemmed mostly from his inability to access the $2 million grant from the city.

Legal hurdles

City officials say a cascade of problems prevented them from giving Warburton the money.

Tammy Hunsaker, an administrator with the city’s Department of Community and Neighborhoods, said issues with the terms of Warburton’s ground lease prevented the city from being able to immediately get legal assurances that the property would be used for permanent supportive housing for decades. Those legal snags, she said, delayed the issuance of the grant.

“We definitely need to make sure that the appropriate legal mechanisms are in place to ensure that that money will be used as intended for the long term,” she said.

(Francisco Kjolseth | The Salt Lake Tribune) Ville 1659, one of Utah’s largest proposed deeply affordable housing projects, remains closed and fenced off at 1659 W. North Temple, Tuesday, Oct. 3, 2023. After months of delays, the rights to lease the property are under contract to be sold.

Meanwhile, Hunsaker said, Warburton did not respond when the city requested information needed to issue a building permit. Warburton contends he was in communication with the city the entire time, but architects for the project stopped responding because they were waiting for payment.

Still, the city wanted to move forward with paying for part of the project, entering into a funding agreement in June and putting the $2 million into a holding account in July.

One of the conditions for releasing the money was for Warburton to have sufficient funds to complete the project. The construction lender, however, wasn’t ready to close on a loan, Hunsaker said.

Warburton said not getting his hands on the city’s grant prevented him from securing additional funding from the lender.

Weeks later, Hunsaker said, the city discovered Warburton was doing work on the property without a permit. At the same time, she said, water to the property was shut off due to unpaid utility bills, affecting businesses renting space in the complex.

“That was concerning,” she said, “putting local businesses at risk.”

It was then that Warburton started following up on providing the city the information needed to obtain the building permit, Hunsaker said.

“If I was capitalized, the work would have been done under permit,” Warburton said. “We were expediting it to meet the mayor’s imposed deadlines of April 15.”

Meanwhile, Warburton said he was getting charged a water bill of $9,800 a month for a mostly vacant building with two tenants who paid a combined monthly rent of $5,000.

“That’s why it didn’t get paid,” he said.

What will happen to the money?

Despite the project falling apart, taxpayers won’t lose their investment. The Redevelopment Agency awarded the loan, but Warburton said he never accepted the money. The nearly $4 million grant he got from the state last year will be returned, he said.

State homelessness coordinator Wayne Niederhauser said the state Office of Homeless Services will redirect the money toward “addressing the deficit of deeply affordable housing in Salt Lake County.”

Salt Lake City, meanwhile, is now in the process of terminating the funding agreement with Warburton and getting its money back.

Mayor Erin Mendenhall said half of the money the city will get back could be used to bolster funding for the sanctioned homeless camp the city is setting up at 600 West and 300 South.

“For the other million, I’m grateful to have flexibility to be responsive with what needs come up almost every year that were not anticipated but are urgent regarding people needing shelter and service provision and public safety,” the mayor said. “We don’t know just yet, but we’re grateful to have some options.”

The $2 million payment the city committed to Ville 1659 was part of a larger $6 million grant program the City Council approved in December at Mendenhall’s request.

The money was split equally among three projects and was aimed at helping developers get units on line by the time winter overflow beds closed, giving those in temporary shelter space a more permanent option come springtime.

Only one of the three projects — Switchpoint’s The Point Fairpark — has opened.

A transitional housing project for medically vulnerable Utahns also was awarded money by the city, but the deal is being restructured because the location of the proposed development changed. The project’s future is now in the hands of the Sandy City Council, which is scheduled to consider moving forward with the proposal on Tuesday night.

If that project falls through, Mendenhall said Salt Lake City will get that money back, too.

“I very much hope that the Sandy City Council will approve that land use, as they should,” Mendenhall said. “If they do not, then we will continue to partner with the state and county and other cities who work through the Salt Lake Valley Coalition to End Homelessness and investing where we can make the biggest impact as fast as we can.”

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