When the market is pushing prices down to decade-long lows, does South Florida need to create explicitly affordable housing?
A recent industry conference for tax credit developers brought the issue front and center as some market participants questioned the need for additional low-income housing in the region, where property values have dropped more than 40 percent in two years, based on the benchmark S&P/Case-Shiller Home Price Indices.
Organized by San Francisco-based certified public accounting firm Novogradac & Company, this year’s conference addressed issues affecting low-income housing tax credit developers, such as identifying ways to handle economic challenges, resurrecting stalled projects, and financing structures.
But many South Florida industry watchers aren’t convinced that the local market needs more affordable housing projects. In fact, with a housing glut and devalued properties, experts said more affordable housing could prolong the recovery.
Consider the sharp declines.
According to the Florida Association of Realtors, median home prices in Fort Lauderdale rose 85 percent between 2003 and 2006, reaching about $370,000 for an average home. Since then, values have been roughly cut in half.
What’s more, Miami alone has produced about 23,000 new condo units since 2003 — and many of them have been foreclosed upon, auctioned or otherwise sold for pennies on the dollar or rented at heavy discounts.
With all this in mind, Florida Senator Steve Geller, a partner at the Greenspoon Marder law firm in Fort Lauderdale and former chairman of the Florida Senate Committee on Comprehensive Planning, which deals with affordable housing, said he’s still skeptical about the need for new developments to break ground.
“Most affordable housing developers are not active in South Florida and may not be for some time,” Geller said. “The attraction to this type of development used to be low-interest federal loans and state tax benefits available to build low-income housing. Now it makes no sense to build because you can buy properties for less than you can build them, and affordable housing rents, government-assisted or not, are subject to the comp prices.”
Christian Cámara, director of the Florida Insurance Project for the Heartland Institute, a national non-profit research and education organization headquartered in Chicago, agreed: “Affordable housing development in South Florida is all but paralyzed.”
With only $30 million available in the 2009-2010 state budget to subsidize affordable housing projects, developers looking for building opportunities are forced to get creative with funding sources. Miami-based affordable housing developer Carlisle Development Group is finding some success by partnering with local non-profits.
Carlisle recently opened two affordable housing developments, including Miami’s Poinciana Grove, a $23 million community for seniors. The 80-unit high-rise building opened last November and is 100 percent leased. Meanwhile, Carlisle’s Village Allapattah, a $68 million mixed-use 200-unit affordable housing project opened in Miami in December and is also 100 percent occupied.
Carlisle is forging ahead with two new projects: a 100-unit, 10-story high-rise in Miami’s Brownsville Transit Village and phase two of Village Allapattah. Both projects are scheduled to go vertical within the next two to four months — and both projects rely on partnership funding from local non-profits.
Carlisle is partnering with St. Agnes Church in Overtown on the Brownsville project, which also won $15 million in state tax credits. The developer is working with the YMCA Carver as a non-profit partner on Village Allapattah.
Although the environment is more challenging and there has been political and investor second-guessing about the need for affordable housing, Matt Greer, CEO of Carlisle, is confident that the need still exits for affordable housing in South Florida.
“I wouldn’t be moving forward — and the banks and investors wouldn’t be moving forward — if there wasn’t tremendous demand for affordable housing,” Greer said. “We still need workforce housing units that will remain affordable long-term. Affordable housing is an economic development issue that doesn’t go away.”