A “coming soon” sign posted at the construction site of an affordable housing development in Hollywood, a market brimming with new projects, prompted an unexpected response.
More than 21,000 people applied to live in the 113-unit future development, called Pinnacle 441. Pinnacle opened a lottery for the units March 15 and closed it 10 days later.
It’s no secret that South Florida is facing a huge shortage of affordable housing, exacerbated by the surge in rents and housing prices propelled by the pandemic boom. Coraly Rodriguez, a partner at Pinnacle, said the demand at Pinnacle 441 “puts into focus the housing crisis.”
“We have a lot of people that are going to be disappointed and that was heartbreaking,” Rodriguez said. “We have people who are living hand to mouth right now, working two and three jobs and [they] can’t afford any sort of housing in the city.”
Florida is short nearly 450,000 homes for extremely low-income renters, according to an estimate from LandTech, using data from the National Low Income Housing Coalition. The issue is more acute in South Florida. Miami-Dade County is lacking 90,181 units for households earning below 80 percent of the area median income, which comes out to about $75,000 a year, a report from Miami Homes For All found.
Lawmakers in Tallahassee aimed to tackle the issue last year with the passage of the Live Local Act, a law that set aside more than $700 million in funding and created tax and zoning incentives for developers if they set aside a portion or all of their projects for residents making up to 120 percent of the area median income.
The AMI in Miami-Dade County is $79,400. For a single-person household, 120 percent of AMI is currently $95,400 a year in Miami-Dade County; for a two-person household, it’s $108,960; and for a family of three, it’s $122,520.
The incentives largely bypass local municipality rules, sparking conflicts in some cities between developers looking to build taller and denser projects and cities trying to block that.
During the past session that ended in April, Florida lawmakers voted to pass an amendment bill that will, among other points, create a mechanism for a property tax exemption for up to 75 percent of the assessed value of the workforce units in a project that also has market-rate units. It provides a property tax exemption of up to 100 percent if the entire project is workforce housing. This alone could spur the construction of hundreds, if not thousands, of units, developers say.
Gov. Ron DeSantis signed the amendment bill, called Florida Senate Bill 328, into law on Thursday.
It also allows Live Local projects to encompass up to 150 percent of the highest currently allowed floor area ratio in that county or city; and reduce or eliminate parking requirements for projects if they’re within a half-mile of a major transportation hub or in a transit-oriented development.
Live Local has been dubbed an affordable housing bill, but it is more of a workforce housing bill because of the higher income limit. Pinnacle 441, for example, is not a Live Local project. Like many other traditional affordable housing developers, Pinnacle is limited by how many lower income projects it can build because of the fierce competition for low-income housing tax credits and other subsidies, such as local grants.
Still, Live Local is expected to relieve some pressure for housing and could be a win-win for market-rate developers looking to set aside at least 40 percent of their units for workforce housing.
“We are looking to see how we can make market-rate deals work with Live Local and serve that ‘missing middle,’” Rodriguez of Pinnacle said, especially as “it is becoming more competitive and more difficult to procure local subsidies.”
Waiting for the law
Developers have been hiring attorneys and analysts to determine if they can use Live Local’s latest amendments. Some plan to use the tax incentive and density increase, while others the FAR clarification SB 328 provides.
“We’re doing that [analysis] on a regular basis for clients in the city of Miami, Miami-Dade County,” said attorney Steve Wernick, a partner at Miami-based Day Pitney. “A lot of developers were waiting for this bill to make decisions.”
Pedro Gassant, a partner at Holland & Knight, said his clients were waiting for SB 328 to become law to submit their applications. In addition to the parking reductions, property tax discount and FAR clarifications, Gassant said developers are also eyeing the tweak that applies the Live Local Act to projects with mixed-use components, like condos.
Some land sellers are also looking to capitalize on Live Local. Cary Cohen, a broker with Blanca Commercial Real Estate, said that his team has been underwriting sites in Miami and Miami-Dade to see how Live Local could be used.
The market will ultimately determine the value of these properties, but that will take time. Eventually, Live Local could result in an additional 2.3 billion square feet of development across commercial sites in South Florida, according to data provided by LandTech.
“For a lot of sellers, it becomes astronomical [the price] they’re asking,” Gassant of Holland & Knight said. “They’re baking in a lot of additional value into their site that may not make sense.”
Live Local in action
Developer Asi Cymbal is already taking advantage of the property tax benefit at Laguna Gardens, a 341-unit garden-style apartment complex in Miami Gardens.
The 14-acre development was completed in April. Cymbal’s Cymbal DLT Companies began construction before Live Local was signed into law, but all of the units are for households earning at or below 120 percent AMI. That means rents start at about $2,000 a month for 650-square-foot one-bedroom apartments.
Cymbal said demand has been very high. The ad valorem tax incentive allows Cymbal DLT to “artificially keep rents low.” He estimates he will save nearly $1 million in taxes a year.
“In South Florida, those property taxes are substantial. That’s what makes this program work for us, without increasing density or changing the zoning, to provide for more attainable luxury housing to a broader swath of our workforce,” he said.
Cymbal said he and his team are examining all of their existing developments to see if they can use Live Local.
“Here at Laguna Gardens it made sense because it was a garden-style community. It has surface parking. It was efficiently built by our construction company,” he said. “It’s not always a good fit.”
The higher cost of land in more urban or waterfront areas could make it less appealing to use Live Local.
In Fort Lauderdale, Moderno Development Group and 75Invest Group are planning a 27-story, 290-unit rental building south of the New River at 501 Southwest Second Avenue that will set aside 71 units for households earning up to 120 percent of the AMI. Doron Broman of Moderno said the property tax discount is a “game-changer.”
A studio apartment in Fort Lauderdale that would typically rent for $2,500 could, in a Live Local project, rent for $2,000 a month, he said. Broman is also considering the density bonuses for two possible projects in Miami’s Wynwood.
Like Cymbal, Broman said the property tax discount allows him and his partner to discount the rents when developers are struggling to make projects work on paper.
“Construction costs are higher, financing [costs] are higher, but rents stayed where they are,” Bronan said, speaking generally about the rental market. “Not a lot of new projects are getting built.”
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