Construction is under way on Norstar’s Renaissance Preserve in Fort Myers. Tax credits and low-interest loans allow developers to build affordable housing projects with very little of their own money. But the incentives have encouraged overbuilding of ‘middle market’ affordable housing in parts of the state, including Lee County. [Photo: Jason P. Smith]

In 2000, developer Vestcor Cos. completed construction of a 360-unit apartment complex on Jacksonville’s west side called Courtney Manor. The garden-style community, with a pool, clubhouse and after-school programs, was financed with taxpayer funds as part of Florida’s effort to help alleviate a shortage of affordable housing. Courtney Manor is considered “middle-market” affordable housing — residents earn 60% or less of the area’s median income.

Florida’s system for building complexes like Courtney Manor combines federal and state funds to make the projects attractive to private builders like Vestcor. Tax credits and low-interest loans allow developers to build the projects with very little of their own money.

Courtney Manor in Jacksonville competes for residents like Desiree Garrison and her children in the overbuilt middle-market affordable housing market. [Photos: Kelly LaDuke]

But the incentives may have gotten a bit too sweet. Developers have overbuilt middle-market affordable housing in several parts of the state, including neighborhoods in Indian River, Duval, Collier and Lee counties. In Jacksonville, six nearly identical affordable communities have gone up in the same neighborhood as Courtney Manor, where occupancy rates have fallen from a high of 94% in early 2007 to the low 80s a year later.

These days, large pink and green flags wave outside Courtney Manor to lure renters. A sign screams, “Free rent!” The other complexes have similar flags and similar offers. Meanwhile, the system continues to dole out incentives, and developers, hungry for projects amid the real estate downturn, line up to build even more. A seventh taxpayer-subsidized complex is proposed in the same neighborhood as Courtney Manor, with $8.5 million in tax-exempt bonds from the federal government and a $4.7-million, 1% interest loan from the state.

“Affordable developers are good at overbuilding when given these levels of resources,” says Stephen Frick, president of Vestcor. Company executives have complained to the Florida Housing Finance Corporation, the state agency that oversees the projects, that the new complex will “cannibalize” the existing ones.

The real estate bust is partly responsible for the empty apartments. Rents for single-family homes have fallen to levels competitive with those of affordable subsidized apartments, which rent for $750 to $1,275 a month in Jacksonville.

“We want and need redevelopment of the urban areas” — not in the suburbs, where developers continue to build affordable housing because land is cheap there. — Wight Gregor, director of Jacksonville’s Housing and Neighborhoods Department

But the federal and state affordable housing programs also contribute to the problem. For one, the structure of the financing steers private developers to middle-market projects by making them the only kind of affordable housing that is profitable to build. It’s virtually impossible for private developers to build, at a profit, the types of projects most needed in many parts of Florida — those for extremely low-income residents. (Federal housing resources for people with extremely low incomes have dropped steadily in recent years.)

In addition, the state’s affordable housing finance machine awards public money to developers without enough input from local governments and non-profits. As a result, developers continue to build complexes where land is cheapest, rather than where local officials believe housing is needed most. “We didn’t want the exurban, large-scale development in the first place,” says Wight Gregor, director of Jacksonville’s Housing and Neighborhoods Department. “We want and need redevelopment of the urban areas.”

Jacksonville housing officials say that Duval County now finds itself with a surplus of suburban, garden-style affordable housing while lacking other kinds of affordable housing the city needs more. For example, the county is No. 1 in Florida in “extremely low-income, severely cost burdened households,” says Barney Smith, chairman of the Jacksonville Housing Finance Authority.

Meanwhile, the state continues to focus on suburban affordable rentals even as overall funding for affordable housing shrinks.

The state’s Housing Trust Fund is capitalized primarily by collections of documentary stamp taxes, which are assessed on each home sale. During Florida’s housing bubble, about a half-billion dollars a year was pouring into the fund, making it the country’s largest. Hand-wringing about a lack of workforce housing at the height of the real estate run-up — and lobbying by apartment developers particularly — helped keep funds flowing from the trust fund to the State Apartment Incentive Loan program, or SAIL.

With real estate slumping, doc stamp collections have fallen by more than half; the trust fund is expected to collect less than $240 million this year. At the federal level, the mortgage crisis has large investors and banks shying away from tax- exempt bonds and tax-credit deals.

Yet despite the funding crunch, the housing finance corporation spent more money on the SAIL program this year than any other year in its history: $115 million, compared to SAIL’s average appropriation of $41.7 million a year. The Florida Legislature ordered the extra funding after lobbying by some of Florida’s largest developers of affordable apartments, such as Winter Park-based Atlantic Housing Partners, which has 22,000 rental units across the state.

The frenzy for the SAIL money is even more intense for the 2009 funding cycle. The finance corporation has received more applications to build these projects — 282 statewide — than ever before. In the deflated economy, government subsidies make middle-market affordable housing one of the few lucrative markets left in the state, says Steve Auger, executive director of the housing finance corporation. “We had a stable of Florida developers who had stopped doing these deals in favor of condo developments,” says Auger. “Now they’re back.”

The developers returned just as the housing corporation was considering steering $100 million in Housing Trust Fund money for down-payment assistance to help get first-time home buyers into some of the thousands of foreclosed homes on Florida’s market. At a recent meeting of the housing corporation, W. Scott Culp, executive vice president of Atlantic Housing Partners, argued that demand for apartments is still strong in many parts of Florida, and that giving people down-payment assistance who should remain renters could perpetuate the mortgage crisis. He and others argue that more building will stimulate the economy.

“Basically, we have a scenario where he who has the biggest mouth gets the most money.” — Stuart Scharaga, developer and member of the Florida Housing Finance Corporation board

Stuart Scharaga, a Palm Beach County real estate developer appointed to the housing finance corporation board last year by Gov. Charlie Crist, responded harshly. Instead of spending housing dollars where they are needed most, he said, “basically, we have a scenario where he who has the biggest mouth gets the most money.”

In the end, the housing finance corporation voted to spend the $100 million on the first-time home buyer programs. In addition, the housing bill passed by Congress this summer will funnel $1 billion into Florida’s housing market, including $541 million in federal Community Development Block Grants to help communities hardest hit by the downturn rehabilitate foreclosed properties and help get first-time home buyers into them.

But don’t expect the mid-level building boom to stop anytime soon. Back on Jacksonville’s west side, the state is going forward with credit underwriting on a loan to help Richmond Group build that seventh apartment complex in the area.

What is Affordable Housing?
Type of housing	Income for family of four	Monthly rent/ mortgage	Financing	Builder
Low income/ affordable (middle market)	$30,000 - $50,000 (50% to 80% of median income)	$750 - $1,275 (Housing tax credits mandate maximum rent of 60% or less of annual median income, or about $950.)	Bank financing; limited grants from the federal and state government; local contribution required for tax credit financing	For-profit developers
Very low income	$19,000 - $32,000 (30% to 50% of median income)	$475 - $750	Bank financing; housing tax credits with local contribution; other federal, state and local grants	Non-profit developers
Extremely low income	$13,000 - $19,000 (20% to 30% of median income)	$300 - $475	No or very limited bank financing possible; housing tax credits; federal homeless and disability grants	Non-profit developers
Subsidized housing	Below $12,000 (less than 20% of median income)	Below $300	Requires operating subsidy	Housing authority; non-profits offering transitional housing to special needs clients
Note: Information for Jacksonville market. Source: Local Initiatives Support Corporation of Jacksonville