Florida Trend | Florida's Business Authority

Affordable Housing Challenge

When a moderately priced home in Florida cost under $200,000, "affordable housing" was an issue for low-income people and their advocates. But spiraling housing prices have redefined the dynamic: Affordability as an issue has moved upmarket -- concerns over "police officers, firefighters and teachers" being able to purchase homes are repeated, mantra-like, all over the state.
The shift also finds the business community moving into the advocates' ranks. "I haven't been in a meeting in the last six months where there hasn't been a chamber of commerce type saying please help us with this crisis," says Wight Greger of the Florida Housing Coalition. Steve Auger, the new executive director of the Florida Housing Finance Corp., says the business community "realizes affordable housing is not just a social issue; it's an economic development issue."
With labor and material costs beyond the control of government, some developers are seeking to lower the cost of building affordable housing by asking county and local officials to change regulations involving everything from land use to appearance, taxes, fees and zoning.
Less clear in the discussion is what can be done about homebuyers' expectations and attitudes. Buyers often are unwilling to purchase homes their parents or grandparents would have found acceptable. They may object to older housing stock, the look of a neighborhood, antiquated floor plans and limited number of baths or garage space, for instance. And there's also race. In Pinellas County, for example, a search of the multiple listing service turns up numerous homes for sale under $200,000. Many appear in ZIP codes where most residents are African-American; while the homes are "affordable," many white buyers wouldn't consider them as real options in choosing a place to live -- and many brokers won't show them.
Nor has there been serious discussion about addressing some element of affordability by raising the salaries of the police officers, firefighters and teachers who are now the objects of so much concern.
In any event, some change is already afoot, on a number of fronts. Florida Trend reports on a sample of efforts in both the public and private sectors to address affordability issues.

Falling Behind
Median prices for existing single-family homes for the third quarter of 2005 vs. the change in median income from 2000-05.
StatewideHome price$248,6005-year change90.0%5-year income change15.2%Fort LauderdaleHome price$383,9005-year change115.9%5-year income change6.6%JacksonvilleHome price$193,8005-year change66.9%5-year income change12.6%Fort Pierce/Port St. LucieHome price$267,5005-year change121.0%5-year income change5.8%MiamiHome price$363,3005-year change107.9%5-year income change6.1%NaplesHome price$489,2005-year change114.7%5-year income change7.1%OrlandoHome price$248,9005-year change72.3%5-year income change11.1%PensacolaHome price$170,8005-year change62.0%5-year incomes change19.0%Sarasota/BradentonHome price$338,2005-year change100.8%5-year income change17.2%TallahasseeHome price$169,7005-year change54.5%5-year income change11.8%Tampa/St. Pete/ClearwaterHome price$216,1005-year change79.8%5-year income change9.8%West Palm Beach/Boca RatonHome price$399,9005-year change113.9%5-year income change9.7%
Sources: Florida Association of Realtors, U.S. Department of Housing and Urban Development, Office of Federal Housing Enterprise Oversight Response ... Rental Housing


Developers in the tax-credit market say the state needs to reassert its leadership in creating affordable housing by boosting subsidies.

In Florida, construction of affordable rental apartment units is dominated by just a few developers using federal tax credits provided through the Florida Housing Finance Corp. The developers compete for the tax credits, then sell them to Fortune 500 companies and use the proceeds to finance the apartment projects.
One example: Last month, developer Lloyd Boggio and his Carlisle Development Group, which has built or initiated 8,000 units in 20 counties since it was founded in 1998, completed work on Santa Clara II, a $30.1-million, 204-unit apartment project in Miami. Rents are as low as $646 per month for a two-bedroom unit. Boggio and Carlisle sold tax credits to raise $19.1 million in equity, got $3.16 million in county money, impact fee waivers from Miami and a $6.5-million loan. Carlisle also deferred $753,894 of its developer's fee.
Boggio says if he were starting construction today, the increased cost of labor and materials means Santa Clara would cost him at least $8 million more. And its 204 units wouldn't get built.
The picture is equally ominous around the state: In a typical year, only one or two tax-credit developers return credits because a deal doesn't work out. Last year, however, developers of six projects returned credits to the state -- a record number of givebacks. The developers, once they tried to hire laborers and order construction materials, found they couldn't make their projects work financially.
In response, the Housing Finance Corp. upped the per-unit subsidy. But since the federal government apportions the pool of credits according to a state's population, raising the per-unit subsidy means building fewer units. Through the tax credit program and others, Housing Finance produced 13,000 units in 2004 but only 7,500 in 2005. Now, with the per-unit subsidy costs up, Executive Director Steve Auger expects to do only 7,500 this year as well. (Development costs for projects in southeast Florida are now more than $200,000 per unit, Auger says.)
Boggio has joined those who complain the state has blown its lead relative to other states in providing affordable housing. In 1992, Florida enacted the Sadowski Affordable Housing Act, which increased the documentary stamp tax to raise money for two trust funds for affordable housing. The money goes to local governments and the state to fund housing construction and other affordable housing initiatives.
"The state has been making a significantly lesser contribution to affordable housing," Boggio says. "Every year we fill a smaller percentage of the measurable need, and the trend line is negative," he wrote to the Housing Finance Corp. in November.
Gov. Jeb Bush and the Legislature in recent years raided the housing trust funds to fill the state's needs for education, Medicaid and environmental restoration. In January, however, Bush announced he would recommend an increase in funding for affordable housing in 2006 from $193 million to $243 million, a 26% boost as part of Bush's recommendations for hurricane preparedness and recovery.
Boggio believes the state should treat affordable housing like roads, schools, airports and other public works. "Affordable housing is either infrastructure or it isn't -- things the community needs to function that the free market doesn't supply. The free market cannot supply affordable housing. You cannot build homes and apartments at today's costs and make them affordable. It cannot be done." (CAPTION)LESSONS:"We are learning and teaching in this great social effort to really use 200 acres of municipal land as the economic engine for the redevelopment of the entire community," says Frank Schnidman.

Response ... Inclusionary Zoning

Pay to Play

As they permit big developments, some cities are requiring developers to build affordable housing as part of the process.

At 193 acres, Biscayne Landing in the city of North Miami stands out as the largest tract being developed east of I-95 in Miami-Dade and Broward counties. The $1-billion project, on land leased from the city on Biscayne Bay, will feature up to 6,000 condos and townhouses, a town center and hotel.

Biscayne Landing also stands out as an affordable housing generator -- perhaps the most aggressive example in Florida of what's called inclusionary zoning. Inclusionary zoning requires developers, in return for permission to build a particular project, to create affordable housing. For every condo and home Biscayne Landing builds and sells at the market rate, North Miami is requiring the developer to build an affordable unit elsewhere in the city -- potentially 6,000 homes.

North Miami needs the help. A fifth of the city's families live below poverty level, with a median household income of $30,000 compared with $42,000 nationally, according to the 2000 Census. Nearly half of the city's 60,000 population is foreign born; 65% of residents speak a language other than English at home.

In 2001, the city asked for proposals from the private sector to develop an old landfill on the bay and required developers to address affordable housing. A joint pitch by Deerfield Beach-based Boca Developers and Coconut Grove-based Swerdlow Group beat two rivals to win the competition. The developers agreed to create a for-profit partnership called North Miami Housing that would build the affordable units with its only "profit" a flat 15% administrative fee over costs.

Moreover, while the developers own the majority of North Miami Housing, minorities with local ties own 49% of it.

The city's community redevelopment agency will supply the buyers for the affordable housing by offering people who were city residents when the plan was made a second "mortgage" to bridge the gap between what they can afford and the purchase price of the units. That mortgage will have neither principal nor interest payments and only must be repaid if the buyer sells the home. The redevelopment agency gets its money in large part from the property taxes paid by Biscayne Landing property owners.

"What (Biscayne Landing) does is it creates money to subsidize affordable housing," says Swerdlow Group CEO Michael Swerdlow. The city's community redevelopment agency "is really the one that makes it happen."

CRA Executive Director Frank Schnidman says North Miami Housing also will rehabilitate apartments and residents' homes. "What we're doing is saying the people who lived here when the plan went into effect are in effect the owners of Biscayne Landing," he says. The extra tax revenue Biscayne Landing generates "is their money because it comes from their return on their Biscayne Landing site."

The first North Miami project will be 71 townhouses selling in the low $200,000s, 51 of which will go to subsidized buyers. "There are so many people pushing for this to happen," says Schnidman. "Whether they're Haitian, Hispanic or white, it doesn't seem to matter. We actually have everybody marching in the same direction. We have issues of trust that have to be addressed on a daily basis, but that's true anywhere in America." CAPTION: LANDLORD: Businessman Harvey Vengroff and other principals at his company own more than 1,000 affordable housing units.

Response ... Private Sector

One-Man Band

A Sarasota businessman has developed his own approach to affordable housing that works without government involvement.

SECTORVengroff Williams & Associates, the asset-management firm Harvey Vengroff founded in 1963 in California, employs 300 in Sarasota, 1,100 worldwide and manages more than $20 billion in receivables annually. This year, Vengroff, 64, adds a new chapter to his life experiences -- workforce housing developer. He is putting 31 single-family homes up to sell to his firm's employees, with the help of the firm's principals.

"Kind of a hobby," Vengroff says. Vengroff is no stranger to real estate. He and other firm principals own more than 1,000 rental units they lease out for an average of $650 to $750 a month. They believe they're the largest affordable housing landlord in Sarasota.

LANDLORD: Businessman Harvey Vengroff and other principals at his company own more than 1,000 affordable housing units.The depreciation, which Vengroff estimates at $4 million a year, offsets taxes from their earnings at the firm. Their experience in the collection business means they know how to deal efficiently with a tenant in arrears. As landlords, they know how to buy a dump and make it rentable. Iffy neighborhoods don't bother them. Some units are rented to employees.

In the past, employees looking for a home drew informally on Vengroff's knowledge. Christy Lee, an investigative unit supervisor for the firm, moved with her husband and daughter from Chicago in 2003 to Sarasota. Appalled by home prices (the median sales price in the Sarasota area at the time was $204,100) they decided to rent while looking. Prices kept going up -- the median price was $338,200 last October -- so they looked farther afield. "We were so close to buying five acres and a manufactured home east in Myakka," Lee says.

While walking his dog, Vengroff found her a five-bedroom house near his own home by Riverview High School. He negotiated the sale, assigned her the contract and helped her find a mortgage for the $240,000 house. "I feel I'm a good negotiator myself, but I would never have been able to negotiate the deal he did," Lee says.

Vengroff and the firm now are creating a formal program. Vengroff explains it with a hypothetical. He buys a house for $145,000 and puts in $15,000 to fix it up. He has a line of credit so his out-of-pocket expense is nil. For the first year, the employee pays only interest, taxes and insurance -- no principal. At the end of that year, if all payments have been on time, Vengroff will provide a guarantee for the employee to take out a mortgage.

By then, the house will have appreciated to, say, $200,000. The employee uses half the $40,000 in appreciation as a down payment, and Vengroff takes half. Each year, for the next five years, the employee gets the right to keep 20% of the house's appreciation if it is sold. If held for at least five years, all the appreciation goes to the employee.

Vengroff would like to put 1,600 units on an eight-acre site he owns. He also is willing to buy a house an employee finds and put it in the program. "Harvey is on the lookout all the time, and he finds good buys," says David King, the firm's compliance officer.

Vengroff has a typically breezy way of looking at his initiative: "We just evolved things. If this works, great. If it doesn't, we'll do something else."

Affordable Housing: AROUND THE STATE

>> Tallahassee is putting developers on notice: City council members adopted an inclusionary law that requires 10% of developments with more than 50 units to be priced below about $160,000. The new law will take effect Oct. 1 if council members are not satisfied with voluntary efforts by developers before then...

>> Developer Syd Kitson, who is purchasing the 91,000-acre Babcock Ranch property in southwest Florida, says he will build affordable housing for teachers and other school personnel as part of his planned development...

>> In Boynton Beach in south Palm Beach County, Coconut Grove-based Housing Trust Group and Boca Raton-based Goray Communities plan Green Cay Village, a 420-unit condo, townhouse and rental project targeted at workforce, family and senior buyers. Condo prices start in the low $200,000s and townhouses in the mid-$200,000s. Amenities for seniors include elevators...

>> Palm Beach County is studying whether to mandate that residential developers include affordably priced housing in their developments. Commissioners say a voluntary program isn't working...

>> In east Naples, Habitat for Humanity of Collier County plans to break ground on the first phase of Trail Ridge, a community of 204 villa-style homes. Habitat's Collier operation, the largest in the nation, has built 750 homes since it began in 1978. CAPTION: TRUST HELP: Through the trust, the Eicks were able to buy a three-bedroom townhouse.

Response ... Non-Profits

The Trust Option

Community land trusts are appearing as a vehicle for creating workforce housing.

One year ago, Jennifer Mixon-Eick, her husband, Kevin, and son, Brandon, were living in a one-room efficiency apartment in Marathon. "That's all we could afford in the Keys," says Mixon-Eick. The average sales price in the Middle Keys is $735,000.

Jennifer is an assistant with the local real estate board. Kevin works at a home improvement store. A baby girl was due in June. In May, they were able to purchase a three-bedroom townhouse whose living room is twice the size of their old apartment. The extraordinary low price for the Keys: $170,000.

The Eicks were fortunate to buy one of four townhouses built by the Middle Keys Community Land Trust, founded in 2000 to acquire property and make it permanently affordable. The trust accomplishes that by holding a 99-year lease on the land under the homes and requiring home-owners, if they sell, to limit their gain to 3% appreciation from the purchase price per year. Buyers have had household incomes typically from $40,000 to $70,000.

The trust sold its first four single-family homes in 2004 for $155,000 each. Trust administrator Rick Casey estimates the market rate for a similar house and land would have been more than $450,000.

To make development possible, the trust needs free land and in some cases financial help for construction costs, Casey says. The Monroe County Land Authority acquired the land for the trust's first project. A second parcel was donated by a developer in return for development rights on another site. The trust gets operating income from a 14-unit apartment building the land authority bought and gave to it.

The number of homes created by Florida's four land trusts has been small -- 34. "You've got to start somewhere," says Wight Greger, senior technical adviser for the Florida Housing Coalition. She says 15 Florida counties and cities are working on creating trusts.

The Middle Keys trust, meanwhile, hopes to start work this year on seven homes in Islamorada. "I don't think we'll ever be able to build enough to solve the problem," Casey says. "The economics of Monroe County would seem to say you'll never be able to build enough."

Florida's Community Land Trusts

Florida Community Land Trust Institute: A collaboration between the Florida Housing Coalition and 1000 Friends of Florida, the institute provides technical assistance to communities in evaluating the feasibility of starting up a CLT and also assists with organizational startup of a CLT. Call (850) 878-4219 or contact Wight Greger, greger@flhousing.org, or Jaimie Ross, jaimieross@aol.com.

Bahama Conch Community Land Trust: bcclt.org

Middle Keys Community Land Trust: mkclt.org

Escambia County Community Land Trust: ecclt.com; Executive Director John Wyche, (850) 433-2977

Hannibal Square Community Land Trust: Executive Director Bedilia Campbell, (321) 946-6195, hannibalsquareclt@gmail.com Caption: EASING THE PROCESS: Orlando housing director Lelia Allen wants to step up the city's assistance.

Response ... Regulatory Relief


Orlando has expedited permitting and reimbursed developers for some impact fees.

Orlando was honored last year for regulatory changes that led to the creation of more than 6,000 affordable homes since 1996 -- a third of them built by the private sector with nothing more than regulatory-related incentives.

The federal Department of Housing and Urban Development gave Orlando one of 14 of its 2005 Robert L. Woodson Jr. awards, which recognize local governments that reduce regulatory barriers to promote affordable housing.

Orlando's incentives list is long, but the two most instrumental, says city housing director Lelia Allen, are expedited permitting for affordable homes and reimbursing developers for sewer and transportation impact fees (saving $4,200 per single-family home) and reimbursing a portion of school impact fees -- $952 for apartments, $2,360 for multifamily and $4,340 for single-family homes.

Even so, Allen says, "We have a workforce housing crisis just like every other city in Florida." The median price of existing homes in the Orlando metro area reached $248,900 in the third quarter, up 44% from the same period in 2004, tying the Fort Myers/Cape Coral area for the highest percentage increase in Florida, according to the Florida Association of Realtors. The situation is worsened as apartment complexes are converted into condos.

Allen aims to increase down payment assistance for buyers. She wants to triple assistance for very low income buyers to $30,000 and double help for moderate buyers to $20,000. Very low in 2005 was defined as income under $27,550 for a family of four; moderate income was defined as under $66,120 for the same-size family. One hundred buyers used down payment assistance last year.

CAPTION: SPREADING THE WEALTH: Redevelopment has bypassed Jacksonville's Brooklyn neighborhood. A project headed by Richard Baron's development firm aims to change that.

Response ... Redevelopment

Keeping a Mix

Jacksonville has assembled a parcel to redevelop a rundown neighborhood. The key will be keeping the area from gentrifying.

Jacksonville's Brooklyn neighborhood near downtown hasn't shared in a burst of revitalization around Riverside Avenue that came with the new headquarters buildings for the likes of developer St. Joe Co. Instead, Brooklyn is known for neglect, trash dumping and absentee landlords.

This year, the city plans to begin Brooklyn's redevelopment with hopes for vibrant mixed-income housing, retail and commercial projects. Undertaking the work is McCormack Baron Salazar, a 33-year-old St. Louis firm that made its name with more than 12,000 housing units in 102 projects in 27 cities. Firm CEO Richard Baron is a national leader in mixed-income development. He won the 2004 top honor from the Urban Land Institute for a career of responsible development. The award jury's chair: St. Joe CEO Peter S. Rummell.

Baron's approach is noteworthy. He generally develops rental housing close to downtowns. He focuses on high-quality construction that draws professionals interested in being close to the city center. But he goes off the narrow path to gentrification. His projects typically have half or more of the units reserved for low- and moderate-income families through subsidies. He links existing residents with the social services to support them in life such as job training, child care and elder care.

Baron screens prospective tenants. If low-income families are "responsible and want to stay, fine with us. We don't need to ask everybody to leave. We're not interested in going in and clearing."

Baron hopes to complete an implementation plan for Brooklyn within five months and have earth moving by the end of the year. It will be the firm's first venture in Florida.