Thursday, September 17, 2015
A basketball star and a project: The horrendous maze of affordable housing
Updated Sept. 18 at 4 p.m. to reflect correct number of units planned for Wagner Creek. See note at end.
By John Dorschner
Although virtually everyone agrees Miami-Dade has a crying need for affordable housing, developers often find it horrendously difficult to negotiate the complex funding maze.
Case in point: An Overtown project, Courtside Family Apartments, which took eight years to cobble together a bunch of funding sources, even with former Heat star Alonzo Mourning as a partner-cheerleader for the effort.
"It was a soap opera," said Matthew Rieger, chief executive of Housing Trust Group, a Coconut Grove developer that worked with Mourning's nonprofit to get funding.
Rieger uses the same phrase to describe working on a 73-unit apartment building in Miami's Health District. His company literally won a state lottery to get valuable tax credits to fund the project, but because of rising construction costs he needed to scramble to get the deal done by Sept. 30 or risk losing funding.
The needs for the units are huge. About 495,000 households in Miami-Dade spend more than 30 percent of their income on housing, according to the Shimberg Center for Housing Studies at the University of Florida. Federal guidelines say that's too much for poor or median income families.
The worst off are 121,390 poorer Dade renters -- those earning less than 60 percent of average median income -- who paid more than 40 percent of their income for housing in 2013, according to the Shimberg Center. That leaves precious little for food, utilities and other necessities.
Rieger said the situation in Dade is "desperate -- and multiplied by 10. ... The need for affordable housing here is more than almost anywhere in the country."
The concern is not only humanitarian. Urban planners, such as Miami's Elizabeth Plater-Zyberk and Andres Duany, say spreading affordable housing around affluent neighborhoods is the best way of reducing Miami-Dade's stultifying traffic jams.
Rieger puts it this way: "Frankly, it's unacceptable that the richest country on earth can have glass high-rise buildings on the water and the people who clean them have to drive two hours to them and two hours from them."
The major source of affordable housing funds comes from tax credits established by the Reagan administration in 1986. Large corporations can get a dollar-for-dollar reduction in their tax bills by helping build low-income rental housing. In this state, those funds are doled out by the Florida Housing Finance Corporation, an independent state agency with a board appointed by the governor.
Making it more complicated: There are 9 percent tax credits, which pay for almost all of a structure; and 4 percent tax credits, which pay for considerably less.
That's just the beginning of the maze. There's something called the Sadowski Trust Fund for affordable housing, set up in Florida in 1992 (but recent years often raided by the Legislature for general funding); Miami-Dade's surtax on commercial property sales; the SHIP program and other sources.
The Eight-Year Courtside Saga
The saga of Courtside Family Apartments started eight years when Mourning's nonprofit company, AM Affordable Housing, partnered with Housing Trust Group to work on affordable housing.
In 2008, helped by Mourning's reputation of working with the disadvantaged, they obtained from the county a 65-year lease, virtually free, for four acres at the Culmer Center, at NW 4th Avenue and 17th Street.
Their plan envisioned a six-story, 84-unit building that would be the first of three phases (the second will be for seniors, the third is still uncertain). About 11 percent of the Phase One units will be for extremely low income (below 30 percent of area median income), with the rest being for those who earn below 60 percent AMI. Projected cost: $22.8 million.
Twice, the partners tried for the gold standard of funding affordable housing -- the 9 percent tax credits awarded by the Florida Housing Financing Corp. Twice they failed. One problem: FHFC wanted affordable housing built in decent locations, close to grocery stores, libraries and such. Culmer/Overtown has been depopulated in recent years, and many services like grocery stores had closed. "Unfortunately, that kind of infrastructure comes after people start living there," Rieger said.
(Such lack of infrastructure didn't stop some aggressive developers, who created highly temporary grocery stores to try to fool the FHFC into approving their applications. More on that in a later article.)
The Courtside developers' efforts turned to the city of Miami, hoping to get a community redevelopment loan. But the area's city commissioner, needed to back the deal, was Michelle Spence-Jones, who was suspended from office after being charged with attempting to solicit a bribe from a developer. She was replaced for a while, then beat the charges in court and returned to office.
Amid all this turmoil, it wasn't until Commissioner Keon Hardemon was elected to the District 5 seat that Courtside was able to get $7.5 million from the city's Southeast Overtown/Park West Community Redevelopment Agency.
Meanwhile, the county's deadline for Courtside using the Culmer property was running out, and the developers needed the help of Miami-Dade Commissioner Audrey Edmonson to make sure they retained the contract on the property.
Eventually Courthouse received $9 million in the four-percent tax credits through FHFC (which unlike the nine-percenters are not subject to a competitive process), $3.3 millon from City Community Capital, $1.75 million from the county surtax program, with the developers making up the difference.
The groundbreaking ceremony was held on June 22.
"Winning the Lottery"
Compared to Courtside, the 11-story Wagner Creek plan near the University of Miami Hospital had it easy. It literally won a lottery to get nine percent tax credits through the FHFC.
The FHFC has been using a lottery system in recent years because the competitive scoring system used in the past often led to extensive delays caused by losers' appeals and lawsuits.
The lottery system also has sparked criticism. Generally, only two affordable housing deals in Dade get funded annually -- out of about 100 applications.
Doug Mayer of Stone Soup Development, a small Miami company that develops affordable housing in partnership with nonprofits, complains that large companies have an unfair advantage in the lottery system because they can afford to submit many applications, increasing their chances that one or two will be approved.
Rieger said that's a "legitimate concern." In the last round, his company, which has done $2 billion in real estate transactions nationwide, submitted 15 to 20 applications for tax credits in Florida. "I played the numbers game. I know what the rules are, and I use those rules."
It's an expensive process. Each application must be accompanied by a $25,000 check. If the applicant wins the lottery but doesn't have a "quality application" or isn't able to build the project, it loses the deposit.
Another $10,000 to $25,000 is spent in creating each application, including architectural and engineering fees, the deposit securing the land if the funding comes through, and the overhead of the staff to prepare the proposal, Rieger said.
Rieger suggested smaller developers partner with larger companies to increase their chances of success.
By winning a $16 million tax credit for the Wagner deal, the Housing Trust Group should have had clear sailing to finish the project.
In this case, there was a catch, said Rieger: South Florida's construction market is suddenly booming, and many skilled laborers who were eager for work a year or two ago are now fully occupied.
Construction cost estimates came in about $3.5 million more than budgeted. Rieger says they worked hard to cut that increase by about half. They've also received an $850,000 loan from the city from home loan proceeds and are talking with the county housing department about receiving surtax funds.
The public funding is intended to cover most costs of the 68 affordable housing units. Another five apartments will be rented at market rate. "Who knows? Maybe some doctors won't want to make a long drive home after a night shift," Rieger said.
Commissioners Push for Affordable
Rieger is encouraged by announcements from commissioners Xavier Suarez and Barbara Jordan to find a way to get developers of large projects to be required to contribute to the county's Affordable Housing Trust Fund.
Rieger added, "the devil's in the details, of course," meaning whether large developers would be required to contribute significant funds for affordable housing.
Suarez and Jordan announced their intentions several weeks ago, but neither has yet proposed a formal ordinance. A similar effort failed several years ago.
Builders Oppose Mandatory Payments
Truly Burton of the Builders Association of South Florida recently told Miami Web News that her organization was opposed to any mandatory payments or use of "inclusionary zoning," in which developers must include a percentage of affordable housing in their buildings.
She said the builders group wants to work with the commission. “Being creative and flexible is really important.”
NOTE: The original version of this story stated incorrectly that the Wagner Creek apartments are planned to have 64 units, which is what the company lists on its website. Rieger clarified after publication that the project will have 73 apartments, with 68 of them being affordable housing and five rented at market-rate.
By John Dorschner
Although virtually everyone agrees Miami-Dade has a crying need for affordable housing, developers often find it horrendously difficult to negotiate the complex funding maze.
Case in point: An Overtown project, Courtside Family Apartments, which took eight years to cobble together a bunch of funding sources, even with former Heat star Alonzo Mourning as a partner-cheerleader for the effort.
"It was a soap opera," said Matthew Rieger, chief executive of Housing Trust Group, a Coconut Grove developer that worked with Mourning's nonprofit to get funding.
 |
| Matthew Rieger |
Rieger uses the same phrase to describe working on a 73-unit apartment building in Miami's Health District. His company literally won a state lottery to get valuable tax credits to fund the project, but because of rising construction costs he needed to scramble to get the deal done by Sept. 30 or risk losing funding.
The needs for the units are huge. About 495,000 households in Miami-Dade spend more than 30 percent of their income on housing, according to the Shimberg Center for Housing Studies at the University of Florida. Federal guidelines say that's too much for poor or median income families.
The worst off are 121,390 poorer Dade renters -- those earning less than 60 percent of average median income -- who paid more than 40 percent of their income for housing in 2013, according to the Shimberg Center. That leaves precious little for food, utilities and other necessities.
Rieger said the situation in Dade is "desperate -- and multiplied by 10. ... The need for affordable housing here is more than almost anywhere in the country."
The concern is not only humanitarian. Urban planners, such as Miami's Elizabeth Plater-Zyberk and Andres Duany, say spreading affordable housing around affluent neighborhoods is the best way of reducing Miami-Dade's stultifying traffic jams.
Rieger puts it this way: "Frankly, it's unacceptable that the richest country on earth can have glass high-rise buildings on the water and the people who clean them have to drive two hours to them and two hours from them."
The major source of affordable housing funds comes from tax credits established by the Reagan administration in 1986. Large corporations can get a dollar-for-dollar reduction in their tax bills by helping build low-income rental housing. In this state, those funds are doled out by the Florida Housing Finance Corporation, an independent state agency with a board appointed by the governor.
Making it more complicated: There are 9 percent tax credits, which pay for almost all of a structure; and 4 percent tax credits, which pay for considerably less.
That's just the beginning of the maze. There's something called the Sadowski Trust Fund for affordable housing, set up in Florida in 1992 (but recent years often raided by the Legislature for general funding); Miami-Dade's surtax on commercial property sales; the SHIP program and other sources.
The Eight-Year Courtside Saga
 |
| Courtside Family Apartments at NW 4th Ave and 17th Street |
The saga of Courtside Family Apartments started eight years when Mourning's nonprofit company, AM Affordable Housing, partnered with Housing Trust Group to work on affordable housing.
In 2008, helped by Mourning's reputation of working with the disadvantaged, they obtained from the county a 65-year lease, virtually free, for four acres at the Culmer Center, at NW 4th Avenue and 17th Street.
Their plan envisioned a six-story, 84-unit building that would be the first of three phases (the second will be for seniors, the third is still uncertain). About 11 percent of the Phase One units will be for extremely low income (below 30 percent of area median income), with the rest being for those who earn below 60 percent AMI. Projected cost: $22.8 million.
Twice, the partners tried for the gold standard of funding affordable housing -- the 9 percent tax credits awarded by the Florida Housing Financing Corp. Twice they failed. One problem: FHFC wanted affordable housing built in decent locations, close to grocery stores, libraries and such. Culmer/Overtown has been depopulated in recent years, and many services like grocery stores had closed. "Unfortunately, that kind of infrastructure comes after people start living there," Rieger said.
(Such lack of infrastructure didn't stop some aggressive developers, who created highly temporary grocery stores to try to fool the FHFC into approving their applications. More on that in a later article.)
The Courtside developers' efforts turned to the city of Miami, hoping to get a community redevelopment loan. But the area's city commissioner, needed to back the deal, was Michelle Spence-Jones, who was suspended from office after being charged with attempting to solicit a bribe from a developer. She was replaced for a while, then beat the charges in court and returned to office.
Amid all this turmoil, it wasn't until Commissioner Keon Hardemon was elected to the District 5 seat that Courtside was able to get $7.5 million from the city's Southeast Overtown/Park West Community Redevelopment Agency.
Meanwhile, the county's deadline for Courtside using the Culmer property was running out, and the developers needed the help of Miami-Dade Commissioner Audrey Edmonson to make sure they retained the contract on the property.
Eventually Courthouse received $9 million in the four-percent tax credits through FHFC (which unlike the nine-percenters are not subject to a competitive process), $3.3 millon from City Community Capital, $1.75 million from the county surtax program, with the developers making up the difference.
The groundbreaking ceremony was held on June 22.
"Winning the Lottery"
Compared to Courtside, the 11-story Wagner Creek plan near the University of Miami Hospital had it easy. It literally won a lottery to get nine percent tax credits through the FHFC.
 |
| Wagner Creek rendering |
The FHFC has been using a lottery system in recent years because the competitive scoring system used in the past often led to extensive delays caused by losers' appeals and lawsuits.
The lottery system also has sparked criticism. Generally, only two affordable housing deals in Dade get funded annually -- out of about 100 applications.
Doug Mayer of Stone Soup Development, a small Miami company that develops affordable housing in partnership with nonprofits, complains that large companies have an unfair advantage in the lottery system because they can afford to submit many applications, increasing their chances that one or two will be approved.
Rieger said that's a "legitimate concern." In the last round, his company, which has done $2 billion in real estate transactions nationwide, submitted 15 to 20 applications for tax credits in Florida. "I played the numbers game. I know what the rules are, and I use those rules."
It's an expensive process. Each application must be accompanied by a $25,000 check. If the applicant wins the lottery but doesn't have a "quality application" or isn't able to build the project, it loses the deposit.
Another $10,000 to $25,000 is spent in creating each application, including architectural and engineering fees, the deposit securing the land if the funding comes through, and the overhead of the staff to prepare the proposal, Rieger said.
Rieger suggested smaller developers partner with larger companies to increase their chances of success.
By winning a $16 million tax credit for the Wagner deal, the Housing Trust Group should have had clear sailing to finish the project.
In this case, there was a catch, said Rieger: South Florida's construction market is suddenly booming, and many skilled laborers who were eager for work a year or two ago are now fully occupied.
Construction cost estimates came in about $3.5 million more than budgeted. Rieger says they worked hard to cut that increase by about half. They've also received an $850,000 loan from the city from home loan proceeds and are talking with the county housing department about receiving surtax funds.
The public funding is intended to cover most costs of the 68 affordable housing units. Another five apartments will be rented at market rate. "Who knows? Maybe some doctors won't want to make a long drive home after a night shift," Rieger said.
Commissioners Push for Affordable
Rieger is encouraged by announcements from commissioners Xavier Suarez and Barbara Jordan to find a way to get developers of large projects to be required to contribute to the county's Affordable Housing Trust Fund.
Rieger added, "the devil's in the details, of course," meaning whether large developers would be required to contribute significant funds for affordable housing.
Suarez and Jordan announced their intentions several weeks ago, but neither has yet proposed a formal ordinance. A similar effort failed several years ago.
Builders Oppose Mandatory Payments
Truly Burton of the Builders Association of South Florida recently told Miami Web News that her organization was opposed to any mandatory payments or use of "inclusionary zoning," in which developers must include a percentage of affordable housing in their buildings.
She said the builders group wants to work with the commission. “Being creative and flexible is really important.”
The association believes there “should be market-based incentives” to make housing available to regular working folks, who are at 80 to 140 percent of area median income. Presently affordable housing is concentrated on those below 80 and/or 60 percent of AMI. An average $300,000 condo doesn't work for those earning up to 140 percent AMI, and it's crucial they have enough housing, Burton said.
Rieger said he's also been working with Miami City Commissioner Francis Suarez to discuss the need for affordable housing. "Without these kind of people, we're never going to get to the place we need to be." NOTE: The original version of this story stated incorrectly that the Wagner Creek apartments are planned to have 64 units, which is what the company lists on its website. Rieger clarified after publication that the project will have 73 apartments, with 68 of them being affordable housing and five rented at market-rate.
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