Live Local Act 2 Weeks In: Lots Of Movement, Little Certainty

Two weeks after it went into effect, developers have already begun to take advantage of Florida’s new law aimed at spurring affordable housing development. 

The Live Local Act went live on July 1, but it is already being leveraged in proposals in South Florida and across the state. It is reshaping how developers approach affordable housing in Florida, land use attorneys said, by creating a broad incentive structure that provides some relief from the high construction costs and interest rates that have kept projects from breaking ground.

“The amount of interest from market-rate developers and luxury developers that I’ve received from Live Local has been unparalleled,” said Pedro Gassant, a partner at law firm Holland & Knight focused on land use in Miami-Dade County. “I've never experienced as many developers, some of whom have never done affordable housing, who are looking at it and trying to figure out how they can make it work for their project.”

Gassant said he has already submitted multiple Live Local proposals and spends 35% of his time on calls discussing the new law with clients. But while developers and land use attorneys say the bill will spur affordable housing development, the details of the law’s rollout and enforcement are still being developed at the local and state levels. 

The state’s housing authority has been holding workshops to distribute information and solicit feedback while it finalizes the rules.

As the details are being hammered out, lawyers have been studying the law’s finer points to develop proposals that maximize a property’s potential under the law’s provisions. At least one locality has looked to pass measures to retain more control over land use decisions the law is designed to speed up.

“I'm working on several projects now, and everybody I talk to is doing the same thing,” said Dennis Mele, the chair of the land use and zoning practice group at Greenspoon Marder. “We’re looking for sites, figuring out what density you can achieve based on the new statute, figuring out what building height you can achieve based on the new statute, and then also determining where the holes in the law are or [where] the interpretations might come in.”

Among the bill’s broad range of provisions are property tax exemptions for affordable housing development, new state debt funding for affordable projects and allowing developers to increase the height and density of their sites by right if they hit certain benchmarks. 

“The major selling points are the density and the tax benefit,” Gassant said. “I think those two at the end of the day make it more feasible for the developers to be able to develop affordable housing.” 

Related Urban Development Group, the affordable housing arm of Related Group, is one developer working on a variety of Live Local-related proposals across the state, including a project in West Palm Beach, another in Broward County and several in Miami-Dade County. 

The firm is focused on creating mixed-income developments that meet the 40% minimum affordable unit requirement to qualify under the law, which Related executives see as easier to finance and maintain over time. 

“It's very difficult to do strictly affordable deals, and it's not only challenging from a financial perspective, it's not the best approach from a long-term perspective of also having projects that are just predominantly affordable,” said Albert Milo, president of Related Urban Development Group. “You run into long-term sustainability issues as it relates to how viable those projects can be.”

Related is looking to leverage the loans and tax exemptions at later phases of projects that have already broken ground, Milo said. The developer has completed three out of nine phases of Liberty Square, a master-planned community north of Allapattah on a Miami-Dade County Public Housing site, and Milo said Related would look to leverage incentives from the program on later phases.

'A New Tool In The Toolbox'

The tax breaks are available to developers building at least 70 affordable units that would account for at least 40% of a project’s total unit count. They provide a total property tax exemption for projects serving tenants making less than 80% of the area median income, but attorneys and developers told Bisnow they are more focused on the “missing middle” exemption that provides a 75% property tax break for projects aimed at tenants making up to 120% of AMI. 

The law also adds $150M in funding for the next 10 years for loans related to affordable housing. It broadens the loan qualifications to include properties priced for the missing middle — the first time loans have been made available for those types of projects, Milo said. 

“It's a new tool in the toolbox to produce units that weren't previously being produced because no previous program aligned with those income levels,” Milo said. 

The law also ties the maximum density on parcels zoned as commercial, industrial or mixed-use to “the highest allowed density on any unincorporated land in the county where residential development is allowed” and permits developers to build taller than zoning rules allow by tying maximum project height to the tallest commercial or residential development within a mile of the proposed development.  

Stephanie Toothaker, a land use attorney and board member at the Fort Lauderdale Downtown Development Authority, said the tax exemptions and changes to density and height restrictions have created enough incentives to stimulate affordable developments by making them more financially viable.

“If you had a project where you couldn't otherwise put a project with an affordable component in it, you add those three things on top of it, and then all of a sudden it works,” Toothaker said.  

Developers building projects on commercial sites in Broward County have been required since 2019 to build a certain number of affordable units based on the number of market-rate units at a property, but Toothaker said developers have generally opted to pay a $10K-per-unit penalty rather than add the affordable apartments. 

Live Local has turned that calculation on its head, she said, with developers now more interested than ever in building affordable properties and considering a broader range of sites, including in urban cores that have more frequently attracted luxury development. 

“We've got five projects now where developers are looking at triggering Live Local, even though it has a much higher percentage of affordable units,” Toothaker said. “The development community is really excited about this legislation, and I think you're going to see a lot of local projects.”

The tax exemptions have also led developers to revisit projects that might not otherwise have been financially tenable in a macroeconomic environment of high interest rates and construction costs. 

“It's increasing the viability of the projects given how constrained the market is today, with all the different factors that are working against multifamily development,” said Jake Maya, director of acquisitions at Property Markets Group. 

While PMG hasn't yet submitted any proposals, Maya said the development firm is revisiting plans at four affordable projects in the state, including one in Miami-Dade. 

“This just kind of gives a new lever that you can pull to kind of make some of these projects more financeable,” Maya said.

Giving developers and lenders a reason to move forward on projects could be critical this year. 

Miami is the most competitive rental market in the country, according to a RentCafe report from this month, and the city ranks seventh in the country in terms of the gap between job openings and residential unit building permits. The average rent for a one-bedroom apartment in Miami has gone up 55% in two years.

Developers responded with 55,080 multifamily units under construction in South Florida at the end of the first quarter, according to a report from Lee & Associates, and 22,541 market-rate apartments under construction are scheduled to deliver this year, according to a January report from Berkadia.

That is almost double the number of units completed in each of the last three years and is expected to surpass this year’s expected net absorption of 16,179 units. But as interest rates and insurance costs have risen, more developers have delayed starting their projects this year, The Real Deal reported.

A Patchwork Of Local Enforcement

Lawyers and developers expect the law’s enforcement to be uneven across the state, with each locality responsible for following provisions that they say are open to interpretation.

The Florida Housing Finance Corp., the state’s affordable housing agency, has been working to solicit feedback from and provide guidance to developers and lawyers about the law’s implementation.  

It held a workshop on Tuesday to provide guidance on the tax exemptions, which go into effect in 2024. The agency also held online seminars in June around the law’s increased funding for state loans on affordable housing, which the agency said could be applied for through upcoming requests for applications, and its creation of a tax incentive program that the agency said will be open to applications on Oct. 1. 

New projects will still have to comply with zoning requirements related to things like parking and setbacks. If a development requires variances, it is expected that it will still have to go through the traditional approval process involving public hearings and commission votes. 

This could give municipalities a point of leverage when considering projects that would otherwise be approved administratively under the Live Local rules. 

“I've talked to a city planner in one of the cities I go to, and he said, ‘Our biggest protection is going to be our parking ordinance,’” said Mele, who primarily works on projects in Broward County.

He said the city planner told him that his locality could block unpopular developments by denying variances related to minimum parking requirements, a frequent request of affordable housing developers.

The city of Weston in Broward County is considering a further step. The city commission on June 20 passed the first reading of an ordinance that would require a public hearing for development proposals involving affordable housing units. 

The ordinance requires final approval from the commission, but it would effectively delay the administrative approval of a development until the hearing is held and the city manager examines whether the project violates zoning laws or Weston’s comprehensive plan. 

There are questions about whether the Weston ordinance complies with Live Local’s requirement that affordable developments receive administrative approval, multiple attorneys told Bisnow. Milo said he expected the state to issue rules to help ensure that any hearings wouldn’t be an impediment to affordable housing development.  

“I have a tremendous amount of respect for the Weston attorneys that serve the city, but it’s not my read of the law,” Toothaker said. “That’s not how I read it. I think the whole point of the law was to take it out of that public process.”