State Rescued Stalled Affordable Housing Projects With Live Local Act Funding

Florida legislators passed the Live Local Act in 2023 with the goal of funneling millions of dollars to new affordable housing construction to combat a growing housing crisis.

But pandemic-era price spikes forced lawmakers to pivot, redirecting nearly half of the money awarded in the first year to projects already in the works when the law was passed, shrinking the pool of funds for future development.

The Florida Housing Finance Corp. has awarded $273M in low-interest loans from the Live Local Act since the law went into effect last July, according to a Bisnow analysis of records from the quasi-public agency that administers funds for Florida’s housing programs. 

But $117M, or 43% of all funds awarded through August, went to 30 existing projects already in FHFC's development pipeline after the agency made rescue capital available to developers facing pressure from pandemic-era inflation.

Click here to see the 15 South Florida projects to win Live Local Act funding.

Gov. Ron DeSantis signed the Live Local Act when development costs were exploding across the country, especially in South Florida. 

The pandemic created a rolling wave of new arrivals, increasing demand for materials and labor and doubling the price to build a home in South Florida. Commercial developers raced to meet demand, and the line of condo and apartment towers waiting to break ground helped drive up construction costs. 

As a result, state leaders diverted more than $100M in Live Local funding away from new development and toward existing projects that were facing inflation-related cost overruns.

“Areas like South Florida, with limited and very expensive land costs, are a literal Rubik's Cube when it comes to the complexity of structuring deals to ensure affordable housing rent standards,” Rodrigo Paredes, who leads development at Housing Trust Group, said in an email. 

“The only avenue to make affordable housing a reality in the two or three years of unprecedented inflation that originated from COVID, was for the Federal, State, and Local governments to come together. This is where the Live Local Act is beneficial to fill a badly-needed capital funding gap.”

Finding The Money To Fill The Gaps

The Live Local-related funding flowing through FHFC is part of the $1.5B in total investment committed by the state legislature over the next decade as part of the law. Loans awarded to developers are administered through the State Apartment Incentive Loan, or SAIL, program, which are typically designed as bridge loans or gap financing and cannot exceed 20% of a total development’s cost. 

The new funding is just a piece of the Live Local Act, a comprehensive housing and zoning reform law that was further expanded in the most recent legislative session. It initially made its way through the Florida legislature in March 2023 as lawmakers faced pressure to address a housing affordability crisis that had been brewing in the state before being supercharged by pandemic-era inflation and migration.

The problem is especially acute in Miami-Dade County, which saw its population decline between 2019 and 2022 despite the influx of $7.4B in additional wealth to the county in 2022 alone. 

Longtime residents are being priced out by new arrivals, and despite a burgeoning development pipeline, Miami topped RentCafe’s list of most competitive rental markets in 2022 and 2023, with the tightest fundamentals of the country’s 139 largest markets. 

The region has the highest proportion of cost-burdened renters in the country, with 60% of renters spending at least 30% of their monthly income on housing, according to a Census Bureau report. More than three-quarters of South Florida residents today report difficulties paying typical household expenses. 

State and local officials recognize the need for more affordable units, but getting projects out of the ground has become increasingly difficult, thanks in part to inflation and the pandemic-era explosion in development that led building costs to rise by roughly 40% nationally. 

Construction costs jumped 38% in the four years beginning with February 2020, with concrete prices spiking 77% and power equipment jumping 72%, according to U.S. Bureau of Labor Statistics and Producer Price Index data. 

Budgets for ongoing housing developments were squeezed across South Florida, and while market-rate developers could leverage rapidly rising rents to offset costs, affordable housing developers with locked-in prices needed to find new funding sources. 

FHFC responded by working with developers to unlock more financing streams, including by pulling future housing tax credits forward to allocate to struggling projects, said Timothy Wheat, partner at Miami-based developer Pinnacle Housing, which has received one Live Local-related award for $4.3M to help build a 110-unit project in Miramar.

“Supplemental money would have come somewhere from Florida Housing. The agency was dipping into their reserves before the passage of the Live Local Act,” Wheat said. “If the Live Local Act hadn't passed, the ability to fund projects in the future after the pipeline experienced the construction cost rise would have been severely hampered.”

An FHFC spokesperson declined to make anyone available for an interview and didn't answer a list of emailed questions. 

State Funds Flow To South Florida

The Live Local Act’s sweeping provisions included new tax exemptions and density bonuses for developers building workforce housing, defined as up to 120% of area median income, or a $95,280 salary for a single person living in Miami-Dade County. 

While the provisions for workforce development have captured the most attention, the law also provided additional funding sources for developments with units catering to low-income tenants. To qualify for funding under SAIL, at least 20% of a project’s units have to be priced for tenants making no more than 50% of AMI, or alternatively, 40% of unit rents have to be capped at 60% of AMI. In Miami, that amounts to an annual salary of $39,700 or $47,640 for a single person.

Funds are awarded through a request for applications process, which sets aside tranches of money for projects that fit certain criteria. One set of awards thus far, for example, focused on affordable housing developments near military bases while another targeted projects in the Florida Keys specifically. 

One particular request for applications became a lifeline for struggling developers already working on projects with FHFC support. 

Applications for these requests, called Construction Inflation Response Viability Funding, were among the first offered by FHFC, and the program was explicitly designed to provide additional funding to projects that were already receiving FHFC assistance but were running out of cash because of pandemic-era price increases. 

The loan program had $164M in available funding, and FHFC awarded all 30 projects that were eligible and applied a combined $117M in assistance.  

Projects across South Florida have won 40% of the awarded cash to date, with developments that had already received the FHFC funding accounting for 11 of the 15 Live Local applications approved in the region. Miami-based Housing Trust Group secured five awards for projects, the most of any South Florida developer.  

The largest awards statewide were two $25M allocations, one of which went to an Atlantic Pacific Cos. project in Miami’s Overtown neighborhood called Culmer Place V. The 375-unit mixed-income project is being built in partnership with Miami-Dade’s public housing authority as part of a broader 1,100-unit redevelopment project. 

Atlantic Pacific plans to break ground on the apartments in early 2026, a spokesperson for the developer said. 

Pushing Past Internal Politics

FHFC was tasked with distributing the new funding at a time when the agency was in turmoil. Complaints about the work environment under the agency’s executive director, Mike DiNapoli, were piling up, leading to his August 2023 suspension from the role.

DeSantis quickly overruled the board to reappoint DiNapoli, although he would eventually resign amid mounting pressure from inside the organization and increased media scrutiny of past financial challenges.

Despite the internal power struggle, which led to the departure of at least 15 employees, developers said FHFC has been working to push projects through credit underwriting and get funds disbursed.  

Housing awards are distributed on a rolling basis through the competitive application process, with FHFC currently accepting applications for one Live Local-funded program that earmarks up to $100M for affordable housing development in mixed-income, mixed-use and urban infill developments.

“Quite frankly, my hat is off to Florida Housing, because they did all this in essence without an executive director,” said Michael Donaldson, a shareholder at Carlton Fields who frequently helps developers secure FHFC funding. 

The Live Local Act and its 2024 amendments passed through the legislature with broad bipartisan support, with Republican lawmakers acknowledging that state aid will be needed to dig Florida out of its affordability crisis. 

The state only has 25 affordable units for every 100 extremely low-income renters, according to JP Morgan, and the titans of industry in Miami have warned that a lack of affordable housing will hold back the city’s growth.  

Miami’s skyline is amid a transformation spurred by pandemic-era migration, but the dozens of towers that are sprouting from the ground are anything but affordable. Instead, developers are partnering with luxury brands, from Dolce & Gabbana to Aston Martin, to build condos in an attempt to capitalize on the influx of wealth to the city.

Apartments are also getting built — there are nearly 50,000 units under construction across South Florida, according to Lee & Associates — but the vast majority of new construction is targeting the top third of the market. 

When affordable projects do get built, demand is overwhelming. Pinnacle and the city of Hollywood recently completed Pinnacle 441, a 113-unit project with rents capped for residents earning up to 60% of AMI, or a $53,460 salary. 

Pinnacle expected high demand for apartments at the project and opted to offer the units through a lottery, but it wasn’t prepared for the deluge of applications that came.

“We had 21,000 people register in 10 days for 113 units. That tells you there's a lot of pent-up demand,” Wheat said. “There were 113 very happy people and 20,887 unhappy people.”