Developers in Fort Lauderdale are taking advantage of the state’s Live Local Act by designating affordable housing units in apartment projects that are already under construction or completed, according to a recent panel at the Urban Land Institute’s (ULI) Fort Lauderdale Forum.
Panelists discussed how the Live Local Act is encouraging developers to add below-market rent units later in the development process, rather than only at the pre-approval stage. One example highlighted was The Arcadian, a 502-unit project developed by Fuse Group Investment Companies. Eyal Peretz, founder of Fuse Group, said during the panel that phase one of The Arcadian will be finished by year-end and some apartments will be designated as affordable housing under the Live Local program. “The Arcadian ‘started as a non-Live Local project and went through some transformation, and we are going through a process right now where we are about to submit [it as] a Live Local project,’” Peretz said.
With high interest rates and rising construction costs making many residential projects less feasible, panelists noted that incentives from the Live Local Act can help make marginal developments profitable. These incentives include property tax breaks for offering affordable or workforce housing units with rents below market levels.
Doron Broman, founder and CEO of Moderno Development Group, explained: “Every project we’re looking at, we’re looking at adding a Live Local component to it. Most projects don’t pencil in today. So, with the Live Local Act that gives you additional income, that means, maybe, the project will pencil in.” Moderno began building Rivr Lofts—a 29-story building with 352 apartments—before passage of the law but is now considering converting some smaller studio units into affordable housing under Live Local. “We are looking right now at converting some of the units into the Live Local pool,” Broman said. He added that these units would target people earning up to 120 percent of area median income: “So, we’re talking about aiming units at people making around $90,000 a year. A lot of our residents already fit that criteria, so it’s worthwhile for us to lower the rent a little bit more and get the tax benefit.”
However, not all developments can easily blend market-rate and below-market rate apartments within one building. Russell Galbut of Crescent Heights cautioned: “It’s really a small percentage, and that’s because you have 60 percent of your building that has to pay for the other 40 percent. If it doesn’t work in paper and pencil, it will never work in brick and mortar.” Galbut also noted another advantage provided by state law: expedited municipal approval for developments with affordable housing components without lengthy planning board or city commission reviews. “Time kills many great projects,” he said.
Financing remains an obstacle for many mixed-income residential developments created under this law. Peretz commented: “We see an issue with financing … I’m hoping it’s going to change …. But I’ve been hearing from a lot of developers with issues on that side of things.” Panel moderator Alfonso Costa Jr., chief operating officer of Falcone Group agreed on challenges when working with lenders such as Fannie Mae and Freddie Mac: “Working with the takeout agencies Fannie Mae and Freddie Mac on takeouts, and then HUD as well, both on the new construction and takeout side—it’s more of an educational process.”
