South Florida Affordable Housing is a political mess because of tradeoffs that need to happen before anything real can happy in the marketplace.
Catching up on some news today, I saw some big issues being brought up in the ongoing Affordable Housing debates in Palm Beach County, Florida and Broward County, Florida.
I want to isolate a few interrelated issues to get the ball rolling as the sum total of Affordable Housing is just a big complicated mess. Hopefully this will inspire some people to start delving into some of the problems and open their eyes to the areas for improvement everywhere - not just Palm Beach County, Florida.
1) Depressed Real Estate Market
Right now, builders are seeing doom and gloom. They don't believe that the market is there for big housing projects and they are partially right. In Boynton Beach, Florida and Delray Beach, Florida, there are a few new projects that are either in the works or being completed currently.
Builders, though, sense the consumer panic and see so many listings sitting unsold. They also see their other projects having mass cancellations and houses built and empty. This creates havoc in their bookkeeping...but it also hurts their lending potential when they want to start a new multimillion dollar projects. Lenders require certain amounts of presales, certain occupancies and in Affordable Housing certain demographics targetted.
Because of this, many Builders are actually trying to scale back on their plans for new projects!!
This is not a good sign as these are the units and the buyers that we need to kick start. The ultra-luxury market moves on its own. The rental market moves in waves... the affordable market seems to be the toughest market in Palm Beach County, Florida despite scarcity... part of this is due to the property tax issues.
Scaling back the projects just means that the consumer doubt is creating a ripple effect and scaring builders.
When developers decide to scale back, they have to make up the revenues somewhere... so they ritz up the units, make them a little bigger... and sell to a higher income bracket.
When you lower the density - the cost per unit rises so the sales price has to rise as well!
When a developer or a government agency reduces a project from a 50 unit per acre density to 30 units per acre, that means that people at the lower income levels are less likely to find suitable and affordable homes.
3) Infrastructure and Amenities
Sometimes governments overestimate the ability of existing roads and commercial areas to sustain growth - and underestimate the amount of additional growth that needs to be added in that light.
When as few as 400-500 units are added, local merchants cannot sustain the growth and need to expand. If there is not adequate new space made available, then these merchants will not be able to handle the new growth.
Also, Infrastructure also needs to assume growth of schools, fire and emergency services and police... something the current budgets don't always allow.
4) Tax Dollars
This is a double edged sword. As we focus on property tax reform, we also have to remember the effect it will have on the localities and how they will deal with the monies that may or may not come in depending on the tax plan that is adopted. Hopefully the newest tax plan will still provide some property taxes so local governments can still have revenue from these new, below median price housing. In Palm Beach County, Florida - median house price is $374,100. In Broward County, Florida it is $372,200. With the current tax plan under debate... a $200,000 home would bring in only 1/2 what it is bringing in today.
Municipalities are holding back all projects right now in reaction to the future budget cuts... and this includes - Affordable Housing!
Again... these are only a few of the issues on the hot seat right now. There are many more we can and will discuss in the future.
Lawmakers and other local commissioners realize some of the issues. Developers realize others...