South Florida Affordable Housing: Political Trade Offs...

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.

2) Density

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...

We as real estate professionals are left to debate the differences and create a sense of urgency to unite the powers that be to create a plausible and meaningful solution to this problem.

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
www.TheMortgageGoToGuy.com
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Property Tax Update: Getting Closer...but very underwhelmed

So Florida Lawmakers took a moment to announce they've come closer to finalizing the Property Tax Reforms that have been the subject of special legislative sessions that seem positively never-ending to residents in the state.

The local media has been buzzing with anticipation of the final announcement of where the taxes will roll back - but based on the latest numbers, I am personally quite underwhelmed.

There were issues that went untouched entirely and property owner classes who really are only getting token reductions while the "target property owner class" really didn't get that big a boost by the numbers.

Here's the breakdown:

• Taxes will be frozen at 2006 levels at the City and County levels... this coming from ideas that said there would be an actual rollback as far as back to 2001.
• Taxes will be reduced by 0-9%... those that get a 0% reduction are likely going to be upset... but 9% isn't a lot considering some assessed values have gone up considerably more than that in recent years.  Counties and cities that have raised taxes the most in the past years will have the steepest reductions.  Palm Beach County Florida is due 9% for sure.   Some cities like Belle Glade Florida that have not raised taxes would not reduce taxes. 
• Revenue growth for Cities and Counties would be capped in the future based on growth of personal income in the state... so local surges in population and job creation would be countered if the entire state doesn't grow in synch.
• Local governments could veto their caps, but only with a unanimous vote.
• School Taxes will be untouched in the first year... but that's just a warning to local governments to prepare themselves. With thousands of vacant teaching positions, cutting taxes won't help when trying to fill those spots!

Homestead...ugh, what an issue.  My past posts detailed homesteading and the new percentage system.  Here's how it will work...but only after a majority vote (possibly not a simple majority but a 60% majority will be needed) on January 29, 2008 in the Florida Presidential Primary Election:

• 75% off the first $200,000 in value... house assessed for $200,000 would pay taxes on $50,000 value.
• 15% off the next $300,000 in value... house assessed for $500,000 would pay taxes based on $305,000 value ... i.e. $50,000 for the first $200,000 and $255,000 on the next $300,000 in value
• No further exemption for homes valued above $500,000

Pros:

• This plan definitely targets people who own or will own property in the low and moderate income ranges
• This plan is far superior to a flat $25,000 homestead which does little at the top or bottom of value

Cons:

• This plan misses the mark in many counties where median property values are higher than $200,000
• This plan does not help a huge sector of middle income property owners at the $400-650K range which is a large section of future middle-income buyers.  This price range is basically where the family homes come in for many of the "middle class" citizens live that Legislators wanted to help keep in the state.

Forgotten:

• Portability... with only a tax freeze, many people will be frozen in their current homes and unable to upgrade or move because the issue of Portability has not been addressed.  Only people that have been in their houses for longer than 4 years will really feel the significance of this plan
• Assessment Practices... the big issue in South Florida has been the interpretation of assessed values by County Appraisers.  The Palm Beach County Florida Appraisers office has been embattled due to their view on Highest and Best Use judgements vs Property in current use.  Having the Appraiser assess your property based on what the property could be some day in the future is unfair.
• Commercial Property Owners & Investors... a rollback to 2006 and a reduction of 9% for most of South Florida and other high growth Florida Counties will do little to help investors and businesses that own property.  The incentive to move to Florida is diminished by the high property taxes. 
• Renters... without reducing taxes of Investors, the high cost of taxes must be passed on via higher rents.  This is a large population and a big issue for the working class.
• Snowbirds... a large part of the economy, albeit the seasonal economy, are the second homeowners from out of state.  These property owners will get no further reductions.  These are the people who eventually do move down full time but will not get the benefit of longer term ownership and portability if they upgrade or downgrade when they move down to Florida full time.
• Foreign Investors... this is the same scenario as snowbirds and commercial property owners.  A lack of further reduction will lessen potential gains for these investors and send them to other destinations instead of Florida.

All in all... it is a start... but legislators need to reconsider both the freeze date  and possibly roll back further (2004??)... and also at least address Portability and Assessment Practices to benefit a broader range of Property Owners.

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Property Tax Update - AN EARLY VOTE!!

My earlier post Florida Property Tax Update - The Compromise is Near!! details what seems to be the final answer to the Florida Property Tax Reform issue that is currently the main topic of the Florida State House and Senate special session.

Florida House Speaker Marco Rubio, R-Miami, pushed forward a plan that will create a percentage system that will reward property owners with much larger exemptions based on the type of ownerships:

• Homestead
• Non Homestead Residential
• Investment
• Commercial
• etc

The only issue to resolve at this point is what the specific percentages will be for each category of ownership.

The good news out yesterday was that due to the Florida Presidential Primaries being moved up, the House and Senate have requested that instead of waiting for a vote on an amendment for property taxes to wait for the next general election in November 2008, they want to have this amendment available for vote in this upcoming Primary election!!

Yesterday Morning, Governor Charlie Crist, R, signed a bill moving the Florida Presidential Primary election from March to January 29th of 2008.

As that is only 6.5 months away, it looks like Property Tax Relief is coming soon!

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida