Developers in Florida are increasingly considering the addition of affordable housing units to residential projects after construction has already begun, a shift attributed to incentives provided by the state’s Live Local Act. This trend was discussed by industry leaders during a recent panel at the Urban Land Institute’s Fort Lauderdale Forum.
The Arcadian, a 502-unit apartment development in Fort Lauderdale by Fuse Group Investment Companies, is an example of this approach. Eyal Peretz, founder of Fuse Group, explained that while The Arcadian did not initially plan for affordable housing under the Live Local Act, it is now undergoing changes to include such units. “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.
Panelists noted that rising interest rates and construction costs have made it harder for new residential projects to be financially viable. However, incentives like property tax breaks for offering below-market rents can improve profitability for developers. Doron Broman, founder and CEO of Moderno Development Group, stated: “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 work on Rivr Lofts—a 29-story building with 352 apartments—before the law was enacted but is now considering converting some units into affordable housing under the act. Broman explained: “We are looking right now at converting some of the units into the Live Local pool. The smaller studios seem to be a very good fit for that type of product.” He added that these units would target residents earning up to 120 percent of area median income: “So, we’re talking about aiming units at people making around $90,000 a year,” Broman said. “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.”
Russell Galbut of Crescent Heights pointed out challenges with mixed-income developments under this model: “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,” he said. “If it doesn’t work in paper and pencil, it will never work in brick and mortar.” He also cited expedited municipal approval as one major advantage: “Time kills many great projects,” Galbut said.
Despite these benefits, panelists highlighted ongoing financing challenges related to mixed-income developments using Live Local Act incentives. Peretz noted: “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.” Alfonso Costa Jr., chief operating officer of Falcone Group and moderator of the discussion added: “It seems we need to get everybody on the same page and make sure … our cash flow matches with what the lenders are expecting… 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.”
