The Live Local Act is incentivizing some developers to add affordable housing units with below-market rents to buildings that are already under construction or completed, instead of doing so at the pre-approval stage of development, according to a panel of speakers at the Urban Land Institute’s Fort Lauderdale Forum.
For example, the developer of The Arcadian, a 502-unit apartment project in Fort Lauderdale, is in the process of designating some of the apartments as affordable housing units under the state’s Live Local Act, which encourages the development of rental housing with below-market rents. The developer is Fort Lauderdale-based Fuse Group Investment Companies.
Construction of phase one of The Arcadian will be completed by the end of the year, panel member Eyal Peretz, founder of Fuse Group, said during a panel discussion of the Live Local Act at the ULI event last week. 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.
As elevated interest rates and construction costs slow residential development, the Live Local Act’s incentives can make marginal projects more profitable, panelists said. The Live Local Act’s incentives to developers to offer affordable and workforce housing include property tax breaks on apartments with below-market rents.
“Every project we’re looking at, we’re looking at adding a Live Local component to it,” said panelist Doron Broman, founder and CEO of Miami-based Moderno Development Group. “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 started construction of Rivr Lofts, a 29-story, 352-unit apartment building in Fort Lauderdale, in 2022, prior to enactment of the Live Local Act. Construction is complete, and “we are looking right now at converting some of the units into the Live Local pool,” Broman said. “The smaller studios seem to be a very good fit for that type of product.”
The availability of Live Local units at Rivr Lofts would be limited to people who collect 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.”
Not all residential developments are feasible as Live Local projects because blending market-rate apartments and below-market rate apartments in a mixed-income building is difficult, said panelist Russell Galbut, managing principal of Crescent Heights.
“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,” Galbut said. “If it doesn’t work in paper and pencil, it will never work in brick and mortar.”
Galbut said the biggest benefit of the state’s Live Local Act is “prompt and professional” municipal approval of developments with affordable housing without a time-consuming review by a planning and zoning board or a city commission. “Time kills many great projects,” he said.
Many lenders are hesitant to finance construction of mixed-income residential developments under the Live Local Act , Peretz said. “We see an issue with financing,” he said. “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.”“It seems we need to get everybody on the same page and make sure … our cash flow matches with what the lenders are expecting,” said Alfonso Costa Jr., chief operating officer of Falcone Group and moderator of the panel discussion. “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.”
