'Developers need more skin in the game': Affordable housing bonds plan hits stumbling block
It appears unlikely that the $200 million housing bond issue, approved by voters in November, will create anything close to the goal of 20,000 housing units anytime soon.
County commissioners pushed back against a plan presented May 7 that would have exhausted more than half of the $200 million for a batch of projects that would have created just 1,100 affordable housing units. They called on the county administration to work with developers to redesign the projects.
“We will be lucky if we get to 1,500 units,” said Commissioner Marci Woodward, noting that the voters expected the 20,000 units.
With the county’s area median family income (AMI) at $104,000, there are concerns that rents for new apartments may also not be affordable. They are based on a percentage of AMI that can be as high as 140%, resulting in monthly rents ranging from $1,827 for a one-bedroom apartment to $2,532 for a three-bedroom.
“I have a hard time understanding how $2,500 a month rent is affordable. We need to get these rent rates down,” Woodward said.
Commissioners requested that the county Department of Housing and Economic Development require developers to limit the amount of county bond funds to no more than 15% of a total project cost and to place a cap on rents.
County commissioners want developers to share more of the costs
Some developers were relying on the county bonds to finance nearly half of their total costs. Jonathon Brown, director of housing and economic development, is expected to return in early June with new proposals to address the issues raised by commissioners.
“They (the developers) need to have more skin in the game,” said Commissioner Maria Marino. “This is not a good use of our bond dollars. People without skin in the game can walk away.”
Commissioners were concerned that some of the developers were using the bond funds as their primary source of funding, noting that was never supposed to happen.
Jack Weir is chair of the Housing Leadership Council, the non-profit that worked to convince voters to approve the bond referendum. He said the commissioners' concerns were "spot on," noting that the bond revenues were meant to be “a gap financing” source to help developers leverage other means of financing.
Some projects called for bond funds totaling nearly half of their project costs.
Weir told The Post he was pleased with the reaction of county commissioners. He said staff is under pressure to get units built as quickly as possible but noted: “We don’t want to do something that the voters never expected when they approved the referendum.”
How can the county prevent too much money from going to any one affordable housing project?
Weir said the county should limit the amount of bond loans to no more than $10 million. One developer sought $22 million.
Weir also said bond proceeds should not exceed 15% of the total cost of a project. He added that the 20,000 units were never meant to be built overnight but it is possible to reach that goal during the next 10 years if certain guidelines are adopted by the county so more projects can be funded. After nearly two hours of debate, county commissioners agreed to approve three projects on a conceptual basis:
Calusa Pointe II, a $59 million, 168-unit apartment complex in Belle Glade. The builder requested $7.6 million in housing bonds, a figure that accounts for 14% of the total project cost.
Residences at Marina Village, a 148-unit apartment complex in Riviera Beach. The $54 million project requested that 9% of its cost be funded with housing bond funds.
A for-sale eight unit villas project in Lake Worth Beach with each unit having three bedrooms. The units will be sold to households with incomes at or below 80% of AMI, requiring a great subsidy. While the housing bond is financing more than 60% of the project, the loan must be paid off within three years or when the units are sold.
Brown noted that as the loans are paid off, the money will be recycled to allow more loans to be issued. That is why the commissioners included the eight-unit project in Lake Worth Beach because the loan will have to paid off so quickly.
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County Administrator Verdenia Baker said Palm Beach County is a very expensive place to live, noting AMI reflects that. It has risen more than 14% in just three years and it is probably going to continue to increase, Baker noted.
“We are dealing with difficult circumstances,” she said. “We understand that these housing units are desperately needed but we heard the board and will work to address its concerns.”
Mike Diamond is a journalist at The Palm Beach Post, part of the USA TODAY Florida Network. He covers Palm Beach County government and transportation. You can reach him at mdiamond@pbpost.com. Help support local journalism. Subscribe today.
This article originally appeared on Palm Beach Post: Palm Beach County's affordable housing bonds financing plan in trouble
