A Revised Affordable Housing Law In Florida Takes Opportunities Away From Developers

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Since first being introduced in 2023, Florida’s Live Local Act—the $711 million package offering developers tax breaks and bypassing local zoning restrictions to create more affordable and workforce housing—has been a lightning rod for controversy. Local municipalities and residents argued that the increased height of buildings would ruin the character of neighborhoods and that the affordable housing component could cause residents to head to the suburbs. 

Not surprisingly, it is back in the headlines. Florida Governor Ron DeSantis recently signed bill SB 328, revising the original Local Live bill. The original bill gave tax breaks to developers who create multifamily and mixed-use residential properties with at least 70 units in any area zoned for commercial, industrial, or mixed-use. At least 40% of those units had to be set aside for affordable housing—defined as people making 120% of the local area median income (AMI)—and would be enforceable for up to 30 years.

The revised bill provides height restrictions for single-family neighborhoods and prohibits Live Local Act projects within airport flight paths, noise zones, and those that exceed airport height restrictions. It also allows counties to opt out of giving property tax exemptions to developers if the number of available, affordable units in a metro area is greater than the number of renter households that meet the income criteria for the 80% to 120% AMI amongst a raft of other clarifications, aimed at to ease uncertainties.

But with the new revisions, some projects already undergoing the initial groundwork stages have been outright killed. Since the bill specifically targets Florida’s most dense areas, including Jacksonville, South Florida, Sarasota/Bradenton, Orlando-Kissimmee, and the Tampa Bay area, the backlash has been fierce. 

Local Governments Angry Over Local Live 

DeBary Mayor Karen Chasez said via email to the Daytona Beach News-Journal:

“The Live Local Act is regrettable, in my opinion, because it undercuts the kind of planning for ‘what goes where’ in our cities that our residents rightfully expect we will define through our future land use maps and development codes. When we define areas as appropriate for industrial or commercial use, it is a thoughtful process. Live Local Act will allow those property owners to place apartments on any of those sites. There are transportation, infrastructure, schools, and more that must be available for residential development but not necessarily so for commercial or industrial.”  

Developers and Municipalities Divided Over Local Live

The original Local Live bill was intended to increase the number of housing units in some of Florida’s densest cities and thus increase affordability for residents who were getting priced out. That created pushback from local governments, which started to delay the processing of development approvals.

Landlords and developers have butted heads with local municipalities, allegedly delaying approving projects using tax breaks under the new law. After the upscale Bal Harbour Shops owner announced a multimillion-dollar mixed-use expansion that includes a 17-story boutique hotel and 600 residential units, the Village of Bal Harbour put the brakes on. Local officials instructed the municipal attorney to investigate the possibility of a development moratorium. 

The developer retaliated by filing a lawsuit against the city, asking the Florida Circuit Court to force the city’s approval of the project. The 161-page complaint alleged that the municipality created new restrictions to prevent the development from moving forward, highlighting a city memo that said building workforce housing would risk the city’s “standing as a unique and elegant community” and its “role as a luxury destination,” as well as the safety and security of residents and the neighborhood. 

The revised bill signed by Governor DeSantis in May provides height restrictions for single-family neighborhoods and prohibits Live Local Act projects within airport flight paths, noise zones, and those that exceed airport height restrictions. It also allows counties to opt out of giving property tax exemptions to developers if the number of available, affordable units in a metro area is greater than the number of renter households that meet the income criteria for the 80% to 120% AMI amongst a raft of other clarifications, aimed at to ease uncertainties.

What Local Live’s Amendments Mean for Developers and Residents

LandTech, a site sourcing technology and data for developers, crunched numbers on what the DeSantis amendments mean in real terms for developers. They came up with the following conclusions:

• A 22% reduction in sites available to affordable housing developers from what was originally proposed in Florida’s five densest metropolitan areas.
• 6.6 billion fewer square feet of land available for this kind of development than the 30.2 billion that had been available under the original legislation.

“We’ve had at least half a dozen affordable housing projects just die on the vine because of these new restrictions of using it, I would say, in the vicinity of airports,” said Jake Cremer, a partner with Stearns Weaver Miller, a law firm with offices throughout Florida, in an interview with the Florida Phoenix.

Cremer’s colleague Nicole Neugebauer MacInnes expounded: “When you extend that runway out, you’re taking a chunk of downtown Tampa, which takes those properties out of being eligible for Live Local. And we’re seeing that all over the state because of the way that [the law] is written as it applies to airports. It doesn’t say, ‘large, commercial, Tampa International-style airports,’ or these little, small-plane ones. It just says airports.”

Concessions to Developers

The amendment did not change the law that angered many municipalities, giving developers tax breaks to build on land that was previously zoned industrial.

“The fact that we could still see one of these buildings go up in an industrial area where we normally wouldn’t allow residential is definitely concerning,” Doral Mayor Christi Fraga told the Florida Phoenix. “The fact that the local authorities have zero say over that? I think that is a concern.” 

Potential Loopholes are Cause for Concern Amongst Municipalities

One issue that the Local Live bill has attempted to address is the same facing many major cities: the need for workforce housing. Workforce housing is intended to be affordable to essential city workers, including law enforcement, teachers, and government employees. However, maintaining oversight over who drops in and out of the workforce criteria over a 30-year period is, according to many, an almost impossible task, exposing the rule to abuse.

“The onus on the auditing on whether 40% of the units are actually being rented to workforce housing is basically just an affidavit,” Christi Fraga told the Florida Phoenix. “I don’t think that there’s enough oversight or enforcement on that aspect, and really, all of that responsibility is being put on the city.

Recent Study Finds Out Florida Housing Is Overvalued

A recent study from Florida Atlantic University and Florida International University found that the South Florida market is almost 35% overvalued, indicating that the area could be in a housing bubble. 

“This trend does concern me, as prices are still going up in the Miami metropolitan area, but not in the rest of the measured areas in Florida,” Ken H. Johnson, a real estate economist with FAU’s College of Business, said in a statement.

Another new report from the National Low Income Housing Commission found that the average person working minimum wage in Florida has to work around 100 hours per week to afford a one-bedroom house in the state.

Despite the discrepancy between what people earn and what they can afford, research from Dave Ramsey Solutions found that a market crash is unlikely. The state of Florida differs markedly from area to area. House prices have fallen in West Florida due to increased construction, but they have risen in other areas due to low inventory. Luxury real estate—such as new condos—is out of reach financially for working-class Floridians, with a dire need for affordable housing.

Final Thoughts

While the Local Live bill has been a much-needed help to Florida’s housing crisis, it is unlikely to be enough, especially with the recent modifications. Florida is currently suffering from an ever-increasing wealth gap. On one hand, it is home to millions of visitors and boasts many millionaires living in luxury homes. On the other, the working and middle class are struggling to make ends meet. 

This presents a golden opportunity for investors to provide decent housing at a reasonable price. As with many expensive cities such as New York, San Francisco, and Los Angeles, co-living is a growing trend, allowing investors to own single-family homes that they rent by the room. Websites such as Coliving.com, Common Living, and PadSplit have thus recently increased in popularity to accommodate co-living—a fancy term for having roommates. Major metro areas in Florida appear ripe to embrace it.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.