Developers In A ‘Mad Rush’ To Take Advantage Of Florida’s Live Local Act

When Condra Property Group bought the single-story motel at 2007 North Ocean Drive in Hollywood, Florida, last year, it was planning to redevelop the site into a 10-story luxury hotel.

But the project required a height variance, got tied up in the approval process and never broke ground, the developer’s land use attorney said.

Then in March, Florida Gov. Ron DeSantis signed Senate Bill 102, known as the Live Local Act, a dramatic overhaul of the approval process for housing development across the state. As a result, Condra is planning to submit an application to build an 18-story apartment building on the site instead, according to emails seen by Bisnow.

“Under the provisions of the Live Local Act, the local government is prohibited from denying the application,” Government Law Group attorney Keith Poliakoff said.

The passage of Live Local has already begun to transform development processes across the state of Florida ahead of the law’s July 1 effective date. The law’s far-reaching provisions — which curtail local governments’ authority to approve and deny projects, redefine what affordable housing means and inject hundreds of millions in funding toward new developments — have set off a wave of pre-development activity, industry players said.

“What we’re seeing is a mad rush by smart developers to find industrial, commercial and mixed-use properties,” said Poliakoff, who is based in Fort Lauderdale and represents developers and local governments. “For the first time in so many years, they’re able to build residential on land where it was previously prohibited. And they’re finally given the density and height necessary to make the development of those blocks profitable.”

Several sources told Bisnow they were already preparing proposals for developments that fit the new legislation, with some planning to submit their plans on July 1. They said the law has led a new group of developers who weren’t previously in the affordable housing space to consider projects.

But there is some concern that the $711M in first-year funding the law provides could quickly be depleted — and there is an expectation that the rules around approval could change or be challenged in court.

“You have to be ready to go now,” said J.C. de Ona, the Southeast Florida president at Centennial Bank.

De Ona said Centennial, which has invested over $150M in Southeast Florida’s affordable housing sector, is already hearing from clients that are trying to get “that first wave of funds” that are unlocked this summer.

“The money that’s going to be available I think is going to go pretty quick,” De Ona said. “You’re looking at the entire state of Florida.”

SB 102, which was introduced to the Florida Senate in January and signed into law March 29, was designed to encourage affordable housing development through a mix of loans and tax incentives while also changing zoning rules and prohibiting local municipalities from blocking developments that fit the law’s requirements.

The law provides $711M in funding for existing affordable housing loan programs in the upcoming fiscal year and more than $1.5B in the next 10 years to fund development across the state.

As developers prepare projects that fit the new law’s guidelines, the local governments that will be responsible for implementing the law are still trying to understand how it will impact their approval processes.

“We’ve talked to some local governments, and everybody’s in the same position right now,” said David Deutch, co-founder of Pinnacle Communities, which has built around 10,000 housing units through its affordable housing division while also developing market rate products. “There’s lots of questions. There’s lots to digest in the bill, and everybody’s trying to figure out ‘What does this mean for us?’ and how best to implement this. Everybody’s excited about the opportunity, but the devil’s in the details.”

The Legislature Usurped Local Power

Under the Live Local Act, municipalities and counties are prohibited from restricting the density of projects “below the highest allowed density on any unincorporated land in the county where residential development is allowed,” so long as the project meets the law’s other provisions.

The law also changes how height restrictions can be assessed, prohibiting localities from blocking projects because of height so long as the project is “below the highest currently allowed height for a commercial or residential development located in its jurisdiction within 1 mile of the proposed development.”

The provisions put new limits on how local governments can approve properties, saying municipalities “must authorize” projects under certain circumstances and that local governments “may not restrict” density or heights outside of the limits set out in the legislation. By putting these limits in place, the law has taken away some aspects of city planning that have historically been done on the local level.

“For one of the first times that I can remember in state history, the legislature usurped local power,” Poliakoff said. “It has now taken over land use and zoning decisions and has taken over a municipality or county’s right to govern the development of lands within its jurisdiction if that land can be utilized for attainable housing.”

Poliakoff said he expects local governments to still try and reject projects on the basis of density and height after July 1, but he said those decisions would likely lead to lawsuits from developers.

“Municipalities are going to push back and are going to try to do everything in their power not to implement the law because they are upset that it usurps their power,” Poliakoff said. “I’m already hearing through the grapevine that a lot of the eastern cities that contain land on the barrier islands are going to push back. But the law is very plain, very easy to understand. And it will be hard for municipalities to get around the clear and strict and unambiguous language that’s contained in the statute.”

Other attorneys and developers told Bisnow they have had conversations with local officials who support the intent of the Live Local Act and are leaning into it.

“The jurisdictions I’m working with so far are embracing it,” said Iris Escarra, an attorney and co-chair of the land use practice at Greenberg Traurig. “They’re trying to implement it and they’re trying to see how they can incorporate it into their traditional application processes.”

Escarra said she has spoken to politicians and their constituents who are concerned about a lack of affordable housing in the state and think this legislation has the potential to streamline the approval process.

“The leadership of the state is telling the local governments that they need to cut through the red tape,” Escarra said. “The state wants affordable housing. The state wants to give flexibility. The state wants you to do it expeditiously.”

But with less than eight weeks until the law goes into effect, local governments are still working to develop rules and the process for getting approvals.

“The only thing that I think is going to cause a little bit of havoc, at least initially, is how many of these are going to be filed, how quickly they’re going to be filed,” Escarra said. “The local governments pretty much run a regular ship.”

Landowners Think ‘They’ve Hit The Lottery’

The Live Local Act also includes a number of provisions meant to encourage affordable housing development beyond state loans and the flattening of the approval process.

It expands the definition of affordable, allowing developers to claim some tax credits for units leased to tenants making up to 120% of an area’s median income.

In Miami-Dade County, that means developers would need to make units affordable to a single person making $81,960, according to Department of Housing and Urban Development data. In Broward County, a single person would qualify if they made less than $76,200. In both cases, developers who build to the Live Local Act could charge rents above $2K per month for 40% of the designated affordable units while listing the other 60% of units at market rate.

“I will say there is an intense amount of interest from developers,” said Becky Wilson, an Orlando-based land use attorney at Lowndes. “There are a lot of groups that believe that with the combination of the tax incentives, along with skipping the political approvals, they can make this work.”

The law will also open up commercial and industrial zoning to residential development, provided the property has at least 40% of its units restricted at the new affordability level. Developers are looking at converting properties like big-box stores, old office buildings and shuttered fast-food restaurants into residential properties, sources said.

“There’s people out there that are looking into it a bit more now to see if they can get incentives at the property they’ve been looking at and see if they get the zoning they want with the bill,” Centennial Bank’s de Ona said. “A deal that was not financeable before, we can make them financeable because there’s more equity available.”

The law could also alter the industrial development landscape, as property owners may begin to weigh the return on investment from building warehouses against the potential of a mixed-income residential development.

“Everyone who owns a piece of industrial property today believes that they’ve hit the lottery,” Wilson said. “Finding a place to build a warehouse is going to be expensive because the owners think, ‘Wait a minute, this is a new 10-story apartment complex.’”

As the development community, along with local and state governments, prepare for Live Local to go into effect, there is a broad expectation that the law will need to be updated and clarified. Some expect new legislation will be introduced to clarify some of the rules and restrictions put in place by Live Local.

“July 1 is the starting point for implementing this bill. It’ll take time,” Pinnacle’s Deutch said. “It will take a concerted effort on behalf of local governments and the development community to sort through the issues and come up with strategies that make sense, as opposed to just being adversarial.”

In the meantime, developers are working with lawyers on new proposals even as they acknowledge that uncertainties in the economy continue to make financing projects a challenge.

“I mean, what do you have to lose getting it approved administratively?” Wilson said. “I would anticipate a lot of business getting these projects approved, and then I don’t know if they actually get built.”

Source: Bisnow