Restoring The Trust

The Sun-Sentinel ran an interesting editorial last week on the lack of affordable housing in Florida.

Affordable housing is an interesting and sometimes loaded term.

But the Sentinel offered a practical definition: if you spend more than 30 percent of your income on housing (rent or mortgage) your home is not affordable.

The editorial went on to lament that the state legislature is raiding a fund designed to create more affordable housing to pay for other things including pet projects, staff salaries and tax cuts.

The William Sadowski Affordable Housing Trust Fund has about $322 million socked away for its intended purpose. But Gov. Scott’s 2018-19 budget plan recommends taking $154 million out of the fund for other state expenses. Mind you, these are good times. Imagine what could happen if/when the state falls into a recession.

Ultimately, Scott’s budget is a proposal. It’s now time for the State Legislature to weigh in.

It has been more than a decade since I traversed the hallways of Tallahassee meeting with State Senators and State Representatives and sometimes state department heads. Many of our local elected officials are in Tallahassee this week making the rounds.

Local mayors and city commissioners make the always difficult trek to Tallahassee (conveniently located in a place that’s a long drive for many Floridians with expensive and often ridiculous plane routes that included a stop in Atlanta). I used to wonder if the powers that be wanted to be remotely located so as to avoid the public they were trying to serve. But that’s a cynical view— I’m sure there are plenty of dedicated public servants doing their best to serve the Sunshine State. The proof– as they say– will be determined by the results they produce at the end of the legislative session.

While some of the specific issues we went to lobby for have faded from memory (an ability to design our own stretch of A1A, canker, help with some of our parks, reclaimed water etc. are some issues I remember) two themes seemed to be perennials.

  • Home rule—which is an elegant way of saying: please leave local government alone because we believe that the government closest to the people best serve our communities. Please no unfunded mandates and stop choking off our revenues so you can look good by cutting taxes. Cities and counties have needs, obligations and aspirations that have to be funded—and a partnership with the state would be ideal. And if we can’t partner…well then… don’t hurt us.
  • The Sadowski Fund—Don’t raid it, so you can look good; use it for its intended purpose.

 

The fund was established in 1992 and uses doc stamp taxes (generated through real estate documents such as titles) to help create affordable housing.

It seemed to work fairly well for about a decade, but than in 2003, the legislature decided to make it a piggy bank to pay for its own budget. Those raids increased during the historic recession that hit Florida a little earlier than most states.

It seems that the practice has become a habit, even during boom times.

Last year, the doc stamp tax generated over $290 million for the affordable housing trust fund. But the legislature grabbed $130 million of those funds to help balance the budget.

For the past 14 years—and if the Governor has his way 15 years—that raid has occurred—even as the legislature has passed tax cut after cut.

While nobody loves paying taxes—they are necessary if we are to have a functioning government. And while tax cuts feel good—the reality is they are often a bait and switch with the onus being placed on local governments to pick up the slack.

Local governments have nobody below them to stick with the bill—other than taxpayers.

That said, we all know there is colossal waste in government operations—at every level federal, state, county and city.

So it is impossible and disingenuous to argue that every dollar raised is needed or spent wisely. It isn’t.

But…

That doesn’t mean that a trust fund set up to provide affordable housing should be raided for other purposes. And it doesn’t mean that the issue/problem doesn’t exist because it does.

Florida has an affordable housing challenge/crisis.

Some might say—“well just wait for the next recession and poof the problem goes away”—but it’s not that simple.

People and families of all ages are having a hard time getting traction in Florida and especially in our communities Boca Raton and Delray Beach.

While long time homeowners are thrilled with the price appreciation they have experienced (often a home is our most significant asset) we must be cognizant that others would like to access our cities because of the quality of life/opportunities we offer.

An “I’m in the boat, pull up the ladder” mentality is not only selfish, it’s short-sighted.

To maintain our quality of life and to be economically sustainable—we need to provide housing options that are attainable for working people and families.

Companies will not be able to locate or grow here if their workers cannot find housing that they can afford. And our children will not be able to live here either.

Economic sustainability is a complicated equation that also requires good schools, excellent health care, recreational options, culture, open space, job opportunities, safe streets, mobility, a clean environment and reasonable taxation.

P.S. that list goes on.

All the more reason why we need quality elected officials and talented staff at all levels of government who see the big picture, know how to create sustainable economies and craft policies that aren’t just politically expedient but also address long term needs.

Raiding the Sadowski fund so you can send out a mail piece that says you cut taxes misses the mark on a slew of levels. It puts off the need to create efficiencies in the state’s operations or grow revenue in other ways and it leaves families struggling to pay their bills and keep a roof over their heads.

Call your legislator and tell them to stop raiding the trust and start solving the problem.

As for local governments, they play a role too.

Nimbyism—(not in my backyard) that prevents the creation of housing opportunities restrains supply.  And if you took an economics course you know what happens next—prices rise.

We are certainly not advocating out of control growth (or unsustainable traffic choking sprawl either) but we are advocating smart growth and new urbanism. Google “Strong Towns” or the Congress for New Urbanism—there are solutions that offer compelling math for taxpayers that back up these philosophies.

 

 

Housing For Young People Needed

Delray’s Community Land Trust is an innovative organization supported by the Delray CRA and others.

The headline was a grabber: Are You a Millennial Looking to Buy a Home? It Could Take Up to 32 Years.

Only 32% of the country’s largest generation (which consists of 75 million Americans) own homes. Those that do are flocking to interior markets, which tend to be cheaper and more cost-effective than most coastal markets. In our neck of the woods, that might mean the western fringes which creates sprawl and traffic as workers head east for jobs. But even out west, higher end homes seem to be the order of the day and many of the communities cater to the 55 and over crowd. Redfin recently reported that the 33446 area code (west of Delray)  is pacing the nation in price appreciation.

 

As the front line of millennials enter their mid-30s, financial security is not guaranteed. Instead, the generation is beleaguered with student loan debt (which exceeds car and credit card debt) and salaries that are 20% lower than what their baby boomer parents earned at the same age, according to a report by real estate research site Abodo.

 

The average net worth of a millennial is $10,090, or 56% less than what it was for baby boomers at the same point in life, according to Federal Reserve data.

 

Coupled with rising home prices, it could take decades for a millennial to be able to afford a down payment on a house in places like San Diego or San Francisco. This may be why more millennials live with their parents than any other generation in the last 130 years, according to Bisnow Media.

Millennials living in the country’s biggest cities, including New York City, Boston, San Francisco and Los Angeles are especially challenged.

 

The average millennial makes $40,500 per year. Using that average, were one to save 15% of her income each year, it would take just over 18 years to save enough for a 20% down payment on a home in Boston. It would take 32 years for a millennial to afford the average $112,000 down payment for a home in Los Angeles. And as the father of a few millennials who are gainfully employed (thank goodness) I have a hard time believing that even the most frugal and disciplined young person can save 15% of their income.

The picture in South Florida is not much different than some of the aforementioned hyper expensive markets.

I remember moving here when I was 22 and thinking that relative to New York and the Northeast, Florida was very affordable. My car insurance was lower, home prices were reasonable, there was no income tax and property taxes were much lower than my native Long Island. Even homeowners insurance was nominal at first—before changing after Hurricane Andrew.

Still, according to researchers at Abodo, Florida as a state remains much more affordable than other parts of the United States. It would take 5-10 years for millennials to save up.

Hence, the desire for developers to build apartments and the willingness of underwriters to finance deals. However, finding sites in built-out and expensive Boca and Delray is challenging. With land prices soaring, rental rents are also rising and the uncertain regulatory environment (costly, lengthy and torturous entitlement processes, toxic politics, NIMBYism and an aversion to density) make it even harder for millennials to strike out on their own.

Another headline in USA Today recently also grabbed me: Where Did All The Starter Homes Go?

The article cited a byzantine maze of zoning, environmental, safety and other requirements that has led to a 35% decrease in housing construction across the country from previous levels. According to economists cited by USA Today, the lack of supply has driven up home prices by 40% over the past five years.

Single family home construction suffers from a lack of available land and a lack of skilled construction workers, according to the National Association of Realtors. Banks are also tougher on borrowers as a result of the housing crash in 2008.

The perfect storm has led the National Association of Home Builders to sound the alarm. The NAHB says that from 2011 to 2016, regulatory costs to build the average house has increased from about $65,000 to $85,000 and now represent 25% of the cost of a home.

Of course, we need regulations as long as they are necessary, fairly priced and serve a public purpose.

Still, the inability of millennials to gain a foothold in our community should be pressing concern for public and private sector leaders.

It’s important for companies to be able to recruit workers in order for the economy to grow. Workers, young families, entrepreneurs and established companies look at housing prices, quality of life, quality of schools and cultural amenities before making a decision on where to put down roots.

Unfortunately, the word density has taken on a bad meaning. But, truth be told, density done well (i.e. properly designed for great buildings and public spaces) is essential for cities such as Boca Raton and Delray Beach. Compact and walkable development is better for the environment than traffic producing sprawl which serves the needs of cars over people. It also allows for young people to form households and become part of the community injecting needed ideas, life, energy, monies and volunteer hours which make cities work.

The recent changes to Delray’s land development regulations for the downtown core which capped density at 30 units to the acre, was a big mistake. It virtually guarantees that millennials—who seek walkable environments and don’t want to be car dependent—can’t live downtown. By limiting the supply, you jack up prices and we end up with an eastern core that’s shut off to all but the very wealthy.

The 2001 Downtown Master Plan, which did much to build on the 1990s Decade of Excellence, was a community wide education effort that encouraged well-designed projects versus a fixation on density numbers. We saw visual examples of ugly low density housing and also saw attractive higher density projects which have the added benefit of increasing your tax base while also adding residents who can support local businesses. That was the guiding rationale behind the push to add downtown housing. We wanted a sustainable, year-round downtown.

The other areas that make sense to add attainable housing for millennials and others is North and South Federal Highway, Congress Avenue and the “four corners” of Atlantic and Military, which has zoning allowing for a mix of uses. The four corners zoning—done over a decade ago—will become increasingly important as we see pressure on the retail landscape increase with big box chain stores being driven out of business by ecommerce.

Delray is ready to offer shopping center developers more options for their properties should they decide to invest and change course.

The best incentives are not monetary—which almost always leads to an arms race you can’t win with companies taking the money until a better offer comes along. Rather, the best incentives are zoning, a tough but fair and timely approval process that emphasizes design and good uses and enough density to give the next generation a chance to access your city.

We were always ahead of the curve—which is why Delray succeeded. It’s important we stay there or we will be left behind. Right now, we’re losing ground.

Housing is the Killer App

Housing is a hot button issue

Housing is a hot button issue

I saw a poll last month and the numbers were clear: affordable housing is a priority in the hearts and minds of American voters.

Nearly 60 percent said that housing affordability was a key issue, and 74 percent said that they would be more likely to support a candidate who made housing affordability a focus of their campaign and a priority in government. Predictably, the issue weighed most heavily with the groups both major party candidates are seeking to win over: millennials (ages 18 to 35), those earning less than $50,000 a year, and those with children living at home.

We are the parents of four millennials; one of whom lives at home, two rent and one is off at college and living off campus in rental housing. So this issue is meaningful to this baby boomer and millions of baby boomers across the land who would like to see their kids move out—(even though we love them dearly).

In hot spots across the country, affordable housing is rapidly becoming a burning issue.

A planning commissioner in super expensive Palo Alto, California recently saw her resignation letter go viral when she lamented the high cost of housing in that tech hot bed which has prompted her to relocate. According to the Palo Alto Forward, the median home price in that city is $2 million. San Jose recently became the first MSA to surpass a $1 million median home price.

Civic leaders in Austin, Texas, another tech hot spot, sees an opportunity to better compete for companies and young talent with Silicon Valley: the high cost of housing.

Here’s an excerpt from a recent Austin, based blog: “The bureaucratic ordeal in getting a new software development project started at a large company is legendary, but pales in comparison to getting a land development project off the ground in Silicon Valley.

The Valley and San Francisco have their own versions of Microsoft Millionaires: Housing Millionaires. Folks who had the good fortune to own a house in San Francisco years ago and became lucky as their asset skyrocketed in value. Many of these folks have, understandably, become less concerned with making San Francisco a place where a new generation can make their fortune and more interested in protecting what they have. Despite (or perhaps because of) its reputation for innovation, San Francisco’s local politics is dominated more by discussions of the past than the future. Like a company that refuses to release new products out of fear of harming their current cash cow, the city has become extraordinarily conservative in its approach to new development. New developments must first prove that they will harm no existing residents in any way, rather than merely proving they will provide a benefit to new residents.

The results are catastrophic: San Francisco and Silicon Valley are failing at one of the core competencies of any city: providing housing. Tech workers spend enormous fractions of their income to live in poorly maintained homes in the Mission, while those outside tech frequently live far outside the city and commute long distances on congested roads. New housing for tech workers is protested as are buses to transport workers from homes in San Francisco to jobs in Silicon Valley. The city and the region understand that they are in an intractable mess of antagonistic politics, but still cannot do anything to extricate itself. San Francisco and the Silicon Valley are ripe for disruption.”

 

The conclusion: Housing is Austin’s killer app: specifically, walkable, bike friendly, transit-accessible, relatively affordable housing.

It’s an interesting observation and the author concludes by saying that business needs to be deeply engaged in public policy to ensure that local governments facilitate the construction of new units to keep up with the demands and needs of a new generation of workers and families.

Closer to home, the issue of workforce or affordable housing has ebbed and flowed with the strength or weakness of the market. I used to be on the board of the Affordable Housing Coalition of Palm Beach County formed during the previous boom. At the time, the issue was front burner but when the market crashed so did the profile of the issue.

Today, it’s back again.

According to a recent Harvard report, 11.4 million households pay more than half their income for housing, and the number of those who spend more than 30 percent of their income on housing has reached 21.3 million. And affordable housing isn’t just a problem for the working poor. In that recent poll, 47 percent said they have personally struggled to pay their rent or mortgage in the past 12 months, or know someone who has been in that situation.

“There are serious structural inequities in our country and within the housing market that can only be remedied with the private and public sector working together,” says Angela Boyd, managing director of Make Room, a national campaign focused on rising rents in America. (Funders of the effort include the Ford and MacArthur foundations). “About 90 percent of the rental housing market being built right now is for luxury, and a whole segment of the population is being overlooked — recent college grads with high debt, senior citizens with fixed incomes, working-class families. If there isn’t some sort of subsidy to fill the gap, some sort of policy that changes the equations, you will never be able to build decent apartments that people can afford based on the wages being earned right now.”

But even young college grads fortunate enough to earn a good wage are struggling to find housing that doesn’t consume the budget, especially if they have college loans to repay, a car payment, insurance etc., as many do.

And for starting teachers—my daughter for example—the issue is even more acute.

Locally, Delray historically has been active on this issue.

About 11 years ago, we formed one of the area’s first Community Land Trusts, passed a workforce ordinance (imperfect but used as a model by some other cities) and approved some projects that featured workforce housing including Bexley Park and Atlantic Grove (10 units).

While this isn’t a popular idea in some circles, it’s hard to achieve affordable housing without density. When land is expensive and densities are kept low, you just can’t add the product needed to address the issue. The Strong Towns movement also argues that this kind of development cannot be sustained financially because the cost of servicing sprawl outstrips the taxes it generates.

In Delray, the Congress Avenue Task Force, saw workforce housing as one of the key elements to jumpstarting the corridor and ensuring the city’s financial future. By creating a compact, mixed-use, transit oriented environment with amenities and affordable apartments, Congress has an ability to thrive by attracting millennials and others who would also work on the corridor.

It’s a long way from happening, but progress starts with a vision and if the right policies are in place, private investors will make it happen. There is certainly a need.

But cities, including Boca and Delray, also ought to look at the eastern cores to see if there is a policy tool to incent the creation of units for young professionals. Not only will they enjoy the amenities of living downtown, they will support local businesses year round. If we want to maintain the mom and pop establishments in an expensive environment, we have to do what we can to bring people downtown especially during the slower summer months.

The problem is a knotty one for cities, but there are policy tools available to create more opportunities for new households and young families. Like the Austin blogger notes, it may also prove to be a smart economic development tool. Housing may indeed be the killer app and lack of it may kill you too.

Making Room for the Middle

The lack of workforce housing has reached crisis levels in the Bay area.

The lack of workforce housing has reached crisis levels in the Bay area.

The headline blared “Build, Baby, Build” in Sunday’s New York Times.
The story focused on the growing YIMBY (yes in my backyard) movement in the hyper expensive Bay Area of California.

The lack of work force housing in the San Francisco area is stoking a movement to pressure local governments to allow the construction of more housing. Led by young professionals, groups are forming to confront those who fight new development.
Several cities are now facing competing lawsuits. For example, Lafayette down zoned a parcel that was zoned for high density multi family housing. Now the city faces a lawsuit by a group that wants multi family on the site and another who thinks the new zoning -for single family housing–is also too much.
High profile technology executives are writing checks to fight those who oppose multi family housing fearful that their workforce will have no place to live. The lack of housing has also been blamed for traffic because workers are forced to drive long distances to their workplaces.
Several local elected officials have welcomed the YIMBY movement saying it is important for young professionals to feel they have a future in the region and that cities need to be thinking about ways they can plan to accommodate their needs.
It’s an interesting debate and one that may soon break out in the Sunshine state.
In case you haven’t noticed, housing is expensive around these parts and if you know your economics one way to lower prices is to increase the supply.
While that is a simplification of the issue, it’s hard not to include density in any serious argument about addressing the need to create workforce housing.
In Boca Raton and Delray Beach, the issue of housing affordability has been around for decades. We are not talking about low or very low income housing but rather middle and upper middle class housing–places where teachers, accountants, police officers and others in the workforce can afford to live.
There used to be a joke among public officials in Boca and Delray. When asked where their workforce could find attainable housing, Boca officials would often answer: “Delray”.
That might have been true in the 80s and 90s but these days housing prices have accelerated to rival that of Boca. In fact, many neighborhoods exceed Boca prices.
Delray was considered a leader in workforce housing strategies during the last boom in the early and mid 2000s forming one of the first Community Land Trusts and passing what was then considered a model workforce housing ordinance.
A major part of Delray’s strategy to revitalize its downtown was to increase densities–an effort in part to add residents downtown to support businesses and increase safety but also an attempt to create some measure of affordability. But recent changes to the land development regulations capped density downtown at 30 units to the acre and a promised “bonus” program seems to have been lost.

With land prices downtown sky high, it seems unlikely that a meaningful number of units for young professionals will be created. That’s a big loss, since millennials would tend to be year round residents who would enjoy downtown’s vibrancy and would support local merchants.
Cognizant of the high price of downtown living, the Congress Avenue Task Force emphasized the need for workforce housing and higher densities along the 4.1 mile corridor.
Another opportunity would be at the “four corners” of Atlantic and Military Trail where moribund shopping centers could be redeveloped into mixed use lifestyle centers.
While Boca and Delray don’t yet face the pressures of San Francisco, the best economic development strategies would include plans to make our cities appealing to young professionals. There are several legs to that stool: abundant job opportunities, good schools, low crime rates, amenities such as arts, culture, parks and recreation, good transportation and attainable housing.
Regardless, to ensure a positive future you have to plan for it. The operative word is plan. Perhaps, there would be less antagonism toward new development if it was tied to a long term vision or strategy. If that strategy is to make room for young families or to plan for our kids to come home it may resonate. Still, just about any plan for the future would require making room for those who may wish to live here. “I’m in the boat, pull up the ladder” is not a strategy for economic sustainability.