AFFORDABLE HOUSING: One Step Forward, Two Steps Back
Commentary by Naja and Arnaud Girard…….
Key West’s City Commissioners are considering the purchase of the old Navy housing at Peary Court.
According to Commissioner Weekley, the real estate deal will relieve some of the effects of the dire housing crisis that bleeds the island of its workforce. Yet The Blue Paper discovered this week, that the City is also discretely considering loosening its land development regulations, easing the requirement that developers provide affordable housing.
Currently, new housing developments in Key West are required to include 30% of the units as “affordable.” But the new land development regulations being discussed by City government, actually propose a reduction, from 30% to 15%. Are we heading in the wrong direction?
Protecting affordable housing through regulation is only an attractive solution from the vantage point of workers. For property owners those rules only mean less development rights and diminished property values. And, let’s face it, the lack of housing has been good for landlords: fierce competition for too few apartments had driven rents through the roof.
The re-development loophole
As despised by developers as it is, the City’s 30% affordable rule has so many loopholes that it’s not saving as many homes as one would hope. The requirement only applies to “new” development not “re-development.” In 2013, 44 affordable housing units were lost when the City Commission approved the construction of million-dollar homes to replace the RV park on Simonton Street. Those “existing units” were in fact registered vehicles, not buildings; regardless, the new homes were not considered by the commission to be “new” development. “Redevelopment of 44 vehicles,” laughed Rita Whalen, one of the trailer park’s evicted tenants, “How does that sound?”
Mayor Cates told The Blue Paper last March he could support applying the affordable housing requirement to re-development in addition to new development. And in theory, most commissioners say they would too, but you couldn’t call them enthusiastic or even committed. “Oh you should talk to Teri Johnston about that,” said Commissioner Weekley when we asked him last June if he would support the 30% rule for re-development projects, “She was just telling us that she’s been trying to close that loophole for 7 years…” But when asked whether he would support that amendment he shifted quickly to the importance of purchasing Peary Court.
In spite of all the declarations of concern over a lack of affordable housing, at the December 17, 2015 Planning Board meeting, a reduction of the 30% requirement – to 15% – for new development was entertained.
As to the notion of extending even a 15% affordable housing requirement to re-development projects, it was received with cold skepticism. “There may be a problem with a constitutional taking of people’s property rights,” said board member Richard Klitenick, while another participant was heard shouting across the room, “It sounds like a lawsuit to me!” Yet for the past 30 years Monroe County has been enforcing a 30% rule for both new development and re-development projects.
“I spoke with Monroe County Planning who said to their knowledge they have never been challenged on their re-development affordable housing requirement,” wrote former Commissioner Teri Johnston in an email to The Blue Paper last February.
In fact, this type of regulation is called “inclusionary housing” and it is expressly allowed by Florida Statute 125.0103(7).
The unaffordable “affordable” loophole
Even in those rare cases where developers were compelled to reserve 30% of units for affordable housing, another loophole kicked in, which neutralized the requirement. We all tend to believe that affordable housing means low-income housing. It does not. In August of 2013, when Peary Court’s new owners negotiated the zoning code that would apply to the property, the City required that 48 of the existing 160 units be deed restricted “affordable” under the 30% rule. However, when it came time to seal the deal and sign the paperwork, the affordable housing requirement was somehow re-defined as “moderate-income affordable.” Moderate-income affordable is actually hardly affordable. A couple qualifying for a Peary Court moderate-income affordable apartment can make up to $112,000 a year and the rent is capped at $2358/month. Typical Key West workers earn an average $34,850 each a year. The 30% affordable requirement, in the end, meant very little in the fight to create homes for typical working class Key Westers.
The forces opposing a regulatory solution to the affordable housing crisis are not all that discreet. During the December 17, 2015 Planning Board meeting, former City Planning Director, Don Craig, claimed that the more restrictive Monroe County regulations were unconstitutional, yet, as mentioned above, in over 30 years, no legal challenge has ever prevailed against them.
The City is facing a dilemma
The affordable housing crisis is now endangering Key West’s tourist economy. High rents drive workers out of town and cause labor costs to rise. The City fathers must decide whether to use taxpayer money [buy Peary Court] to bail business owners out of their labor predicament or whether to regulate developers out of their unbridled property rights.
They have decided not to decide and to submit the decision on the 55 million dollar purchase of Peary Court to a voter referendum (to take place on March 15th). Maybe the referendum should have included another proposal: The adoption of a 30% low-income affordable housing requirement applicable even to re-development. A referendum might be the only way such necessary legislation could become the rule in Key West.
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As for those constitutional considerations. Here’s what a group of attorneys who studied that very issue had to say about it 14 years ago: INCLUSIONARY ZONING: LEGAL ISSUES
Are you correct to say Peary Court would be purchased with taxpayer money? The income-expense projections clearly show the rents paying all expenses, meaning the project pays for itself, no cost to us taxpayers. The referendum asks voters to approve a loan only.
The City currently has approximately 12.5 million dollars of Monroe County Land Authority funding it may use for affordable housing. The proformas that have been drafted to help decide whether or not to purchase Peary Court are based on an assumption that 10 million of that Land Authority funding will be used towards the purchase cost. Land Authority funds come from bed taxes. You are correct that the remainder of the purchase would be financed through a bond issuance [a loan].
Glad you understand that, because as written in the original article, it implies that it is the home-owning property taxpayers’ money. The 12.5 m was collected by the the businesses so why do you refer to spending it for affordable housing as “bailing them out”? And finally, you make it sound like the Commissioners chose referendum over making the choice themselves, when, in fact, they have no choice but to go to referendum in order to purchase or sell property. That’s three misleading statements in one article.
1. Taxpayer money: The Land Authority money is funded by bed taxes. Don’t really see where “property taxes” have been implied. 2. The 12.5 million was “collected” by hotel and legal transient rental businesses, but this tax was PAID FOR by their customers. 3. Bailout: There has been no leadership on tackling the well known need to protect affordable housing over the past several decades, including 7 years of recession when the price of real estate was lower. Those in charge were not overly concerned that people were having issues finding affordable housing. Now that the crisis has come to a head and it is affecting business’ ability to hire workers at low wages, we are seeing some reaction. Affordable housing is linked to wage level. Some people believe it’s not the role of government to provide subsidized housing for the workforce – others believe it is the job of government. 3. Yes, the charter requires that voters approve by referendum a DECISION by the Commission to purchase Peary Court. That’s not what is happening. The Commission voted to send THE QUESTION to the voters -they did not decide to purchase Peary Court – in fact, they state that they do not even have all the necessary information before them at this point to take such a decision.
Again, one may infer, though you do not imply, from your last sentence, that the City leaders are acting on too little information, when in fact all they lack is the outside inspections of the condition
of the units, which they decided to put off until the voters approve the loan that will keep us from losing yet another 157 units of worker housing. There is also available the very thorough inspection report done for the developers two years ago when they bought it, at which time walls were removed to inspect the units most likely to have incurred problems in Wilma. No damage or problems detected then.
Normally, I might agree that government should stay out of the housing business – except when government is the cause of the problem, and I think you’ve clearly placed that blame on the shoulders of Key West leaders. Further, we are not alone in any of the housing problems we are experiencing, and I am sure you are well-read enough to know that, and that the crisis, i.e., more than half of renters qualifying as cost-burdened (over30& of income going to rent). Are you politically astute enough to connect the problems to the redistribution of wealth this past decade?
Fewer homeowners, more renters, higher rents – it’s all part of the accumulated fallout from the recession, government caused. In any case, why now miss a cost-free opportunity to salvage at least these 157 worker homes along with land on which to build more? As for that 12.5 million in Land Authority Funds, that has grown to that number from 8m just two years ago, thanks to the recovery, and it is likely to continue to grow at the same rate or better.
The only land left to be developed in Key West by the City is in Bahama Village, Poinciana, and Mosquito Control. Projects recommended for those, and requiring referendum, are two to three years away. There is certainly no better use for 10m of those funds, collected by the hotels and tourists business, than to serve as a down payment for worker housing, and to shelter our homeless, left so by the prolonged economomic downturn.
Thank you for your precise reading, Faithful Reader. It has helped provoke a sharper definition of the issues.
I am generally against the govt competing with the private sector on housing. It has an unfair advantage in not paying property taxes (in this case, the County share). This hurts me twice: I rent out workforce housing, and a major expense is my RE tax–unfair competition. Second, I am a taxpayer on the rentals and my residence, and taking millions off of the tax rolls means more for the rest of us landowners to pay.
HOWEVER…Singapore govt owns 80% of housing (this includes high-end). Hong Kong owns 30%, but this is specifically for low-wage earners and elderly poor. Hawaii took over a struggling development and developed homes at half the price, ~$280k, specifically for workers in nearby resorts.
I am now getting a 10% return on investment renting private apts in Old Town for $1,100 to three local hospitality workers. I don’t see why the $2.5k rents are necessary.
I don’t think we are clever enough to think outside of the box to re-commission the evil cruise ships sensibly (see Sloan, below). I don’t see the problem being addressed by the private sector uncontrolled by our govt–viz. the Simonton “redevelopment” fiasco. So we have to consider some sort of public action, though I still think the Peary purchase is dubious.
Thank you, Rick;
The 2000 to 2500 rents are necessary to make the project pay for itself. I think taxpayers have made it clear that they don’t want it on their backs. Perhaps on your rentals you can clear 10% because you have less than an 80% mortgage? These units are 1283′ larger families, roommate situations, and shared tenancies. They are currently getting 2700 for new rentals, as are the 795ft 2/2’s at the
Salt Ponds. Believe it! As for government getting into housing. Please read my note today to the editor. Thank you for the opportunity to put some of these facts before the public. Too little information is the root cause of many missteps.
Rick, you are certainly smarter than I am when it comes to making money, but I would be willing to bet that the cost basis for your three apartments is a LOT less than current market values. Even a studio is now selling for more than $300k. After you add taxes, insurance and interest (or opportunity costs) to that, you won’t even come close to breaking even by charging a $1,100 rent.
Faithful Reader and Colby are both right: I have no mortgage, and my cost basis is low from having bought in 2001. But the govt own a huge amount of underused property (storage bldg behind the weatherstation on White/United, storage bldgs at the School District offices, dozens of others). With the property and significant structure already owned, I would love the challenge of redeveloping some of these properties as affordable housing.
Thank you Blue, once again for the truth. Unfettered unregulated capitalism is the antithesis of fair play for the unconnected and those without power. “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” Thank you for clarifying what capitalism is, Mr Keynes…
BTW….We ain’t seen nuthin, yet….TPP is on the way…Stay tuned ya’ll and have a nice day.
and your Keynesian economics will be the death nell to freedom and liberty as central banksters conduct more and more control over the governments they supply with ‘currency’ [money] in their never ending creation out of thin air fiat scam! did you ever wonder why hard asset gold and silver were written into our constitution as the payment of debt? NO? well of course not. too busy with Keynes’s ponzi scheme I presume. ever wonder why it takes more and more ‘currency’ creation out of thin air just to pay the last interest installment on the last loan? libs and their ‘economics’….what would we ever do without them? ;(
btw we don’t have capitalism anymore … its called crony capitalism or shall I say ‘cabal’!
limited pockets of monopoly controlling vast percentages of the economy…..sorta like ‘socialism or communism or Marxism or fascism. always good to get the identity of words meanings accurate. helps thinking too!
‘Quotation: “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered…I believe that banking institutions are more dangerous to our liberties than standing armies… The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
https://www.monticello.org/site/jefferson/private-banks-quotation
what is tpp please?
What is tpp?
Trans-Pacific Partnership. An even worse version of NAFTA.
As usual, a great piece of journalism. The “unconstitutional” argument always kills me. Property rights are not a blank check. This is no more than a kind of zoning law. If the 30% rule is unconstitutional, then how could HARC be legal? Whenever somebody buys a house, there is almost always some kind of land use restrictions, like hey, you can’t open a night club on this spot. What has happened in KW is very sad, because proper political leadership could have done much better, but, alas, the politicians did not give a damn. This is not simply KW’s problem. Most places that have evolved like this, that is, have become tourist destinations, suffer similar symptoms. ciao, Jerome
When I read about affordable housing like Peary court or today Big Coppit I see it is for policemen, firemen, teachers. Maybe it really is for subsidize housing for government bubbas?
You are going to pay for police, fire and teacher services one way or another. Our property taxes et al pay their salaries.
The sad thing is no policeman, firemen or teacher can afford Peary Court housing without a second job or spouse/roommate with a better paying job.
For too long tourism has been out of control – too much traffic, not enough parking, and not enough housing for workers, residents and tourists to share. No longer a ‘season’ to the invasions and no resbite from the masses for the locals. Key West never met a tourist they didn’t fall in love with – the drunks, the duggies, they love ’em all. There was talk of sustainable tourism and managing tourism in the days of the channel widening debate – but there no longer is any talk of good management practices for the millions of tourists yearly. Could it be that the lack of affordable housing could do what our government and TDC can not? Without additional workers (and HOUSING) – businesses and hotels can not continue to open and thrive. We’ve learned we can not count on the local government to protect the affordable housing we had and then lost over the years. So why would anyone even consider voting to approve $58,000,000 to provide more housing, that the city will not manage any more responsibly, than the lost truly affordable housing in the past? They’re real good about TALKING about affordable housing. What we need now is ‘a little less talk and a lot more action’.
You equivocate. Everything you say here relates only to affordable housing for sale, designations for which sundowned because they were not restricted in perpetuity. The proposed Peary Ct.purchase is for rentals only, like Roosevelt Gardens on the boulevard, and will be deeded affordable in perpetuity, like the other 1200 units managed ably by the Key West Housing Authority. Thanks for the opportunity to make that distinction to the public.
When I refer to the city FAILING MISERABLY to protect affordable housing – and I’m not talking about housing like the Shipyard (however even then the city failed to foresee the problem and do anything about it!) NO, what I am talking about is the failure of the city to update and put in place LDR’s that protect citizens and affordable housing for residents. It has never happened in the past and it never will. It has always been about the money – developers and tourists. Look, now they’re trying to water down the 30% in the LDR’s we now have! Teri Johnston tried for many years to protect housing – but she could not find 3 other votes of support. I have to wonder if it was this type of frustration that she no longer wanted to serve as a Commissioner. She was the best commissioner the city has ever seen, she would have made a great Mayor! That you cannot see the bigger picture of the city’s repeated failures over time to protect the affordable housing we did have – tells me you are either a developer, a politician or just not very smart – sorry my intent is not to name all. This affordable housing issue is not resolvable. Happily in the end there will be an equilibrium reached and hopefully many of the tourists and tourists businesses will go away, returning the island back to those who remain or still want to live there.
Er, Faithful reader …
You say $2,450 per month rent for a 2 BR apt. in Peary Court is affordable housing? Do you think any of Jimmy Weekley’s cashiers at Faustos, or shelf stockers, or deli workers, can afford on their Faustos’ salary to live at Peary Court? Do you think on city street worker, or one Waste Management sanitation worker, can afford to live at Peary Court?
Do think the voters should approve the $55 million purchase price, which was not negotiated, but was what the developer sellers were asking for the 157 units and the land, plus $12 million for the 48 “affordable” unit building rights the city gave to the developers for free? So, the deal “negotiated” was the developers would keep the 48 building rights and 2-plus acres on which to build the 48 hardly affordable units.
All after the developers had gotten slam dunked 3 or maybe 4 times before the Historical Architectural Review Commission, and the developers’ future with Peary Court did not look all that spiffy. Then along came Jimmy Weekley and the city’s crack negotiating team and made the developers, who had not been maintaining the 157 units, because they intended to tear them down, feel like they were going to die and go to heaven, instead of live with the 157 old units, which needed major spiffing up, which would cost beacoup $$$.
What a deal the city will get, if the voters approve the Peary Court referendum at the developer sellers’ asking price, which will net the developers a $37 million profit, as follows: $20 million profit on the sale of the 157 units, plus the $12 million building right they paid nothing for. Then, maybe they make even more than that when they get the 48 hardly affordable new units built.
The general talk about affordable housing is a joke, because the affordable rental housing shortage is so acute, 3,000 to 6,000 units,depending on which pundit you are quoting, that it cannot be resolved on this tiny built-out island and the built out island above it, unless housing is put on Mt. Trashmore, which would be like putting housing on the Love Canal before it was cleaned up..
The only large tract of buildable land left is Truman Waterfront, where the pundits say a $58 million new park should go right next to a beautiful park, Fort Zachary Taylor State Park, which costs the city zero to maintain. A lot of actually affordable Housing Authority rental housing could be put on Truman Waterfront, housing any Faustos employee, any city street cleaner, any Waste Management sanitation worker could afford. Imagine the sanitation workers going on strike until they have housing which really is affordable. The city would be uninhabitable in one week.
New commercial development is like maybe the do do bird, or nearly that extinct. Redevelopment is what is happening nearly every time. How redevelopment went this long without City Hall imposing the 30 percent affordable rule on redevelopment I can only ascribe to lack of political will in City Hall, or being on the take.
The only way I see for the city to solve its housing crises is to buy an old cruise ship and park it at the outer mole and hook it up to the city’s water and sewer system and rent out the rooms to people who can’t pay Key West’s high rents. But, gosh, why buy just one old cruise ship. Buy 2, and park the other one at Mallory Pier. Affordable housing is seriously more important for Key West than cruise ships coming help.
Where would the money come from to buy 2 old cruise ships, the rents from which will pay for the debt service? Don’t spend $55 million on Peary Court, and don’t spend $58 million on a new park at Truman Waterfront would be a great start.
Oh, well, a big hurricane, CAT 5 size, might come along and sink the cruise ships and erase a lot of the residential development and disappear lots of residents, which would make a serious dent in the affordable housing shortage.
Well considering key west is at 98% buildout the 15% makes sense – there can be no more new development only redevelopment – of course if you would like key west to look like Hialeah- please let the crazy train continue!
The percentage chosen for the affordable housing requirement is about who is allowed to live in the units that are built and how much can be charged for their rental or sale. It does not affect the total number of buildings- its about how many of the units must be used [and deed restricted] for affordable housing vs. how many may be rented or sold at market rate.
Sustainable tourism is way long gone! We got greedy.
We are known the world over and I still see TDC advertising on my various Comcast stations here. Do we really need to spend all that money and what is the averge citizen getting for it all? Do we meet expectations? Shouldn’t the Tourist Development Council want to slow things down and try to solve the problem that has dogged us for 30 years?
I get the feeling from others writing here that we may have created a beast that has devoured us and the real Key West. How many years of hotel rentals does it take to raise that 10 million proposed for Peary Court since the Land Authority gets only ,what? , a half percent of the 4% bed tax. Does anyone want to change this paradigm? Enough hotels ,drunks, and jet skis, thank you.
OK as a landlord I dam sure would not be happy with 10% return. That is fat too close to failure when property values drop and they will.
Your pay scale is far to low for most workers to live on a 40 hour a week job. Your average worker can only make $34k by working 60 hours or more a week.
I checked few days ago on craigs list to see what the pay is. $15 to $18 an hour for an electrician. That is insulting to offer being they made that 20 years ago in far cheaper to live areas. They could not live paying anything near $2k. They would never get to enjoy living in such a town.
There is a question to legally limiting the use of property. When the government removes a use it also removes value and must compensate for the loss of value. However anyone buying today knows the restrictions before buying. So only victim was the owner before the law and statute of limitations likely ran out.
No investor will build new housing for such a low return. The government can and will because they are using tax payers money not own.
The Simonton trailer park issue makes me laugh. Seen it few weeks ago. Looks like construction has stopped and likely the project will end up bankrupt hurting all that bought into that scam. Unfinished and won’t be and no housing for anyone. What a stupid move that was.
Workers are needed and has always been one simple way to get workers and that is pay a living wage. With no workers a tourist town can not survive. Only the rich can afford to live or visit KW. We visit about 5 to 6 weeks out of a year and mostly stay at bed and breakfast inns. Now being average place is $300 plus a night then why can’t they pay the help enough to live ? Bars and food are not exactly cheap either. When you can’t find help you must raise the pay. Many are living on Wisteria island or renting a couch or firetrap rooms or even a shed. The result is they do not stay long. Unless working a tip type of job they do not stay long before they go back up north.
Is no solution that I can see happening and in time tourist will stop and then property values drop. And dropped values you mean lower taxes. If a serious hurricane ever comes I hate to think of the results then.
We love KW and been visiting for 43 years but dam sure not investing in what in time will be a mistake. How many of the workers will ever be able to retire in KW and live on SS ?
Can KW be saved ? Maybe but needs new leadership.
If you are referring to my getting “only” 10% return on my rental units, I am happy because that is enough. Unlike a corporation, I do not have to maximize profits. I made a lucky purchase in 2001. I make good money, and share my good fortune with my also-lucky tenants. That’s the kind of world I like to live in.
If you are happy at 10% that is great. We would sell any of our properties that did that poorly.
$1100 for an apartment in KW is very low or in poor condition. We do know of many nice places in new town that get about $1400 or more for apartments.
Will not get into the details of why your happy with a low return. They are 3 very lucky tenants.
Only way landlords settle for 10% is if the property is going up in value. And am sure it has in 15 years. Your real profit comes the day you sell it. Wish you best of luck.
Dear Everyone, This a great discussion about a fundamental issue. I believe Mr. Boettger has hit the proper chord here. It seems as if the “market” has been incapable of providing affordable housing for those who work here. I’d love to see the market be able to do this, but if it can’t (and it can’t) then some form of government interference is not only necessary, but the right thing to do. It is no different than telling the private sector to stop polluting our rivers if they won’t do it on their own. I’m never looking for the government to interfere in the market, but some times it is necessary. The common good is good for everyone, even the rich … whether they know it or not. Great article, great comments, ciao, Jerome
KW is running in a circle. Because of high property values taxes and insurance go up. Now the landlord must raise rent in order to pay that inflated mortgage and the taxes and insurance to make a profit. Tax payers are footing the bill so that tourist can enjoy your party town. You are in one huge never stopping loop. Because of low wages the government pays. The fix is to demand higher wages but that will not happen as long as they can find a sucker willing to work 60 hours to live in poverty. Affordable rent would be 30% of a 40 hour week not 60. It is high time to stop bailing out cheap employers.
The trick is to know when to sell out to the rich that just want a second home and that time is NOW.
KW needs to let the employers handle the problem of affordable housing for their employees and not the governments in KW who have proven time and time again that they are either corrupt or just not bright enough. If the employers don’t treat their employees right than no one will work for them and will simply leave Key West. Your paradise island is crumpling as more and more tourist see how expensive, unhealthy and dangerous it is to visit.
I agree the employers should handle the problem and they are doing just that. Most simply will never have long term employees. They have the solution and been using it. Seems as if there is no shortage of young and some old people that love KW enough to attempt to live there. If the desire is high enough they will work 10 hour days 6 days a week and live in poor conditions. They start with some savings and if you compare to many that work in big cities actually are not that much worse off. It is not uncommon to travel an hour each way for many workers. So now they work where travel time might be a few minutes. Also not uncommon to work overtime for many. So in reality they are not any worse off. Your pay scale is slightly higher than some places but still very low. Often a single person can manage to work longer hours and live cheap. Also some are retired and get a SS check so can afford living in KW with a part time job. Proof that this happens is right in your face. Am not aware of any business in KW that has had to close down because of no workers. All the hotels, taxi, food places, bars, bed and breakfast places are finding enough help and the city employees are getting things done. Are plenty of people needing a job in this economy. Yes they might do better at another city or state but if happy then they stay.
The problem is housing cost about double of average places. So the workers either deal with it or move on. We are in the rental business but not in KW. Many of our tenants do struggle to make ends meet. I suggest that perhaps the housing problem is not as bad as you suggest. When the day comes that they actually can not find workers for what they are paying then they will be forced to pay more or close. Have said this more than a few times, supply and demand works.