KEY WEST: The “Trickle-Down Theory” of Affordable Housing?

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Arnaud and Naja Girard

37 thoughts on “KEY WEST: The “Trickle-Down Theory” of Affordable Housing?

  1. JIMINKEYWEST, It doesn’t matter if the extra 48-96 units are not added, but they would be added to Cornfeld’s or someone else’s bottom line if they are and are probably necessary to make the deal worthwhile. I am pretty sure but not positive that units can’t be sold off individually – so let us know if you find out to the contrary and I seriously doubt if any of these units will end up being 2nd homes.

    If Cornfeld does flip the property, then the new owners will still have the deed restriction guidelines set forth – so in that regard, what is there to worry about? This is or can be a sweet deal for Cornfeld, yes, but I won’t hold that against him and am glad that we can wash our hands of this property which should have been ours for $35 million in the first place. Actually, the Navy claimed that the reason they took back the use of the property from the city was because the city didn’t put in any improvements to the property which would have enhanced the area for use as a park. However, roughly during this time frame the Navy was also looking to sell off some of their surplus property across the country and here’s where Balfour came in to play.

    157 empty units? Maybe, but in the unlikely event that will happen, someone will eventually take over the property, and “IF” the sale contract is written properly, the deed restrictions will still be in place. And, I have no problem with the rental units being used for “high paid” workers with the lower echelon being addressed down the line. It would probably take around 5 years from start to finish to bring more housing on line if you started today anyway, at least that’s how long it will take for the assisted living facility (2013-2018. Remember, RARELY is a deal or solution ALL THINGS to ALL PEOPLE.

    1. The way it works is unless part of deed restrictions and sale contract says individual units can not be sold then they can be.

      Do agree KW should bought it at 35 million

      The other units being built very much matter as they are what is needed before Cornfelt has a dime invested in this scam. Right now he is walking in to rental property with no money of his own. That is perfect for an investor. And to top it off they are already rented.

      Now a forgotten issue is the 157 units likely have a security deposit that must be transferred to Cornfeld.

      As long as the deed restrictions are done properly and recorded that part is safe.

      What I see happening is the Cornfeld family will close this with a first mortgage that they will own. Then proceed with plan C and sell the extra ground and walk away with huge profit. Next step is refinance the property with a real bank without the extra property. Final step is collect rents till bank forecloses. And that is what what then boots the tenants out unless the bank gets into the rental business and few do. 157 people will receive eviction notices. Where will they move to ? Eventually is the main problem. How long is eventually? This is like the Simonton trailer park disaster. That cost not only housing but many of the Mallory Square performers. That is now not worth even walking to see.

      What would really happen if Cornfeld does not buy this property ? Does anyone really think a seller would not sell to this supposed waiting buyer? Only a fool would risk that buyer walking away. Generally serious buyers sitting on that much money buy fast.

      What upsets me is the careless use of tourist tax money and then hear KW complain that an event such as Fantasy Fest cost the city money. @ 5% a night that comes to about $20 a night. We will be there all 10 days so about $200 bed tax alone. And now you just give it away because you are scared the seller might raise the rent or sell units as second homes. And yes I do agree that could happen. But it still can even with the deed restrictions.

      Had they used the money and bring in prefab units in less than a year they could easily be occupied by low paid workers. And then just maybe they could actually work 40 hours and live like humans and enjoy life. Trust me if you gain units the supply goes up and rent comes down. Peary Court is getting high rents only because of demand.

      We been buying, building and selling homes for over 40 years. Me and my wife bought our first home when she was 17. We do know how to play with housing.

      Cornfeld is doing this for profit only and I do not blame him, I blame KW for being STUPID.

      1. How can they sell as second homes if deed restriction is written to require purchase by households that earn at least 70% of their income in Monroe County and they must qualify income-wise for the purchase?

        KEY WEST CODE:
        “Affordable housing (moderate income) for a rental dwelling unit shall mean a dwelling unit whose monthly rent, not including utilities, does not exceed 30 percent of that amount which represents 120 percent of the monthly median household income (adjusted for family size) for Monroe County. For an owner-occupied dwelling unit, affordable housing (moderate income) shall mean a dwelling unit whose sales price shall not exceed five times the annual median household income (adjusted for family size) for Monroe County, in accordance with section 122-1472.”

        Assumed family size for a 2-bedroom is 3 persons. Median household income for 3 persons [2016] is $77,400 if not married and $103,200 if married. The units can be sold for no more than: 5 times $103,200 [to a married couple] = $516,000.

        1. It is bit tricky but what they can do is claim this unit in KW as their main house and the one they own up north now becomes the fake second home.

          But now comes the question of what they would sell for. I broke this down and at 60 million dived by 157 means he paid 382,165 for each. And that is cheap. So if a buyers income is low enough and he sold them at 500,000 each he could make a killing and then still have not other vacant ground. I simply don’t trust this buyer. Without deed restriction to not sell as single units nothing stops him. Maybe this is something that needs added to the deed restriction. We must look at what is written and signed not what we assume or promised.

          The rich can afford to buy second homes and that is part of the problem. That is what has drove the prices up to what they are now.

          Income can easily be played with to show what ever number is needed. What if they are offered at 1/2 million and the buyer pays cash and retired on SS of $1000 a month ?

          It is a game of loopholes. Personally for now we would rather drop $2k a week on a nice bed and breakfast for a week maybe 5 times a year. That is cheaper than investing in buying or renting. For a snowbird that wants to live in KW for 6 months it is smarter to buy.

          My point here is we are trusting a man nobody knows. What his real plans are we do not know but will find out. My bet is he flips the deal.

          1. He’s not paying $60 Million – he’s getting $12.5 Million towards purchase price from the Land Authority. He is also paying about $2 Million in closing costs. So cost to this purchaser is around $49 Million. At keast $5 Million can be allocated to the 48 new not yet built. So cost for 157 units would be $44 Million or $289,000 each. So, at the “moderate-affordable” sale cap there’s room for profit. Is that sales cap below market? ($516,000)

  2. Actually using the price of $289 k and 3.5 % interest = $10115 interest per year or $843 per month. Out of $2400 leaves a profit of $1557 minus taxes , upkeep and insurance. Not a bad profit for using OPM. Too bad the city of KW could not get a deal like that.

    Maybe if forced the city should buy it.

  3. No not a 10% profit but still nice for using OPM.
    Times 157 might be worth it. My thinking says the people would rather still buy it than give 12 million away. Land Authority does not need a profit.

  4. Yes, in a perfect world the city should have been able to buy the property for $35 million, but the city was not able to because they were told that negotiations were to be done outside of the public’s eye and the city could not do this as that would have been illegal. So, no negotiations.

    IMO, this present deal would still be okay even with us using tourist money as we really need the rental inventory, but there is a different slant to this if the units can be sold off individually – and it looks like that could happen.

  5. Hello readers, Dottie and I went to the Monroe County Land Authority for funding 5/11/16 in Marathon, also present was Mayor Cates, City Lawyer, Castillo.
    We where the only citizens presents, we where given a copy of the contract and even had a chance to speak. This meeting started at 09:00 and ended at 11:45.
    No City Commissioners, No Blue Paper, No Citizen paper. The meeting in a short – $12.2 million was approved and another $300k is approved on Oct 1, 2016. The finial approval is when (4) four each items are amended before the May 18, Monroe Commissioners meeting gets the finial copy. Interesting that 157 homes will be work force and will in future be asking for density change making 157 two bed room homes to single bed room homes which totals to 314 single bedrooms and charged the same rate of approximate $2400 Per month, if I heard it right? This is with density change…the 48 new units could be 96 and totals out to 410 units x $2400 single bed room…Parking could be 410 cars x scooters x bicycles.
    Looks like we are now finial going to have work force housing, this is the future and Key West will never be the same as we have known for the last few years.
    I hope more people show for the May 18th meeting !

    1. 1 bedrooms do not rent for the same rate as 2 bedrooms. The rent caps are based on unit size. That said, the revenue for two 1-bedroom units is quite a bit higher than for 1 2-bedroom unit. The community does seem to need more 1-bedroom units than two bedroom so this sounds like a sound concept.

    2. Correct me if I’m wrong, but nowhere did I hear that all 157 units would be converted to 2-1 bedroom units. I am under the impression that just some of the units will be converted.

  6. This deal could still work out to the city’s advantage and in its best interest, but obviously still a big “IF”: If the deal is completed and Cornfeld does split some of the units up to make one-bedrooms, then you’ve got your lower priced housing. Doubt if it will be enough like 50 duplexes split up, but at least it would be something. You’ll just have to wait and see. And again, it is vitally important to have and hold on to the workforce professionals in a community or else you’ll end up with something similar to “brain drain” which can destroy an area.

  7. Splitting the two bedrooms into 2 one bedroom units, besides a massive change in density, will require a lot of renovating like adding another kitchen and bath at the very least. I hope someone posts the contract so that the public can dissect it for all its potential ramifications.

    1. Yes , would love to read that contract as everything depends on it. Promises mean nothing.

  8. So here we go with even more IF’S.
    Unless wording changes Cornfeld can still do anything he wishes with the property.
    Now he can increase his profit by having up to twice the number of units.
    That changes everything. Now tell me what happens to the current tenants that have family and needed 2 bedrooms. Where will they move to ? Just maybe they will attend the next meetings. And Cornfeld now has something of even more value. He also would create more affordable places to rent or SELL. Mark my word that unless wording in the deed restriction restricts the sale of units the end result will be SOLD units to the rich. And that could be a good thing as taxes go up. Gives KW more money to waste.

    From being in the building business most of my life I can tell you this is not a simple construction job to change a 2 bedroom into 2 one bedroom units. First off it means a severe change in the electrical service. We now need 157 more meters, 157 more water heaters, bathrooms, kitchens, pluming, 314 new A / C units as the 157 are now over sized and require re ducting. This is almost more work than building 157 new units. And they would need brought up to code. It also creates parking issues that may or may not be an issue as 2 car families are unlikely in KW.

    This change is another major give away from the city to a private owner.

    Now sit back and watch rents go up for people that now must find a 2 bedroom place.

    Bottom line Cornfeld is not required to do any changes or build any units. Yes this has the potential of creating more housing but only if Cornfeld sees a profit in it. With the added potential the property would now be of higher profit as soon as he closes the deal. He might already have a buyer. He just might walk away in a few months with a nice profit of several million and never do anything more than paper work.

    Yes KW will never be the same. Regardless of who profits from the deal the potential of about 200 more units is a plus. Just what would the rent be for a 1 bedroom apartment ? You can bet it will not be half of 2400 and not much lower than 2400.

    You need to get some experts involved that know what they are doing. I see another disaster coming fast. If building more units on that extra property was a financially smart move they would already been built. Why has the city been sitting on this money so long and not built on the ground they already own ? Almost any bank would lend money on such a project with just the property as collateral.

  9. I’m curious how the units will be reconfigured to accommodate one bedroom apartments on each floor. When you look at the current floor plans (, there will need to be some BIG changes. Both floors will need to be gutted and start again from scratch. I suppose new exterior stairways will need to be build that will allow access to the 2nd floor. How will HARC respond to that?

    It is ironic that the Peary Court “family” neighborhood that we have all read so much about will disappear as the families are replaced with working singles and childless couples. It is also ironic that the current Peary Court residents who were promised that they would be allowed to stay, and worked so hard to keep the status quo, will be kicked out.

    The Peary Court promises are already starting to fall apart.

  10. Was told as a teenager, anything not in writing is worth nothing.

    But do not worry. Long before they split the units in half they will build the new 48 units. That by far is less costly and more profitable. Most unless been in construction have no idea how involved splitting the units up would be. And yes pretty much would mean gutting the units. Remodeling is always more costly and time consuming than new construction.

    I truly don’t think Cornfeld will keep the units or any promises. This place will be flipped and the extra ground sold. It is called creative financing.

    Cornfeld is already changing the deal to make it more valuable to him for resale.

    The good news is you still have the 157 units

    Only a few months ago the concerns where over the condition of the building and now ready to split the units.

    What stops him from dozing them down and build new units ? Plan C = Cornfeld .
    Developers do not care about people just profits. With the helping hand of KW he can do it.

  11. I think we all know this deal will happen no matter what the people want. Too much money for not to be some bribes. And if no sale then no money. Just CORRUPT business as usual in KW. The scary part is what can or might happen after Cornfeld owns it. He is getting a blank signed check and has nothing at risk.

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