by Naja and Arnaud Girard…….
After 58% of voters rejected the purchase of Peary Court six weeks ago, some City Commissioners have a new plan: give the City’s affordable housing funds to a private company that wants to buy the entire former Navy housing complex on White Street for 60 million dollars.
The City would pay the buyer 12.5 million. In exchange, the buyer would deed restrict the 157 existing units and any other units constructed on the 24 plus acre property for use as “affordable housing.”
At Tuesday’s meeting, the Commission could adopt a Resolution nominating the new 12.5 million dollar Peary Court deal to the Land Authority. After approval by the County Commission on the 18th of May, the Land Authority would disperse the 12.5 million at the closing. Peary Court would remain deed restricted affordable workforce housing in perpetuity.
But, isn’t that a lot of money to be rushed through during one Tuesday night meeting?
“The seller literally has a gun to our heads,” says local realtor Claude Gardner, “We only have one month to give our answer.” Apparently another buyer is standing by, having also made a 60 million dollar offer for the property for a market rate project.
“We can not make it work at 60 million. If the City votes down the 12.5 million or if we need to renegotiate land regulations – we’re out,” says Gardner.
“We” is Claude Gardner and his client Jeff Cornfeld. Mr. Cornfeld owns a real estate investment and management company based in Hollywood, Florida. He also owns several properties in Key West including a stately home on Elizabeth Street.
This time there will be no referendum.
So, is the Commission pulling an “end run” on voters? “What part of no don’t they understand,“ asks citizen advocate Christine Russel, ”I thought it was pretty clear we did not want the City investing in Peary Court.”
“I think what this proposal does is solve a lot of the issues that came out of the referendum,” says Gardner. He co-owns Knight and Gardner Realty and is the sole architect of this new proposal. “If this goes forward the City could achieve its goal: Peary Court would be 100% dedicated to affordable housing,” says Gardner.
So far it seems he’s convinced almost everyone he’s spoken to. We spent two hours with him Wednesday morning, unrolling plans and discussing land use regulations.
Here are some of the pros and cons associated with spending 12.5 million in Land Authority funds to deed restrict Peary Court.
Obviously the City not “owning” Peary Court has certain advantages. The City’s proforma on a possible purchase had indicated a profit, but any fluctuation in costs could have pushed the project into the red: there was a question about the cost of maintenance, the risk of skyrocketing flood insurance or interest rates, uncertainty as to boundary lines separating the portion that would not be purchased by the City. The repayment of the 46 million dollar loan was contingent on rents remaining at today’s historically high levels for the next 30 years, regardless of any possible economic downturn. All of these issues are no longer taxpayer concerns, but the benefit of having Peary Court restricted to “affordable housing” is now a real possibility at a fraction of the cost.
One may regret that the City will not have full ownership under the new deal, however in private hands Peary Court will continue producing revenue in the form of property taxes (which help fund the school system and more). Property tax last year was $343,400. When the property sells, taxes will be adjusted up to reflect the higher sale price but also down as a result of the “affordable” deed restrictions.
It also avoids a pernicious conflict of interest: How could we expect the City to fight the housing crisis and diligently keep trying to lower rents when the City itself would have been dependent on high rents to keep paying its sizable mortgage?
Gardner says Cornfeld intends to build the 48 new units already permitted on the property and, if possible, many more if his request [to come after the property is purchased] for an increase in density is granted. The density is currently about half that of the adjacent neighborhood. Under the City’s workforce housing code rents for the existing 2-bedroom apartments could vary from a top rent called “middle-income affordable” ($2709/month) down to $1546/month for a “low-income affordable” unit. The total rent roll may not exceed an average rent of “moderate income plus 10%”.
Since market rate rents at Peary Court are currently $2450/month, tenants will continue to pay approximately the same amount [$2322/month called “moderate-income affordable”.] When you get into the math it becomes apparent that the low-med-moderate-middle income “mix” option included in City code will not produce any low-income units — unless the owner plans on earning less than he’s allowed to under the guidelines.
According to the City’s own data the City has a deficit of 796 low-income rental housing units and a surplus of 270 moderate-income rental units.
Low-income salaries in Key West equate to $48,100 for a single person or $73,333 for a couple. For example, 47% of school district employees would qualify for the low-income category [if living alone]. 177 City of Key West government employees are earning less than 40,000/year, as do most service workers..
Commissioner Sam Kaufman, whose primary reason for running for office was to help tackle the affordable housing crisis, says he is “extremely disappointed’ with the new Peary Court proposal.
- It creates zero new units.
- It depletes the Land Authority affordable housing fund.
- It creates an unknown obstacle to building lower-income housing on government controlled property [Poinciana].
- It contravenes the voters’ intent where 58% of voters said no to Peary Court.
- It preserves units at the moderate level, which equates to market rate rents.
Kaufman points out that there is plenty of room over at Poinciana Plaza to build desperately needed low and median-income housing. [A “low-income affordable” efficiency apartment [400 SF] would rent for $1203/month] “And right now we have $12.5 million to do it,” he says.
Claude Gardner doesn’t disagree.
“Look, I know we need low-income affordable housing, but we also need moderate-income housing for couples, for people with children and right now we have a one-time, last chance, opportunity to keep Peary Court from becoming high end rentals or second homes. The money in the housing account will replenish. It receives over $2 Million a year. But there will never be another opportunity to save 24 acres in Key West, there will never be another Peary Court.”
So, these will be the Commissioners’ choices:
Build 12.5 million dollars worth of low-income housing and use the rent revenue to build more over the years.
Buy a perpetual deed restriction on all of Peary Court, a one time opportunity to keep 157 apartments from being rented for even more than the “affordable“ $2400 /month [or worse – from being turned into high-end very “unaffordable” second homes].