Affordable housing plan for Neal Communities development modified to allow homes at higher prices

Income verification requirement also struck

Former state Sen. Pat Neal, founder of Neal Communities, has told the Sarasota County Commission multiple times that it is very complicated to construct affordable housing under the guidelines of the county’s Sarasota 2050 Plan, which governs development east of Interstate 75.

On June 9, he appeared before the board members once again, this time seeking approval to eliminate some facets of the affordable housing elements of his Windward at Lakewood Ranch development.

And he came away with unanimous consent to modify those facets of the plan the County Commission approved in 2015.

County Planner Jacob Hunt explained on June 9 that Windward will be built just north of Fruitville Road and west of Lorraine Road.

When that project won commission approval in 2015, Hunt continued, plans called for 135 affordable housing units; 90 were to be priced at 80% of the Area Median Income, a figure set annually by the U.S. Department of Housing and Urban Development (HUD), and 45 at 100% AMI.

The total number of dwellings approved for the project in 2015 was 900, according to a county staff memo provided to the commission. Out of the first 500 rented or sold, that memo added, at least 40 had to be affordable.

This year, the median family income for the North Port-Sarasota-Bradenton Metropolitan Statistical Area is $77,200. Therefore, 80% of AMI for a family of four would be $61,750.

Neal wanted to change the stipulation, Hunt said, so the company could built 90 of the homes at 80% AMI, 23 at 100% AMI, 22 at 120% AMI.

Additionally, if an affordable unit is rented, the affordable rate will apply only for the first year, instead of five years, as laid out in the original development plan, a county staff memo pointed out.

Further, Hunt told the commissioners, Neal wanted to remove the stipulation calling for verification of the income of persons wishing to buy or rent the affordable units. Finally, Neal had asked that if any buyer wanted to sell one of the affordable units within two years of purchasing it, then the buyer would have to offer the property to Neal Communities at the market value as of that later time, based on the AMI, plus the cost of resale.

Neal’s request followed commission action earlier this year that modified the affordable housing plan for another Lakewood Ranch community called Waterside, which developer Schroeder-Manatee Ranch has planned.

After Planner Hunt concluded his presentation, Commissioner Nancy Detert, who opposed the Waterside request, asked Hunt whether he had seen any changes like those Neal was proposing before her colleagues approved the Waterside request.

He told her he had not.

“So Waterside, as predicted, has opened Pandora’s Box,” Detert replied, “and after we went through the door of the box, we hit the slippery slope and here we are …” She added that she expected the developers of six more projects would be coming before the board to seek the same kinds of changes.

Making his case

After Neal stepped up to the podium, he told the commissioners, “The goal today is for me to explain the Neal approach to affordable housing.”

Addressing Detert, who also served in the Florida Senate, as well as the state House, Neal added, “Sen. Detert, we could have eliminated the affordable housing,” but that would have meant the company could not have constructed the 135 extra units.

When the commission in 2015 approved Windward, the 2050 Plan allowed additional homes to be constructed as an incentive if a developer wished to make a certain percentage affordable. A new state law regarding such incentives resulted in the commission’s approval earlier this year of amendments to the 2050 Plan, making the inclusion of affordable housing units voluntary on the part of a developer.

Because of his relationship with Detert and her commission colleagues, Neal continued on June 9, “and the overwhelming fact that people who work in Sarasota County live in Bradenton or North Port,” he said he wanted to proceed with construction of affordable homes.

“We used to build lots of affordable housing,” he pointed out. Such homes years ago sold for $138,900, he added. Now they go for $300,000, Neal said. Therefore, he noted, Neal Communities essentially provides a $50,000 or $60,000 subsidy for those homes.

“I’ve been building in this county for 52 years,” Neal told the commissioners, “and I can afford to build some affordable housing.”

The reason he wanted to eliminate the income verification facet of the original agreement with the county, Neal added, is because “we cannot thread the needle” in finding people who are rich enough to qualify for a mortgage but who also have income low enough to meet the affordable housing stipulations. His employees do not know potential buyers’ status, he continued, “until they show up and we intrusively ask them for all their data …”

Moreover, Neal said, “Our experience is that people don’t really tell us the whole truth about their income when they want to get into affordable housing.”

Neal further stressed that no financial institution will allow his company to build homes “without knowing the price at which they will sell.”

Then Neal talked about a project his company constructed in Bradenton in 2009-2010, as the firm dealt with the ramifications of the Great Recession. The development was for what he calls “Hometown Heroes” — teachers, firefighters, police officers and hospital personnel, he noted.

Neal Communities sold those homes only to individuals, not corporations, he emphasized.

If the County Commission approved his request for Windward, he continued, he would “prohibit the flipping.”

Neal Communities did that in 2004, he pointed out, “and it was a good decision.”

During that period before the recession, he explained, when someone wanted to purchase one of his homes, and the person did not even want to pick out specific features for the structure — such as the design of the kitchen — “We knew they were flippers.”

Therefore, with Windward, he added, Neal Communities also would agree to sell only one home per customer.

The provision about buying back a house within two years of its purchase also was designed to keep the house affordable, he said.

The company is ready to start on the Martinique townhomes portion of Windward, he pointed out, which was why he was hoping to gain the board’s approval that day for the changes in the stipulations for the 2015 plan. “They’ll have Neal standards for recreation and for landscaping and for visual beauty,” he said of the townhomes.

“We’re going to try to sell to the people you want us to sell to.”

Concerns and commendations

The first to respond to Neal was Commissioner Detert, who called him Sen. Neal, adding, “I like calling you that.” She continued, “I certainly have respect for your service and experience.”

Then she noted that he had heard her past comments about the value of affordable housing. “Rental units [are] one way to put a roof over somebody’s head [but] home ownership is better.”

She explained that a person can gain solid financial footing by starting off with a less expensive home, which the person later can sell so he or she can purchase a house at a higher price.

“I believe that home ownership is the only way for low- to middle-class people to build wealth,” Detert said.

The requirement he was seeking, she continued, which called for Neal Communities to buy back a house within two years of an individual’s purchasing it — if that person wanted to sell — “kind of flies in the face of private property rights.”

“We were trying to avoid flippers,” Neal replied.

Then Detert noted the short supply of houses in the community, with demand having increased over the past months.

“There are going to be for people waiting in line for these houses at this price,” Neal told her, referring to the affordable homes in Windward.

Commissioner Ron Cutsinger concurred: “People are going to be lining up like crazy to buy these [houses], especially in this market.”

Cutsinger voiced approval of Neal’s proposal for buying back houses within the two-year period as a means of preventing flipping, and Cutsinger talked of the boon of adding 135 affordable homes to the Sarasota market.

“I support this,” Cutsinger said. “I think it’s a good thing.”

Chair Alan Maio noted his desire to avoid flipping. He added that he was not sure “how much affordable housing has yet to be built,” out of the approximately 3,000 such units the board has approved over the years. Nonetheless, Maio said, “We need to get those built.”

As the discussion continued, Neal asked his attorney, Dan Bailey of the Williams Parker firm in Sarasota, to show the board members a slide that summed up the Neal Communities request, including the two-year resale stipulation. The other facets of the proposal are as follows:

• Only one unit could be sold per purchaser.
• The purchaser must be a “natural person, not an entity.”
• A person could not enter into a contract for an affordable home and then assign it to another individual or corporation, which could lead to the flipping of the unit.
• The affordable homes will be advertised to “Hometown Heroes,” including military personnel and county employees.

“I think these are good solutions,” Bailey told the commissioners.

Only one speaker addressed the commissioners about the request — Sarasota attorney Dan Lobeck, who noted that he was representing the nonpartisan nonprofit Control Growth Now, of which he is president.

“It would be abundantly refreshing to see action by the Board of County Commissioners to not necessarily give Pat Neal everything he wants,” Lobeck said. “It seems to me income verification is very important,” he continued, noting the necessity of proving that a potential buyer qualifies for an affordable unit.

Moreover, Lobeck stressed that a person whose income is 120% of the AMI “is not someone in need of affordable housing. That’s market-rate housing. … Eighty percent AMI is what you need to be talking about.”

Lobeck added, “I suggest you send this back to the drawing board.”

Unanimous support

After Chair Maio closed the hearing, Commissioner Michael Moran made the motion to approve Neal’s request with the details attorney Bailey had shown the board. Moran referred to the “legal word math gymnastics” through which developers have to proceed to create affordable housing. They underscore, he added, “why the government should not be getting involved in pushing against a competitive market environment.”

Commissioner Cutsinger seconded the motion.

Cutsinger again noted his eagerness to see the 135 affordable homes constructed, especially given the fact that the expense of housing materials has continued to climb.

“I’m half happy to support this,” Detert said, adding that she appreciated “Mr. Neal caring what we think.”
“I will approve this one for this project only,” she added. “Everybody through our doors is going to have a similar presentation in order to avoid affordable housing.”

Detert then told her colleagues, “I still want us to talk to staff .. about coming up with new strategies on affordable housing that aren’t so cumbersome and speed up the process.” (See the related article in this issue.)

The motion passed 5-0.”