Discussion with developer Neal on June 9 the impetus for her request
On the figurative heels of a discussion with developer Pat Neal of Neal Communities, Sarasota County Commissioner Nancy Detert won the support of her colleagues for a new county staff report on affordable housing initiatives.
She made the request at the end of the board’s regular meeting on June 9. “We’ve certainly heard all the concerns about our current system,” she pointed out.
Earlier that day, during a discussion with Neal about modifying the affordable housing plan for his Windward development in Lakewood Ranch, Detert said, “I don’t feel comfortable with the developer rewriting my affordability code. I think we should rewrite our … code.” (See the related article in this issue.)
Following the hearing on Windward at Lakewood Ranch, Detert initially brought up her interest in a staff report. Her focus during those comments was on strategies “that aren’t so cumbersome and speed up the process [of creating affordable housing].”
“Would it be easier,” she asked, “if developers just paid into an affordable housing fund,” and then the commissioners could use the money for a down payment assistance program?
“Down payment assistance is by far the biggest hurdle for the real people that we want to reach,” Neal told her during his hearing.
The down payment assistance money had to be paid back whenever the person sold the home for which he used it, Detert pointed out.
Detert also noted that the Sarasota Housing Authority used to handle all the mortgage pre-qualification work for low-income families who wanted to buy houses.
She suggested that the new staff report contain information about more modern ways to help first-time homebuyers.
Commissioner Michael Moran countered that he could support an alternative: a history of affordable housing efforts in the county. He indicated that that could spur board discussion.
She envisioned staff’s laying out all the options already available to help developers construct affordable homes, Detert responded, “and then we’d see what our choices are. … I just want it all on paper.”
Chair Alan Maio responded that he could support the idea. He added that he would like for it to include the status of any plans for construction of 750-square-foot dwellings, which the board members approved a couple of years ago. The idea was to help builders by lowering their expenses for affordable homes.
“There must be a demand for those,” Maio said of the smaller houses.
When Maio asked whether any commissioner objected to Detert’s request, no one offered another comment.
Then Maio asked whether County Administrator Jonathan Lewis had sufficient information about what the board members are seeking. Lewis answered that he did.
Latest thoughts from Pat Neal
In a May 11 memo to the commissioners, Pat Neal pointed out that his company has three properties that have won approval under the county’s 2050 Plan for development east of Interstate 75, and all include affordable housing.
The commission, he continued, “for as long as I can remember,” has attempted to offer more affordable housing options for county residents, especially teachers, nurses, law enforcement officers and firefighters. “These homes are for people who work and live and have committed their lives to Sarasota County, but could not afford living in Central or South Sarasota County (and often live in Lakewood Ranch, Manatee County, North Port, or elsewhere),” he wrote.
“To my knowledge,” Neal continued, “there have only been a few dwelling units built under Sarasota County’s various programs.”
About 100 of those were constructed at Palmer Place, he noted, adding that that development is part of a community housing program. Another 35 affordable, single-family dwellings were built “at MI Homes Hidden Creek, he pointed out. “Both projects are now sold out.”
Neal went on to offer comments about why he believes the county’s 2050 Plan provisions for affordable housing have been unsuccessful. (The 2050 Plan was created to govern development in the eastern part of the county.)
“The chief problem that we have seen at Palmer Place and other places around Florida,” Neal wrote, with emphasis, “is that people who buy the income subsidized dwelling units do so to speculate on their sale to subsequent purchasers!!!”
For example, he pointed out, if Neal Communities offered a $300,000 house for $250,000, “the first and best thing that the market directs is for buyers to make the $50,000 profit on the immediate purchase and sale of the Contract for Sale and Purchase (before [his emphasis] or perhaps after settlement of the dwelling unit itself).”
People use a family member or a person with a lower income to handle the transaction, so the purchase conforms to county requirements, Neal pointed out.
Yet another issue, he continued, is what he calls the “variables of the program.” The affordable housing formula in 2050 Plan developments involves interest rates, debt-to-income ratio, cost of insurance, property tax payments and other factors, he wrote. “So, the issue with a provider is that all the numbers can work very effectively at such time as the housing product is commenced,” he added, again with emphasis.
“But upon completion,” he pointed out, “everything can have changed and the factors could have ‘conspired’ to raise the price of housing and, of course, diminish the viability of the project, its ability to sell, and reduce the developer’s ability to create a successful project.”
“[T]he solution of the problem,” Neal wrote, “is to create certainty.
“If there is certainty,” he explained, “there will be creation of more inventory and progress made to reduce the problem of Affordable Housing in Sarasota County.”
Further, he noted, the county’s “regulatory framework presents a ‘one size fits none’ focus on the buyer’s income.”
Comprehensive county report issued in 2017
In May 2017, at the request of the County Commission, staff produced a Situational Report on affordable housing, after the board members identified the issue as one of their top priorities. (Detert was elected to her first term in November 2016.)
At the time that document was produced, Tom Harmer was the county administrator. (Harmer later hired current Administrator Lewis as an assistant administrator; Lewis had been manager of the City of North Port.)
That 2017 report documented a number of public meetings, 842 responses to an online survey, and outreach to peer counties, as staff worked to pull information together.
In its Executive Summary, the report said the following: “From a business viewpoint, home builders and sellers are motivated to build and sell homes that yield the biggest return on investment. In the current market, there is a strong demand for both moderately and high priced homes, which translates to what developers naturally want to build. However, it is still possible to yield a reasonable return on investment for developers who are knowledgeable in building subsidized housing. What this leaves out is housing projects that operate at tighter profit margins, in particular, workforce housing. Being cognizant of the economics of housing requires the development of creative ideas that directly impact the overall profit margin to make these projects more appealing to build from a competitive standpoint.”
Altogether, the report offered 18 recommendations within five themes:
- “Place Affordable Housing Near Employment Centers
- “Provide More Flexible Housing Types
- “Increase the Number of Rental Units
- “Increase Density
- “Unlock Land Supply (The report said staff had received suggestions that the county offer surplus, vacant property to developers for affordable housing projects. Recent efforts have been underway to that effect, with board approval.)
- “Provide Redevelopment and Infill Opportunities
- “Create a Supportive Environment for Affordable Housing Regulations
- “Utilize Financial Incentives
- “Streamline Government Process
- “Diversify the Economic Base
- “Encourage Higher Wages
- “Provide Preference for Locals
- “Direct Assistance to Workers
- “Provide Assistance to Employers
- “Create a Housing Trust Fund
- “Develop Affordable Housing Services
- “Support Community Collaboration and Partnerships
- “Confront Political Perception through Community Engagement” (This item refers to the fact that some property owners believe that affordable housing stock is of lower quality and, therefore, the values of their parcels will decline if such developments are constructed near their neighborhoods.)
Other board action within the past few years
Additionally, on Aug. 21, 2019, the commissioners conducted an affordable housing workshop.
During that session, William Russell III, president and CEO of the Sarasota Housing Authority, suggested that the commissioners authorize a Request for Proposals for affordable housing on one or more county surplus parcels. He added that the county could donate the land, as the price of property is the most expensive factor of any development in the county.
Neal of Neal Communities also participated in that discussion. Then, he emphasized how long it takes for a new 2050 Plan development to go through the process of winning commission approval. He has pointed to that timeline factor since then, as well.
Further, Neal discussed developers’ concerns about expenses rising as that county approval process plays out — comments similar to those he expressed in the May 11 letter.
Jon Mast, who was serving on the county’s Affordable Housing Advisory Committee, called for the commissioners to waive impact fees for affordable housing projects and allow more housing density in the urban core.
Mast, who is the CEO of the Manatee-Sarasota Building Industry Association, remains on that advisory committee.
Additionally, as Commission Chair Maio noted on June 9, the commissioners have taken several steps to try to reduce developers’ costs for affordable housing projects. Among those was their March 13, 2019 vote to approve provisions for 750-square-foot homes in multi-family housing developments.
Such homes would be allowed only in Commercial General (CG), Commercial Intensive (CI), and Office, Professional and Institutional (OPI) zoning districts; they would not be permitted in areas zoned for single-family residences.
Each 750-square-foot home would count as half a dwelling unit, thereby allowing for double the residential density of a project.
The commission also has reduced the parking requirement from two spaces to one for smaller housing units, and it has lowered mobility and impact fees, as well as the expense of county water and wastewater hookups, for smaller dwellings, as incentives to developers.