Inside South Florida’s Affordable and Market-Rate Development
- Jul 02, 2020
The COVID-19 outbreak has exacerbated the dire need for affordable and workforce housing across most parts of the country. In South Florida, a region known for developers’ appetite for luxury developments, affordability was a thorny issue long before the pandemic hit. To conform to the current climate, developers must invest in the construction of subsidized housing, according to Nelson Stabile, a principal at Integra Investments.
The South Florida affordable housing and market-rate multifamily developer expects demand for apartments in suburban markets to increase, as individuals look to relocate based on attractive pricing. In the interview below, Stabile discusses investor sentiment and also touches on how the pandemic has impacted his company’s soon-to-be-delivered projects.
What can you tell us about investor sentiment across South Florida when it comes to the affordable housing and market-rate multifamily market?
Stabile: The appetite for low-income housing tax credits—which is crucial for our affordable developments—remains strong, although indications are that LIHTC syndicators and investors are increasingly selective in the current environment. LIHTC pricing for new deals—that were not underwritten prior to the onset of COVID-19—is currently somewhat elastic, which we expect to be temporary as the world recalibrates.
On the market-rate side of things, investor sentiment remains positive. Given multifamily rent collections have shown strength relative to other asset classes, an appetite to invest in the space is still prevalent today.
Is it harder now, in the current economic environment, to build affordable and market-rate communities in South Florida?
Stabile: For affordable developments, we have not seen COVID-19 materially impact the progress of permitting or closing financing for our projects. In fact, we’ve been encouraged to continue engaging with permitting authorities, governmental financing agencies, our nonprofit partners, project design and legal professionals, and financial institutions that are our partners. All are working with diligence and focus toward our common goal of constructing high-quality, affordable housing, despite the various adjustments to the day-to-day operations.
Regarding physical construction, Integra Investments has implemented a series of new protocols to ensure the safety of our construction team and the community, but we have not experienced significant delays.
How has the coronavirus outbreak impacted your multifamily projects?
Stabile: Integra’s project timelines remain on track across its portfolio, with ongoing construction amid the pandemic. Thus, we are fortunate not to have felt the generalized negative impacts as concrete and steel, among other building commodities, remain regularly available. However, suppliers serving the subcontractor industry are experiencing delays in their assembly plants. For example, due to mandated closures, we have experienced longer lead times for appliance deliveries.
Is Integra undertaking initiatives to support those in need of housing at obtainable prices?
Stabile: To respond to the ongoing housing crisis, our affordable development division, Interurban, is maintaining its core focus on increasing the supply of premium, subsidized housing with affordable rents. To close the development funding gap, a combination of programs, including LIHTC, local development subsidy, HUD rental subsidy and local zoning incentives are crucial to our delivery of high-quality housing at affordable rents.
By the end of July, 390 units of entirely affordable and elderly housing in Miami-Dade will be under construction by our Interurban division, financed with LIHTC and other government agency funding. Additionally, at the end of this summer, Bella Vista, a market-rate multifamily development in Lauderdale Lakes, Fla., will be delivering to the market.
Tell us more about your Bella Vista project in Lauderdale Lakes.
Stabile: Bella Vista is a 315-unit, market-rate multifamily development in the heart of Broward, poised to deliver much-needed workforce housing to the community. Understanding the market need and demand potential, given Bella Vista’s prime location and fundamentals, Synovus Bank supplied the project’s financing to develop this quality housing product. Preleasing has remained steady, with dozens of secured leases and occupancies expected for July.
Tenants can select from one- to three-bedroom residences averaging 850 square feet, with Class A finishes. A wide range of community amenities will be available, including a business center with a conference room, playground, fitness center, and several entertainment areas, such as a pool deck and clubhouse.
What does this project mean for market-rate units in suburban markets away from the urban core?
Stabile: Serving as a central point of connectivity to the Broward County community, with access to major thoroughfares, Bella Vista is located on Oakland Park Boulevard, between the turnpike and Interstate 95. The three-story, conventional garden-style development, with private garages available, mimics the style of a single-family home environment. As individuals relocate from the urban core due to the pandemic’s effects, Bella Vista delivers an untapped product that merges single-family home features with Class A multifamily amenities, allowing residents to experience the best of both worlds, while minutes away from the heart of Broward.
How did you finance this project? How difficult is it to obtain the necessary funds for building right now?
Stabile: The project was financed without any government subsidies, with all funding derived from private equity and a conventional construction loan. The most critical aspect regarding financial viability is achieving a proper cost basis, considering both land price and construction cost. While both had been steadily increasing pre-pandemic, it appears that land pricing and construction costs are flattening at the moment, which will hopefully lead to more housing where communities need it in the future.
What measures can developers take to support housing stability?
Stabile: The nationwide need for affordable and workforce housing has increased due to the pandemic’s long-term economic impact. Without new product, neighborhood housing shortages are further magnified as household occupancy rates near capacity. To address the significant lack of supply, developers must continue working to bring products to markets that are not overly saturated. Working closely with the given municipalities to ensure planning ordinances are aligned with each market’s demands and needs is crucial. Antiquated planning and zoning regulations affect the development process.
How do you expect rental rates to perform going forward?
Stabile: Unemployment rates will play a significant role in how rental rates perform and react going forward. Overall, we expect positive net increases in rental rates, with moderate growth for workforce housing product, given the price point. The projected increases will be specific to each market and based on area demand.
What are your predictions for the suburban multifamily market in South Florida?
Stabile: I predict an increased demand for suburban housing product with high walkability scores. As social distancing measures remain, a good portion of our population will forgo the urban core for less dense communities, with ample green spaces. Developers and users will place increased value on live-work-play, open-air environments within walking distance of parks, golf courses and bike routes. As individuals continue to work from home, internet speed and accessibility to different areas of a residential project will become the most valued amenities.