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Florida Gov. Ron DeSantis has signed a bill that amends the state’s Live Local Act, doubling down on the original law’s intent to clear red tape, spur new residential and mixed-use development and bring down housing costs.

The Live Local Act originally passed at the beginning of 2023, providing major funding and tax incentives for developers to build mixed-use and multifamily projects, overriding some local zoning regulations and banning rent control across the state outright.

But while the law was considered a major step toward addressing the state’s housing affordability crisis, local governments pushed back, implementing development moratoriums or dragging their feet on building approvals that under the new law were now strictly a matter of administrative routine without public hearings.

Disagreements over the law led the Florida legislature to double down, passing what’s being called a “glitch bill” by legislators to address the problems that arose from the original law. The new legislation, signed Thursday by DeSantis, clarifies uncertainties in the law that local municipalities had used to prevent development or extract concessions from developers.

The clarifications prevent municipalities from restricting projects up to 150% of the currently allowed floor area ratio; provides height protections for single-family neighborhoods; removes parking requirements for transit-oriented developments while reducing parking requirements by 20% for developments within half-a-mile of a transit hub; and added tax exemptions for land and common areas included in developments, not just the residential units. The law now also extends to for-sale condo units, in addition to apartments.

The new law also prohibits Live Local Act projects within airport flight paths, noise zones, and those that exceed airport height restrictions.

The Live Local Act is “the most comprehensive change to Florida’s zoning laws in decades,” said Anthony De Yurre, a land use and zoning attorney with law firm Bilzin Sumberg, in a prepared statement. De Yurre, who helped craft much of the legislation, added that developers have been “waiting for these revisions and clarifications to tweak their projects or update” their plans. “The final bill enhances the probability of Live Local Act projects getting approved, financed and built,” De Yurre said.

The new law goes into effect immediately.

 

Source:  CoStar

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As commercial real estate markets across the U.S. cope with rising costs and slowing demand, Florida has been a rare bright spot. The Sunshine State has welcomed a record number of people and businesses in recent years, and that activity is driving strength and stability across asset classes.

Florida is home to six of the country’s top 20 most competitive multifamily markets, its tourism sector set a new visitation record in 2022, and office market dynamics from Miami to Tampa are outperforming national averages.

As 2024 approaches, the burning question is whether Florida’s commercial real estate landscape will remain resilient. Bilzin Sumberg, which has one of the largest and most active real estate practices in the state, is tracking the following trends heading into the new year.

1. Lenders will become even more selective

Developers have been grappling with escalating costs on multiple fronts throughout 2023, and this is unlikely to ease as interest rates, inflation, wage growth and insurance costs mount and lenders have been grappling with valuations and pricing. As a result, capital for commercial real estate investments will be increasingly hard to come by, as lenders will be more selective about the deals they choose to finance. The more expenses and interest rates rise while uncertainty prevails, the more difficult it will be to complete deals in 2024. Developers will become even more strategic about the projects they pursue, and more proactive in getting ahead of potential challenges.

The good news for South Florida is that developers are still building, according to Bilzin Sumberg’s real estate practice chair Suzanne Amaducci. The demand for the South Florida lifestyle remains strong from both domestic and international buyers. Condo construction projects financed in part with upfront buyer deposits have obtained financing and are now underway with more projects to start in the near future, Amaducci reports.

“Our team is on track to close at least four condominium construction loans with a combined value of more than $600 million before the end of the year,” Amaducci said. 

2. The Live Local Act will spur development in metro areas

Against the backdrop of a housing affordability crunch and tight financing environment, one Florida law enacted in 2023 is becoming an important vehicle for developers and investors looking to get shovels in the dirt.

The Live Local Act is a statewide housing strategy designed to create affordable and attainable housing opportunities, allowing more of Florida’s workforce to live in the communities they serve. The act offers funding and tax credits, and mandates that local governments administratively authorize multifamily development on certain sites if at least 40% of units will be affordable for people making up to 120% of the local area median income.

The Live Local Act could become a blueprint for other states to follow as cities across the U.S. contend with an affordability crisis.

“This is Florida’s most significant land use policy change in 20 years to address the biggest problem we have had in 100+ years,” said Bilzin Sumberg partner Anthony De Yurre, who is advising on more than 40 projects advancing under the law. “The Live Local Act is crucial for teachers, government employees and other pillars of Florida’s economy, many of whom have been priced out of the best employment centers, resulting in long-distance commutes. It’s also a game changer for developers. In many cases, this law will be the difference between a project getting done or shelved.”

3. Condo redevelopment deals will grow in popularity

Florida is home to 1.5 million condo units, and 925,000 of those are more than 30 years old, according to Bilzin Sumberg real estate partner Joe Hernandez. Nearly 50% of those units are in Miami-Dade and Broward, making South Florida fertile ground for condo terminations that pave the way for redevelopment.

As Florida’s population grows, aging condo buildings emerge as prime targets for buyouts that pave the way for redevelopment. The impetus behind this trend is twofold: the imperative for costly repairs mandated by state regulations enacted in 2022, and escalating construction and insurance costs.

Condo associations at aging properties are dealing with the worst of all worlds, as expensive repairs required under state regulations passed after the collapse of South Florida condominium Champlain Towers in 2021 are colliding with mounting costs. Compounding the problem is Florida’s insurance crisis, which is resulting in fast-rising premiums, decreased coverage amounts, and some insurers becoming insolvent or exiting the state altogether.

“The confluence of factors in Florida creates fertile ground for developers seeking to breathe new life into aging condominiums – and with a surge in population, the demand for housing is more pronounced than ever,” said Bilzin Sumberg’s Joe Hernandez. “Condo terminations represent a strategic move in response to higher maintenance costs, rising insurance premiums and tightening regulations.”

Florida is likely to see even more of these deals in 2024 as condos struggle with higher maintenance and insurance costs, and tighter regulations.

 

4. Initial signs of distress will emerge

For all of Florida’s strengths, there is no escaping the fact that almost $1.5 trillion in commercial real estate debt comes due by the end of 2025. For the time being, distressed properties are hard to come by in Florida, but that may change as pressure mounts on owners whose assets currently benefit from low financing costs.

“The CMBS market is cyclical, and many property owners took advantage of the prolonged period of low capital costs that ended in 2022,” said Karyl Argamasilla, co-head of Bilzin Sumberg’s CMBS and real estate capital markets practice. “We anticipate a wave of loan maturities in 2024 and 2025. In some instances, these loans will not be able to be refinanced or paid off, which could trigger an uptick in workouts.”

 

Source: JD Supra

 

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The Live Local Act will significantly change how real estate is developed in Florida, Miami land use attorneys said at a recent webinar.

Held May 4, the webinar was hosted by Bilzin Sumberg partners Anthony De YurreSara Barli Herald, and Carter McDowell. During the hour-long event, the attorneys urged developers to gather with their teams, consult with municipal planning staff, and take another look at their planned projects.

“This opens up a whole area of potential development that was not there before,” said Herald, who specializes in affordable housing and tax credits. “There are a lot of changes. This is probably the most significant land use change in decades.”

De Yurre, who specializes in zoning and complex land use, added “This is the Magna Carta.”

Also known as Senate Bill 102, the legislation was signed into law in late March, effective July 1. Among other things, the bill grants developers the ability to build the maximum amount of units a local jurisdiction allows – and at the maximum allowed height within a mile of a project’s site – on almost any property zoned commercial, industrial, or mixed-use. And that developer can obtain those rights without a public hearing.

The catch is that 40% of those units must be reserved for households earning up to 120% of a county’s area medium income (AMI) for the next 30 years. (A developer can seek the same rights with just 10% of the units reserved for affordable housing, but that will require approval from the jurisdiction’s elected body.)

In addition, SB 102 does not destroy other zoning rights reserved by states such as setbacks and parking requirements. However, the law states that cities and counties must consider reducing parking requirements for affordable projects built within a half-mile of a transit stop.

Besides zoning variances, the code grants developers property tax breaks if they constructed or substantially rehabbed a building in the past five years in which at least 71 units are affordable housing. If those units are reserved for people who earn between 80% to 120% AMI, the landowner is entitled to a tax reduction of 75% for those apartments. If the units are for households earning below 80%, a landlord can secure a 100% reduction on a property tax bill. The catch is rents must conform to HUD rent income restrictions or 90% of an area’s market rate, which ever is less, for the next three years.

 

Source: SFBJ

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More Density, More Height and Less Bureaucracy

Photo of Downtown Miami showing high rise density

The Live Local Act (“Live Local” or the “Act”) makes unprecedented changes to zoning law that impact and limit local government power. The Act requires counties and municipalities (“Local Government”) to administratively approve multifamily and mixed-use residential projects as permitted uses in any area zoned commercial, industrial, or mixed-use so long as 40% of the residential units are restricted as “affordable” for at least 30 years (a “Preemption Project”). In mixed-use projects, at least 65% of the total square footage of the project must be used for residential purposes to qualify as a Preemption Project.

Not only does the Act expand the areas where affordable multifamily and mixed use developments are statutorily permitted by right without a public hearing, but it also provides unit density and building height benefits for Preemption Projects as summarized below:

Preemption Project Maximum Unit Density: Preemption Project unit density is permitted to the maximum currently allowed unit density for residential development within the Local Government’s jurisdiction. For example, if the maximum unit density in the applicable jurisdiction is 500 units per acre, then the Preemption Project is allowed that same unit density regardless of the maximum unit density that would otherwise apply to that location.

Preemption Project Maximum Height: Local Government cannot restrict the height of a Preemption Project below the highest currently allowed height for a commercial or residential development located in its jurisdiction and within one mile of the Preemption Project, or three stories, whichever is higher.

Preemption Project Approval Process: Critically important, a Local Government cannot require a proposed Preemption Project to obtain a zoning or land use change, special exception, conditional use approval, variance or comprehensive plan amendment for building height, zoning, or densities permitted by Live Local. Further, Live Local also requires that Preemption Projects be approved administratively, without any further action by the Local Government, so long as the development (1) satisfies the Local Government’s land development regulations for multifamily developments in areas zoned for such multifamily use and (2) is otherwise consistent with the comprehensive plan, except of course for the preempted items of unit density, height, and land use.

Other Considerations:

• Beyond the unit density and height as per the Act, in order to obtain administrative approval, Preemption Projects must still comply with Local Government regulations, including but not limited to parking requirements, setbacks, and floor area limitations. Notwithstanding, the Act also requires a Local Government to consider reducing parking requirements for Preemption Projects located within one-half mile of a major transit stop, so long as such major transit stop is accessible from the development.

• While a Local Government is not required to follow the Live Local Act if a project contains less than 40% affordable units, a Local Government may still elect to use the Live Local Act to approve the development of affordable housing, on any parcel zoned for commercial or industrial use so long as 10% of the units in the project are affordable. This provision also applies to mixed-use residential projects that meet the 10% affordable requirement. Importantly, the 10% affordable project language of the Live Local Act is self-executing and does not require a Local Government to adopt any ordinance or regulation before approving a 10% project under the Act.

How to Qualify as “Affordable” Under the Act

Live Local preemptions are mandated only for those projects with at least 40% of the project’s residential units as “affordable” for a minimum of 30 years. “Affordable” is defined in Section 420.0004(3), Florida Statutes, as monthly rents or monthly mortgage payments including taxes, insurance, and utilities that do not exceed 30% of that amount which represents the percentage of the median adjusted gross annual income for the households defined as: (1) extremely-low-income; (2) low-income; (3) moderate-income; or (4) very-low-income.

These “affordable” housing categories, are defined as:

Extremely-low-income persons” means a household with a total annual household income that does not exceed 30% of the median annual adjusted gross income (“AMI”) for households within the state. It should be noted that the Act provides that the Florida Housing Finance Corporation may adjust this amount annually by rule to provide that in lower income counties, extremely low income may exceed 30% of AMI and that in higher income counties, extremely low income may be less than 30% of AMI.

Very-low-income persons” means households with a total adjusted gross annual household income that does not exceed 50% of the AMI for households within the state, or 50% of the AMI for households within the metropolitan statistical area (“MSA”) or, if not within an MSA, within the county in which the person or family resides, whichever is greater.

Low-income persons” means a household with total adjusted gross annual income that does not exceed 80% of the AMI for households within the state, or 80% of the AMI for households within the MSA or, if not within an MSA, within the county in which the person or family resides, whichever is greater.

Moderate-income persons” means a household with a total adjusted gross annual income not exceeding 120% of the AMI for households within the state, or 120% of the AMI for households within the MSA or, if not within an MSA, within the county in which the person or family resides, whichever is greater.

The Act’s changes aim to significantly reduce the time (and related expense) associated with the entitlement process of qualifying projects. Allowing Preemption Projects in commercial and industrial areas has the potential for creative utilization of these properties in ways previously not possible.

 

Source:  Bilzin Sumberg