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HomeMy WebLinkAboutM-87-0580CITY OF MIAMI. FLORIDA MEMORANDUM TO; DATE June 2. 1987 FILE: Honorable Mayor and Members of the City Commission SUBJECT: Critical Shortage Of Affordable Homeownership Opportunities In Miami: Emergency Measures And Other FROM: Cesar H. Odio REFERSNCEs: Actions Necessary To City Manager Ameliorate Problem ENCLOSURES: City Commission Agenda Discussion Item: June 11, 1987 The national inflationary spiral of the late 1970's and early 1980's brought about a dramatic and unprecedented increase in the value of residential real estate in the South Florida market place with which the personal economic growth of thousands of Miami families was unable to keep pace. Today, according to the first quarter statistics of the Federal Home Loan Bank Board, the average price of a new or preowned home in the greater Miami market area is $93,500, representing a 3.6% increase in the price of the average home just one year ago. Indeed, between 1976 and 1986, home prices have risen by approximately 112%, on average. From the homeownership affordability standpoint, the advantages of the lower home mortgage interest rates of the last 18 months have been neutralized by steadily increasing residential real estate costs. While the average cost of a home in greater Miami is reported to be $93,500, the median family income in the area is reported to be $29,688, vastly insufficient to support the mortgage related costs associated with purchase of such a home. The disparity that exists between average family income and average home purchase costs is best described as "the homeownership gap", and it adversely affects thousands of hard- working Miami families who aspire to homeownership, but have been virtually shut out of the home purchase market by home purchase costs that have risen much faster than has family income. The ramifications of this homeownership affordability gap extend well beyond the dampening of the homeownership aspirations of these families. In fact, the homeownership affordability gap in Miami adversely affects the quality and availability of Miami's rental housing inventory which is static and overburdened by families who cannot afford to move into the homeownership market, thereby limiting rental housing opportunities for young families not yet ready for or able to fulfill the responsibilities associated with homeownership. (O g-) M00n C4 8'7-'5EC I- I Most experts agree that the "anti -housing development" provisions of the Tax Reform Act of 1986, coupled with the federal government's nearly complete retreat in domestic housing spending will result in a private investment moratorium on the production of new, affordable rental housing. Unless efforts are undertaken at the local level to free up Miami's overburdened rental housing inventory through jointly sponsored public and private initiatives to bring homeownership opportunities within the economic reach of those working poor families often described as families of "modest" or "moderate" income, the already short supply of affordable rental housing will be overburdened to the breaking point. In recognition of the problem, the Florida State Legislature, in 1983, passed local option legislation allowing certain political jurisdictions the authority to double the cost of documev.tary stamps for the recordation of commercial mortgage documents. To date, Metroppolitan Dade County's "Documentary Surtax" program has assisted 498 families in bridging the homeownership affordability gap through its deferred second mortgage home purchase financing program. However, the demand for such home purchase financing assistance far outstrips projected "surtax" revenues. Moreover, the surtax program alone does not address the need to decrease the "front loaded" costs of home production, equally important to bridging the housing affordability gap in Miami. It is clear that a meaningful response to Miami's homeownership affordability dilemma must involve public -private involvement to both reduce the basic cost of the housing product and reduce mortgage related carrying costs associated with homeownership. In the fall of 1986, the City Commission took a major step toward the ultimate resolution of the existing housing affordability gap in approving implementation of the Scattered Site Affordable Housing Development Program, which has as its major objective City sponsored development and "at cost" delivery of single family homes to be developed on an infill basis in the City's Community Development Target Areas. Construction funding for this unique program was also approved by way of the issuance of a special obligation housing bond issue, the.,proceeds of which will be used as a revolving construction fund. Last month, the City Commission approved, subject to a public hearing, the acquisition of 31 underutilized homesites in the Allapattah, Wynwood, and Manor Park neighborhoods, for development of the planned housing units. On June 24, 1987, the City Commission will be asked to take several additional steps necessary to the successful implementation of the program, including the approval of a Housing Development and Affordable Homeownership Opportunity Demonstration Program, which has as its objective the construction of seven affordable single family homes on a City - owned parcel of land in the Model City Community Development Target Area. s I owned parcel of land in the Model City Community Development Target Area. Among the actions the City Commission will be asked to take are: 1) Approval of the site plan, unit design, and configuration of the seven dwelling unit demonstration projects to be developed on a site presently owned by the City in the Model City Community Development Target Area. 2) Approval to request bids from private contractors for the construction of the demonstration homes. 3) Approval of the home buyer selection process, which will involve a two-tier application screening and public lottery process. 4) Approval of a two-tier mortgage financing program involving the provision of first mortgage buyer financing by Barnett Bank and second mortgage financing by the City of Miami with interest income derived from the investment of 1976 General Obligation Bond proceed principal. As the primary objective of the Scattered Site Affordable Housing Development Program is to deliver quality homes to low and moderate income buyers at affordable prices, it will also be necessary for the City Commission, after a public hearing has been conducted, to make a finding that Miami's housing affordability crisis warrants waiver by the City of the Charter requirement that all City -owned property be sold to the highest bidder, which is allowed for in the City Code. It is recommended that this public hearing be scheduled for the June 25th City Commission meeting. 683 87-580 `.