HomeMy WebLinkAboutM-81-0569Howard Gary
City Manager
A
Dena Spillman, Director
Department of Community Development
June
18 , 1981
Lbw and Moderate Income Rental
Housing Development
Report to City C anmission
Agenda Item: June 25, 16,81
Accompanying this memorandum is a staff report on affordable rental housing
production. The report, which is scheduled to be presented at the City Commis -
Sion meeting of June 25, 1981, has been prepared in response to the City Com-
mission's growing concern over the shortage of rental housing affordable to
families of low and moderate income and in response to the Commission's request
for measures the City could take to encourage the production of such housing.
The report concludes that, vd th federal housing resources diminishing, the City
must work cooperatively with the private rental housing industry to achieve an
increase in rental housing production. Additionally, the report concludes that
the private sector cannot produce rental housing affordable to the City's low
and moderate income families in the absence of substantial financial assistance.
To illustrate this point, the report includes pro formas for four identical
100-unit, 2-bedroom rental projects. Model pro formas "C" and "D" indicate the
levels and types of financial assistance the City would be required to provide
private sector housing sponsors in order to achieve rent levels affordable to
low and moderate income families. As indicated in the report, this assistance
includes land acquisition fundinq, tax exewpt financing, and, for low-income
housing, annual City debt service subsidies.
The moderate income rent level pro forma, model pro forma "C", proposes acquisi-
tion by the City of the development site and its subsequent disposition to the
project sponsor at 5, of actual cost plus the provision of tax exempt interim
and permanent financing. 'While the cash return on equity falls short of the
minimum of 10`: normally expected, private sponsors could well be encouraged to
participate.
The report proposes the use of proceeds of the City's general obligation housing
bonds to fund site acquisition. Assuming a fifteen year issue at 9' the cost
to the City of the land acquisition and disposition mentioned above would be
approximately $69,620 per year or $1,044,300. The public to private sector
leverage factor would be approximately 5 to 1. Bond counsel has provided an
opinion indicating that the City's housing bond proceeds can be used for land
acquisition for low and moderate income housing, but that the question of "public
benefit", given the unique public/private partnership inherent in the program
may have to be tested in validation. (See attached)
311 -569
1
�-.
l3li�ULF'f I'�a .�i9Wn
F
nc�„+ss+
_ r
S( fV"fi ItYJ M.
it l 1 t"A�Z�'Z'f
Ih order to achieve rental rates affordable to the City's low income families,
financial participation by the City must drastically exceed that necessary for
a moderate income project. In addition to the cost of land acquisition and dis-
position described above, an annual City contribution of approximately S121,056
would be required for the 30-year term of the project mortgage. In total, the
City's financial commitment would be approximately $4,675,980. It is unclear at
this point whether housing bond proceeds could be used to fund the annual City
contribution required. Model pro forma "D" illustrates the level of financial
participation required by the City to achieve rental rates affordable to low
income families.
The low and moderate income models provided in the report are intended only to
illustrate "order of magnitude" costs. Actual costs can only be determined
by testing the basic hypothesis in the real world.
Nevertheless, it is apparent that the expense to the City of assisting the private
sector in the production of rental housing affordable to low income families is
considerable. For this reason it is the opinion of staff that the City not embark
upon the development of low income rental housing as described in the report.
It is recommended, however, that the City proceed to test the feasibility of develop-
ing a model moderate income project in accordance with the basic financing strategy
outlined in the report.
/rjf
Fnr1ncurp
001 -5C)9
`S�• �u'�Ff
,.
i�� aK4..e.t'Y
SAN FF3ANCISG6 OFFICE
ALCOA BUILDING
ONE MAPI?IMC OLAIA
SAN FRANCtSCO,CALir. 94111
TELEPHONE: 41S • 398 - 3969
MMOWN, Wood, IWrtY, MITCHr.LL, PVTY
ONE LIBERTY PLAZA, Ntw YOPK, N,Y. 10o06
212-349-IS00
=tak NE" 6AN$t BUILDING
CARLtA00at:SS 8o]µ00:%AW 1660 AtHLEY DRIvE
+eLfcoatta e12.3A9-!5,13 tAMPA, FLORtOA 33609
TELEPHONE: B13.223-9600
,
June 0,3 10ui
Jerry Gereaux
Assistant Director for Housing
Department of Co:r,:.unity` Development
City of Miami
P.C. Box 3307o8
Mlamii; Florida 33133
Re: iiliat:i-Housing, Bonds
Dear. iir, Gereaux:
` $ j %46
' i1 rr
In accordance with your letters to us dated Ma, 19 and
May 22, 1981 and our ttteeting with you and his, Dena Spillman
in Niel.-. Yore: City cn June 3, we have reviewed certain aspect
of your rroccs'ed r-lan icr acsistinz Dade County in financin-
housi2: in t:li C_t;; of :ii r�i for f _: i 1_es and persons of lc
-�e _ i, C,1,•, ?T -,rz th a�ze i
and ::oul,rw .. .:co... �.•�. � 1s,,.. �o � ct. s� ict1.. r � c t
r Jt
your 1� L,erU are a�
s
.C21d: The Florida S1:preme COlirt
in a decizi_.n cats: ='ice ��, }';1 held thin the ��ty of
Pensacola: t-he-uni.cit''al H,cme Rule Fo:,ters act,
Sections 1!'v.011 et zen., Florida _.tatutt?s, to issue t^Grt_;a e
revenue b01:"..._ :O f'i:1:CIirC' �it1f"Le fa:::il,, OtiT132'-OCCUZ:iL' hCUS :1
t + + n• •, 1 o;� .a �, s t '� 1,ub1 _c e tti?s
a21i1 1:aL t;;"":�... �:� 1' .. not, j)I't- :':I, .(„ �,., 0�3i- I'
which ar,3 Zzs:ec___-ca11;,` -:r n t e d thc. r`o::er to f I n a n c c Sufi;
hot;.. I M ";c - z t-. f . m.. - ` 'a r, e to
�-i �.�. l.. :. _} •,,� r_t�•; o� :i.��-:.Lin 1?�• �I n ,_�, c.ri
Dade ti'ULllit;; lithe dtt%ies, functions and. i:;rLjie2'ty Of t11e ;,ia:?li
i1CU:ii2: - :il�.:ti'I .i;; 1t, Ilt� i i :� :'C'..•_L_I:: tht' 011 tJ
t , , ,C ,� }1 t:'O':L:: tO
exercise tho::t i.�.l.:;i27i, I inar ev I C. E?I . , ou.. a 1 e
is ,_ue r.4 -�: ~ veil lo t•:hlch are not �-r,mted to
,.. r.:o_ _._ ,_L re til: ,.c: is,
public ioz by C.ozlerai T' 1cri;.a 1av- IS t104-ed
belo, r th,� 'lC'_'i.la LII'.I'^:':0_ 1-70Lz rt has not e , isSl.tEed
ti- , r t • i
an opinion :•:i�h rc•,���Id to the ,.o::e of nt:. �.ipalines to
issue its revenue bor:ds to make loans to private
develoj ers for the fin,:r.cin , of i alit i -f: m, 1y houwinrr to be
,
ol.erated cn a for -profit Masi:.,; 11; ::ever, as noted 'oelot:, ;re
81 -569
fd ..
•u;ux..- .x'tc. �t
�gl)
i
r �m
W
r
2. City and County Cooperation. As you noted in Your
L
letter of :'lay 22, the proceeds of the City's egeneral obli a ioh
housingbonds a.utherized in 197r rust be used to assist Dade
County in financinc- houcin-- in the Cite of Ni- ami for families
Glllu Nl.l oon', of 1V}: anc. mcdcr atc lltCGl'+C or to iiiC. asc the
Security of Dade County obligations issued for such housing.
You asi:ed ,%hat actions t,rould be necessary to provide for a
deleca.ticn b;; Dade Count,; of its recr.cnsibilities 'or such
housing to the City of i_iai i The s oclfic action required
would be an amendment of the existinr Basic Agreement bets•:een
the County and the City to provide, with respect to the pro-
posed p„o,; e'ct, that
Dade
r`y de-j e�7nte to the City .;hat —
ever . o:•:erc and ditties are .. utually ':':_"_-: ed il:'cn, such as, for
e;:c:, ::. o, thC-' Pro"ect snCl__LaiOTis, sollic-Itincr
`
prc :osed de': eloperz and over eelnc, the .I aintenance and
operation of ti. project a_"ter cor.:r:l-ction of co.LructioTl,
subject to such controls cr re- ier:s that may be required by
the County. It is necescnr,r hC:'.e`icr, that the County
actuall; e— end the bend proceeds an,71 acc�;ire title to the
housi . 'tez i., • t I,, ,,ape- and 4 h � the C =-- e• Weise
u u rl1 : .J i , t it'ss O n r, i r1... `. , and 1, .:� L the �. (•J Li 1^i ', t :: e
di -r r h :te .,c-r c h r Ci cre '.. �i�:..ry �C':'it.•r � �Iid du'- I-.,h i'Yi
may be --* n-; c I :e d h tsa -Ir- Gr.. dnl,�y"-3it d tc It iois 1e,gal
.
or other r,-�a-acnz .
• ; --- .� r• ^ i� s t.. r f r~ t e e h `e C I L j' -
+ f1C'..: it �:: �. '..�Jn n... i'1•. �_ l� n �� ..: .i.vL.... '
would` ��� -r ? '�r�_l�ot 1 .: is r ' 'oceeds
1. i :-i u : _ ...:. . _ ... • . �. s. � i•1 C Li :� 1:•' b O , i,: i. i ..
to the County 1:o be used by the oust-, for the acc—is -ion of '
the sites cclected b;; the 1,ity at acq,ulio'Ltion prices al:proved
1?yhCCLhe l.il7,� _..'1 L ttr t. c-c,ii.i�,, Jould u SuaT:t O �.t.LL r011
1GJ J.! 1,cri ;-a i , : f' t u k,h !:„rorort;1 L r u`I•'• It, ire
:.idly. �.i'�' Jl:. :': e `~ l: :;L,. t -e y t
•;f.;,' ouyl, L r r;�i ��d tl� _'d� ,,i �.Zn,. �o ••t.ile
hi -zlv t 1 bidd -r faYl thl� "<-i, .,1 Ilse t 1,�t, t! e ^,O'1rri
[.- ♦ J ♦ a U . ; i� r1 li c �. ♦ l .. 1
l i 1,n 1•'._' it '110: 6 Tli: 1, • :O+a
�1°?VG au'. �C'^. t;.. fi'_ ta:' _'�Jii.: 1,0;-:'1'l;r det..'r:.nlnc'the i •
hci ;:in:-- f c'I' _',, r i1:, :. mi _'sI�111 '_:3 i:`: .:. �,: '.2:U fi:C)t: 'I':? -ZZ Inco"::C to
bo Lau
4- d ti. ,`•t ., 1 ,1, : .� 1.an-' .: �:4 yh Z �,rOi`c): :. ci t.o L.,
iliilhe:� t an . �+ .� to �� l t :'. �. l.• :. ,.
11' •. 4 i lei l:'ount; �L e c . s tenU
cilaced. _i.' .J c -i(1T1 b,, t; 1� �' Lt '11 ; t li.. b 'c 1:�_.'�
r ht '> > l i a 4- 1, n Tom;» (� 1 :� ,`l h '1
r>li 'll thy_ i%rC7�Lc..u111 :� UL. J_.L:�... .Z, I:}1C' .Jlt-y s F t_ne 1 oID1_,,":ition
hOu:;it1: U JI1C:.,, provided tl::lt fi'l tl.,.;n 1?� Jr 1 lorida :�t:1U1.ILf' i,
io full;; comf lied ;:;th. C1earl;f thic section I':ould not allow
a ne{sotiated onle of the land to a private developer for an
arti,ic': lly lot':
81-569
6
Nh6
A IoAte OP a pro'edt Cite would' be lwWoct to the tand,,
:,�d6ltbOtituive biddln,-LD limitation at a tale of the project kite
At we mentioned at our inectin- in New York, caret In
PlOrIda have struck down the acquitition of land by a muni-
'-LudCipal't- for the purpose of conveyinr
such land to a developer
for the construction of housing to be privately owned and
operated unlett the land it located in a slum or bli,-I-hted
area and the municipality it• acting purtuant to Its redevelop-
Ment no-wert. You Indicated at our meet l*nc,- in York ul�4- 1— a the houtln:; nite", pre-tently contemplated are not located in
exintin,. •r.:�dovelorment, art-�.an. T I -, e p r on o I .se of t-1,- C I- e 4- �Y t n
City
general otl_':-ation housing bonds to purchase there houtin-
:1 Z.3
tites for resale to private developers would only be permitted,
therefore, if the prono,-,ed housing is to be operated In a
Manner --uch that the use of the hou.-r-iris bond proceeds can be
character ize.-I an nr,edomlnat-e! public rather than private. 14e
believe that 'Uhit can be accomi-plizIned by havin:-:- the City enter
.Lnto a -cc-uiator*7 a,-eemcnt *ai;U-h tlne- developer ..;'lereby tne
C�� J U �j
"d overnee- manasen,ent of the de%-elopment by the privatn
i u Y o u �D 0
owner and manan-er and have the no,.-:e;r to step In and either re-
place the mana7,er or tal,-e over mans: -;event in the event the
project is not beiln-, malnta-ined and Operated in accordance
with the City'houzin-, 3tanC33rC33. in ad.." -Lon, tale re,-ulator
a r e m e n t z hic u 1, 11 1 im 4- t t h pro. it d c, r - i v , D , J by the 11 from,
4--
U he Q to 'I 1ixted
in the projecl_ in the
requi.-p- t-11-D tlo rentunits the`
e pro o -* c c t onlY to
ti - Ij
percons an,! fa:7111_103 Of l(D,.-,, and modorate ilicone", bazel upon
the Cltylz !Ielin,'ation of t-hP-- proper meanlin- ol., such torm6
4. Perz�,cn,.-. Ind T',,il 1 of -Ijoa �inc! :-'o(llei,at,_� You
,have an in,o..i_ 11'or in pro -
Us" of tile coun"y's
, -,Dc,- i 1i
posed houzin pr
med-Lan Inc, --me -ia'�-- 1.: -':' le s t I ?o o of the o, n'?rnl obli-a-
tion houoin.: bon.:j authorIzat-lon. ',.:e belseve that limits
are approprilate unde� the d1(,-f`Lnit Lon of and modlorto income"
P" de`.'Cr th,,t the City anCl Coun-,,;y detormine in thtamon-_I,.d
Ba:;ic A;"re,�n:nt t.,at ouch llmlt-z _,xcluJ.-_ any "ninily or por-
.,son .-.hone annual Lncon,,,^ :?xceed,: t!.--- ' mount niece ssary to c"nable
them to 1.11vu in deccnt, cafe antl zanitary in the
City ..zIt')ut un,l-rotand from our oonvor..,.a-
tion you that 120'! �f mf-cIlan 111cc'mo 12 a 11-11t 0::"ployed
by the F�fJeral Government in va,_,iou- of its for per-
_14
sons and faa,,ii1ion, of moderate incomC'.
Pl,':ino note that 1*1-,,
U
of tj C J4, y 4,0 0 e proceeds
of '-c-nern.1 oblL;-,ation bond:-, to financta ',lo u - 11,, to be, o,:�Jjodl and
0pc 'rited o by private (10vlopero, on a profit ma'1-:1nr,- basis is
81-569
{• ryl r
�-
A
it t
RS L
ON
i t
Y
I
(Ie14t ua
q
into question by certain Florida
ohd)as; therefore, based --
tpdti the present state of the lavts it iU
our opinion that your
. pVoposal may have to be presented to the
Florida Supreme
Coust for adjudication either by way of
a new validation
proceeding respecting the mort�a=,e revenue
bonds or by some
other form of test case, We do believe,
however, that if
proper City controls are established by
means of a regula-
tor y a�reer ent withthe developer, the Florida
Supreme Court
Will itnhni_ri trp f i nanc lnc- n^ such he sing
61CD �a h u� .�
!-t nI ` i t -
b;; .ac .,�„y ;,�%h
proceeds of its general obligation bonds
and its mort'age
revenue bonds.
We hors that the above answers to your questions are 1
sufficiently specific so that you can establish the parameters
of a program for the City of I�fiami. Please do not hesitate
to call us if you need any further clarification
81 -5 fig
',.:-,...x..Nr.z:-.,.:4k1'.x:._.a,:,t'_-2�F; .: 9�et�rr.;?,�...,'„•.;.,-sF�,r...,.><3,.�._,'i,�X:=:.w ,T,,.-a-�.w�,s,._<r, �.,:.. F,L,,.._�,....G.,.�.�,,:�.,, .u-.,.•:;.,,,.. ,,tv .1,u,y�:�>..,..i .:--°.. �:.•,�E S�^.s �.TS.sEr --
1
r; e3... J •,-ir :rt%1:, , >:a•. . ry '1 _ *;x • ^v`2,..t:r--• ^>:Ir:, . •Rr,.:.�,.� ..nar"`�.,
Mr e � ...,.#, , 7a: �'a"a - ` aaFt„+ is Y, ..Pi•.. . x
..''%:' -r s.,....t. ti9�:; :,=^!-..�.. ,.; tit:. 'L.<;ci<. +.:.`'�.,s _c�'wr .. , �k nt-x� 4tS,.;:^ r. a„t';, ,w '_.tn'€-:, ,_� , ..,b::'. •':I �! .•'� �_ —
�" r�"' _tKi.' .,s:. �+ F s. %i,. n: .x �., x, t`. .�z�1., ..�. '•.sue s M.,... —
1,SI-rr>, 11€'. ,3. ,:.r:. .b:, , Emil
.>5. ;..p„t-
- ..� �^r--'*, Ire: ;. ,. }.- .!. i,+., ,u.g-•,,,- .+ P.n" .•yln �+r f:r�' ^a' :e: a n'a,. °g' t -r-:rc:f s •:£:yus -a•:{ ,.a;•ul,r, ,�;. ,::�.. ,°:tid. ,.�"e3 ci,
.f3, I'«rw :E�e`a'tt� •-�It' 4' +:n't :sr'
:ti+^,6ar::{it ., R` ..�� 4t ;•�!' Ky,.,r ar�: :�-' Am , s�,;,•,r."4. •
'F"'•ur, �:Y . -i.3 :LS: 2 !.v,:'i �: .� -; l3, r�.�+,a. tee, • E � ,.< _ -„�' :'5:.+"'�. .4 0 —
,s,,, f:" „u4.,.s ,. f.,t%u r,..-,. <•ri" �li':�r-: er: _."a,t •,,;�:�i-sa. .�3i:":.. r;,ns'=:> ,<<`-: .'ri�_f„ .e ...➢a)S', „t1 =
.e21y r,'l „_!'t:,, �r{��., r�i,,s. y,:t u, ,•�;^d: ,: �.. <:'trn v,.,, ,.^-t.+w.
.. n ! tt . , u,..,,rat -'t�. ..s.'r•. '1'i�—
i:t' ;ca^r3;: .p_ ,.}r.: ,r}. (`.- ,:;i:, ,-s.i'`'•ek.,;:'J. .rj,. ,..ls —
vh
t x;i ., T•.r....d. .:�?,m ..!? ..<.' "S,55 'iEen. € t: >i',"�.., •, Fi, I„ ,¢t:rv. ,st 1=
:l t 4',... •.°t'4 �`: =..J rvi.el'.�? r,l '.:ISi;,
�,t. ?. ; c.:- a>2 x." � ck'.,...!.=�.�s.:c cS ! _-E..a - t
U —
:i:^r ,;r
. l i. r *';i: F'1#ii -
m s U, :3: oa t x<. Y :s>:<•.' zrrk"a„ fir. ...=s'.
:::� . .� ..•s<, ..�?r,
e !, r.:;;t
r} : v
3 �l s ,t. �, - '.iyr, t<, r_ i• , :.yr ^.s•, . -n . 'n
.� ,:t� • .d �,la 4� • 3 th .9,. ,rs. ..t•- 3• 'fir
u
(;^ 1
MGM
- ._...: �:::.. r., ..f-_ -,,, .,-. .t.,lt, - t;h �`^•'+ ..�.:,.irvr',n"., r ,.'r4." �.;.Y -�. :w y,. �: •r,•,S.w�.., aX•':r,'.:: ,.
k e
J FC�,. }eC ',i':�i{...�•C pia. ,.Y✓i -1.. :?(.y i� „fA`. . ..<:. .,.,,L,....;•-. ,,,...t:r+�.r 1. ,::.�; d; d[r,• .{ai_ :;',th9;xir ,xn°
wr
t'
- £'vy�iv?�^ifn';_,., "H l7°' ::t2" bl �,-• •^v..
.uf ' '�.",:<3ir �;`S9''�,�`>.&, •• ice{ ' ,':t
t _ t - ^9F as+ 5 sif• � ' � i � '7`` +;� t.,t - i t I: r.µ.
��•U�'ts''J
Rik
t � t - -.� � � � ' � t � Y ii�r3a yt r �c} 7 tti''r�,i� 4 a�t3�. + r�rFS•1 }���:�8'E,'�''�
-
i R �,�xG:1;T',�"k;:;`, rr"; f"rA•;.sa`s=a',r�,;;a_Thyk:j = -.
..........
CITY OFFNIJ#Ml' DEPARTMENT OF COMMUNITY DEVELOPMENT
1
81 -569
...:. .., a, ,a* .•, .,zn., a'::<:i. _ '� ,t�"rv}.-.fr; i&' -
lA ' -r..�.,n t-•.0 �.„--,::• %t;r'i:i`: ?a;x.'i''+";' ,a x r r. ,:i' '..
-. .. ate'
r
�'.:k- - ,..#'f5 'ao ;-`„1t-,.,,:. ~ �.y.`.`."•���,.� n;Cri`:;'i:! . Sri 3 ��'.�„ >c • —
,...'T..{..K t.., ,r, x!-.... a.,.-: .: i,.•.-... ":'i' =7`fY. -: i'i4i'ir.%?ip,-'£�v.. .iJ'' _—
3+rn
. .... ,,.,:•,c d... a. ,, C. ..... ,.. t, i f...c. ,,.aoa�k.f;:: Ei• .:,, , .Sa Y',,.,,-:tlh"aa .-a .x:.r '•'�a:
E Yi S
I
... .... ..1..:>.i-.a:..iin
-
{-Gy�fuM
,�._ .:. .. ... _ .... ,.. r... .. . i. .,. L t. . �..�. .�.., •i3.> . S...:7t,..a
T k
'� i 4k A �a G,.,, .,
::a, at•. =4..e-
JS r ��: -
Et,. ,.,k•., a:-.:'. .rt --: <;;, :,.:�;:�•:• .,,,.a,. ,..:..:,art. �,:,;:�-'t�;,f. #,1'r •: r..:..n„ r. - d —
.,, ._..f.,.i -., t->-. .. .., •. �. �.i.-.1:.-,: �-. ..,:.: ,. ,. F,n i_, ,'�• p �. fL yam'_ -O(` �.Ii.: ;.. .:t',":J`._�• y^�4"C�`�i'�.
a, —
1 .t':n
j^i'�'u� =t. 4- '� >:,r 'fJ y.,�.�y,�,* i+.t�t C V,, �'P,`.,^,t t,(R�C#')•y .,::SJr�i .5 : —_
d:'S' {g -`�i r.,,{� >_ ;i `vi '! Ir[ n`I t s f N r,, •y'^�r kti'+r - { r,;T.v,,:
�
' ? slf�`37• .Fk'j. ,} s1r,,., i.1. - _,II' _ ,!, °{},,,, *. Ee"a., .t#f',,�t:;.:h , i_.^ _t :. ! k tat r� 4� it,t� :•n'i:,:'c�`
,'.ta„<ai;. ,+,tl•:t;±•:.,:ti-e `'. ' n'y - si: - 5 �4•.rt}, —
;�}YS'f'dk,.;-yt:F,�kt-{�,j -, -> i f--I' 2"y ``s `_ •# ,�' "„'�; �'j':, I
I ";fir n t#�}� r•. .t., >I tt^ ,;;t-.r :t� r t", Y" ,r,„ ,' i'ck - ;y ���s
�?3;V'• 4r y, ,u>, bz�%_ii? t' '�i' t 1 s a
:c,'.;Prx'f,•;;3�=;}"tS, �n i -a- :ii�,l +�•:; `a�,��„>"{PUN
µ .I•,.� '};.xi �-'.0
',:�#€:'�;r.v,.Y•e;1.Fy -+wd• ;,>:Sw,,.,�� <;;3 --sC.. ,;.tri,=t rP-F;�f,-:;. ,-1 - 1;;`` �'t; a'�`;1,'.»art•., t> a:ir;,F,�,,;�, - _
_;dLv Yl. ' A 'if°S' l,i.S?drk, ''T._. `: •(M :.CJ .,.j.j„c :'�: ,t _+"lrf,'',Y o"e.?, "Jtal,'a'Z,.: `.:rF m x`2i:� &ry<F,.:' . •'}r. '�:_
r f, �'-�r.;'{£yam}�:i.•.;,,,�`«" ..�:�'.���=::i�:•.".'.rat - - f i i,is r'atesa'�,^° (f;W. ,;�,r., �, z 3�„}.+;N:t��.,,�,;,,..
pJ �rilJ? ..s�;•z, :; tS'=�c.q• ,N,{ »,.. t ;ttis`�al;.t.i':�':4;1"<.r>;i'; .;�.._a`{, (—
"'i<t?,:t.a.
4 fi;.�gsw.,,'
- �`:;?;,Yi'�¢';,!'t>i dJ4n t}�+.+�i�,�17)•t � � . ��4 �j4 tt-) ' � i � }�(',:iCdssZry yri"e�a. `t} ft S'>d � xs rL)k`F) 7- i"�f ��,�: —
j'i k:'>ia f t' ;a k,.},ty,s2:�.,�fn..s.d+��',k�.,g,••���'i:•��,:�`?$lr_Fi:`- {, r il {Jr�(tt.,,.,{,;tl;�tk,: ;���7�..;..,,.d'i� r,Ni`,'�n?`x�:Sr;:us'-{`;Syt i j i `�P;,"r.;r �"
p- ,,.a.�=;�Z, ,; .r,+;•,}rm; � �I� �mfy', +.0�� aN Y t ` ;'� zk,aK.,. ,S 3t FGj "�ix,,: �rs��v ; ;, ,ti`^'sT ;,s 3i,�m :;.; {
L�"9=� �:Ike,.i"eh t..�:�5 ,, 4�s ,{� 4. ?�.J•: ; 1 =;t l -..I ,::,..f �>8�"i:J `�`tF���rSF'r; i- 4�r}t rnii <'''Ct,}i.Y^r�,',`?`,i>��`�' -
,1t�,,)�j",l�:tc�„I. ,,,�t?„,';3'�. �:u�;,a�,Y�� ,.•'4''q�°r�ak::;r'';' ,'�.. �. L7, f,�f,v� �,,,iyu_a.. 4 r .sr@r�x.,2;., t,r.,{ rr�t%i
ir�,fl /`'tN tN G : y ; ` .=;Q�, i,� � t` 7x �d4 i 1#-`k� tyu.",rp 3th �vri-r^r'cY;7";:•5,,.,' `'� :
��t\111,��I,U
— I�•��<�r.};,,-r,.,d�t,_?�r;`s '��,`;�,e.Wt .tc.: i.: �.g;'�.;t:�,�,};!> �rr�+;;4'rst,,'Hv.'.::�;'sf__
s,#"gr.r�'}'!_`."•">.'.'!:h.`,'�v^a , tip �,R' i ?- ,1.,'-,:;i,, _:t 1 •"rig i k;,,�;' k: , >' x �' r'af t. .
`,kN�',"p••
AND MON
RATE INCOME
{ r`}'`S Sr�' ,ci, 5, � >° �'s l - f ki'� i a "; z t::f-:34• t i d, E,�Y I#" ...rrr����t ilf � .
FLE �>ry�7¢}�' ��-"�')>>,'s ftPfs+>y y r' f{y, 1x1�IC s1 '£ij r_t �>2��95 t; 7yc �.' ,tCq �.;�s.,, l�>zrSr,:p,•). � *�9r.'
�,P, k2.,(<Nt L-,n�.ri:':)',i' 'y�S 4f. "'k�'lT�,` 7� I1V VJ 1��4 i- }it a� �� },�,•�h„ ���-{�i'�-;�7•'k„ e, i..rt
'`tt�r.--`,r;;,', ''Y St- l '% ",i• ��.;, s%:: !.»f-i n,i .>?`7:,'j" t �it::imi`;�35�iit4X`' �v vGf`i#'�;i'��f:" � is
- F:1, fii' �t� '� ., JY� � � -F' k`•� 4 ., i,� �. �� "�..' ,ay.7. � � M�Ss t�@:.,: J i:4. k. .`s mi'�i` ;*-�'rK fSti; ,�i,5{£:•;._. 14},iW'i IayY3
vf Y
,,+#`r t(di�}ta� �i��„.C:: • � ro k � s..,��' , s .i � i ,�, �v � ��u-t' �''t i���4''s �x tXla��i'>��5�'�ijd' i"C ���1 ?��"S �ro9'��' ` li , Uzr, 3 5 .r fit,;, ;rig_ ) L Jz '•�z � rt � c ',k'w �' it:;°'.Rw"'.}.'nir �hMtji' .. w - lq � ;..I�'.i.::.: s,5.�_,±,.,?c7 ail„+J�., ."Rt,. :ni 1s'^,'k4-�'��,:;_.,,$''.,<v$'.'yvS, _ yt:` 'i?;,n•q.ifij,;:
#�� t4{ ; : # •ti Mt-�rii t i"t,.` "{' a - c,i i,
- 3 -
This report was prepared in response to the City Commission's concern over
the extreme shortage of rental housing affordable to Miami's low and moderate
income families and its expressed interest in actions the City can take to
encourage the production of such housing.
The shortage of rental housing resources within the means of low and moderate
income families is one of the major problems with which the City is confronted,
It is estimated that over 58,000 of the City's lower income families are now
living in overcrowed dwellings, required to pay a disproportionate amount of
income for shelter, or are living in substandard housing (for a family of four,
"lower income" is defined as income of $0 - $16,560 annually). While a
statistical breakdown of the rental housing needs for the City's moderate
income far);ilics is not available, it is reasonable to assume that
families in this economic range are confronted with similar housing circums-
tances (for a family of four, "moderate income" is defined as 516,560-
$24,10.40 annual income).
It is well docucrented that the City of Miami has an overall rental housing
vacancy rate in the range of 1- . A combination of national inflationary
factors have virtually halted non -luxury rental housing development at a time
when F1iami is experiencing an unprecedented {population growth. The inability
of many renter families to enter the homeownership market due to extremely
high doinpayrent and mortgage costs has contributed to the already tight rental
housing market, as has the conversion of approximately 3,000 rental apartments
to condominium ownership over the last five years.
Traditionally, federal housing development assistance has been employed to
generate affordable housing resources for lower income families and elderly
individuals. Conventional public housing and publicly and privately sponsored
Section 3 housing have been the major federally assisted pro,rac-s used.
However, cor,pared to the need for such housing, available resources are minimal.
Miami's annual federal housing assistance allocation for fiscal years 1979
and 1980 was approximately 1,000 dwelling units. For fiscal year 1981, the
City's housing_ assistance allocation is approximately 450 dwelling units.
Beyond fiscal year 1981, the level of federal housinq assistance is expected
to diminis.i considerably.
1h rocent years, the City has been agressive in pursuing "bonus" federal
housing assistance over and above regular allocations: Since 1977, the
City has received contract authority from the U.S. Department of HUD suffi-
cient to allow for the production of nearly 800 units of Section 8 and
conventional public housing by pledging its general obligation housing bonds
to assist in development financing.
While, in the past, public housing development has been the cornerstone of
the City's effort to provide housing for low income families,its future
utility is in question. Notwithstanding the diminishing federal commitment
to housing assistance, inflation in development and operating costs, the
lack of sites suitable for public housing development and unfavorable public —
reaction also contribute to its reduced viability. Recent efforts by Dade
County's Department of Housing and Urban Development to develop available
public housing resources on scattered sites as a measure to avoid overcon-
centrating low incoi;,e farilies and to provide some measure of locational
housing choice have met with extremely negative public reaction. As a result,
the City now has less opportunity to provide needed housing resources.
Yet over 41' of Miami's 138,772 families, on basis of the best available -
information, are in need of housing assistance. Approximately 25,000 Miarli
families have registered for housing assistance with Metropolitan Dade County.
Rental housing affordable to Miami families with incomes falling within the
area's "moderate" income range is not being produced at all. (In 1931, the area
median inco�!re for a family of four is approximately $20,700. For a two or
three bedroom apartment, a family of this size should spend no More than 30"
of annual incore or S513.00 per month for rent). Condominium conversions
are worE:inn to reduce the already short supply of rental apartments in this
category. Rental condominiums are not often available to families with children.
The overall economic health of any city is to some extent dependent upon its
ability to provide housing, resources for renter families in the moderate income
range; those families that have the purchasing power necessary to sustain a
city's retail goods and services industries.
The inability of rental housing, developers to secure land at reasonable cost
and the high cost of construction and permanent financing are two of the major —
factors contributing to the halt in the production privately sponsored rental
housing. The City of Miami is in a position to provide the private rental housing
industry with two of the most i►;►portant ingredients necessary to spur the
growth of rental 'housing resources -land suitable for new rental housing pro-
duction and below market rate permanent and interim project financing.
With assistance by the City of Miami in these two critical areas, the private
rental housinn industry can participate in meeting the City's rental housing
needs. The degree to which the City assists the private sector in these areas
IPA
will largely determine the basic affordability of the units developed, The
greater the level of assistance provided by the City, the less the developer
will require in project income to retire development costs and provide for
maintenance. These "savings" will be reflected in rent levels. Therefore,
should the City elect to participate in the production of rental housing to
meet the needs of lower income families, public costs will be higher than
those for addressing the needs of moderate income families.
To illustrate the levels of public participation required to achieve low and
moderate intone rental rates, a rental housing development model accompanies
this report. The model project is a 100 dwelling unit complex of two bedroom
non -luxury apartments of minir,u!:► acceptable size. A two bedroom project was
selected for analysis as this size unit is deemed to be the unit in greatest
demand. Certain assumptions have been made in developing the model which
approximate actual local economic conditions, but which are subject to some
amount of change. These are:
- Land suitable and of sufficient size to develop a 100 unit two
bedroom apartment complex would cost approximately S500,000.
- Conventional construction financing interest rates are assumed
at 13" with permanent financing rates assumed at
Tax exempt construction and permanent financing interest rates
are assumed at 11:.
Developer equity requirements for conventional project financing
are assumed at 25. of total developrent cost.
Developer equity requirer?ents for tax-exen;pt project financing
are assu:;:ed at 10 ' of total development cost.
"Affordable rent" is defined as 30- of annual income.
"Moderate income" is defined as 80 to 120 of the median income
for the ''etropolitan Dade County SHSA (for a family of four, the
moderate income range is S16,560 to S24,340 income per year).
"Low i ncoine" is defined as 50 ' to 30 of the median income for the
Metropolitan Dade County SiiSA (for a family of four, the low
incor,e range is S10,350 to $16,560 income per year).
- Project construction costs are estimated at $43. per square foot
The project r;odel does not seek to address the public costs associated with
the production of rental housing affordable to families with income of
$10,350 or less.
-3- g1 -569
The first page of the model pro forma consists of a basic description of
the model project.
The second page of the model pro forma consists of comparative financial
pro formas for four identical 100 dwelling unit rental projects. The variables
in each of the pro formas are land costs and project financing costs. The
level of public financial participation in each of the project pro formas is
-al rates neCa"yLG pdyupCaL.y costs, debt en'. 'rhc uri "LLuLu i i ic�i service, and maintain a reasonable net profit in each of the pro formas
reflect the level of public financial participation necessary.
Project pro forria "A" illustrates a conventionally financed project. The
unit rents required, $694 per month, are obviously not within the ability of
either low or moderate income families to afford. Never -the -less, project
income of this magnitude is necessary.
Project "B" illustrates the effect of limited public financial participation
in the form of tax exempt project financing on the rent levels required to
operate the project provide for debt service and return a reasonable profit
to the project sponsor. Even with below market financing,rents in excess of
thoseaffordable to low and moderate income families must be obtained.
Project "C" illustrates the effect on unit rental rates of two forms of
public financial participation. As in project "B", project "C" is financed
through tax exempt bonds issued on behalf of the project by local government.
Additionally, project "C" assumes acquisition by local government of the
development site and its subsequent disposition to the project developer at
95 of value. ',Jith both of these forms of public participation; unit rental
rates can be set at levels affordable to the City's moderate income families.
While the net income accruing to the project sponsor during the initial year
of project operation is substantially less than the 10' generally considered
acceptable, other financial incentives are available to the sponsor in the
forms of development fees and tax "losses".
Project "D" seeks to address the develoorient of a project tqith r-ent levels
affordable to the City's low income families. In order to achieve these rent
levels, public financial participation inproject development must considerably
exceed that provided in project "C". In addition to tax exempt project
financing and a 95 land "write down", project "D" includes a further reduc-
tion in project financing costs through a permanent and interim financing
subsidy beyond that which can be obtained through tax-exempt financing.
Both projects "C" (moderate income level rental) and "D" (lower income level
rental) require direct outlay of local assistance dollars in addition to the
City's ability to provide for tax exemption in project financing costs
through public rrortgac►e revenue bond financing. For both projects "C" and
"D" the City would be required to purchase a parcel of land ..iith local funds
and subsequently convey the land to the project sponsor at a substantially
reduced value. ,•Jhile a long-term lease arrangement would serve the City's
-4- 81 - 5 6 9
20
continuing financial interests, immediate capital requirements for land
acquisition funding would need to be satisfied: In any event, the capital
outlay for land would be the same for moderate and low income projects, as
described above.
One source of capital for land acquisition funding is the City's general
obligation housing bond program. The City Commission previously authorized
up to eight million in housing bonds proceeds for this purpose. The City's
bond counsel has provided an opinion that housing bond proceeds can be used
for land acquisition for low and moderate income rental housing. Furthermore,
bond counsel has issued an opinion that land acquired with housing bond
proceeds can be disposed of the private entities provided certain procedural
requirements are followed and regulatory measures enacted. However, it mall,
be necessary to test the "public benefit" question of such a use of bond
proceeds through some form of validation proceeding, according to bond counsel.
The project pro formas accompanying this report assume a land cost of 5500,000
With the indicated "land write down" of 95'' (or a high bid on the project
land of 5: of value)51044,300 in general obligation indebtedness would be
accrued by the City.* A bond retirement schedule accompanies this report
(see schedule "C"). Of course, the lower the actual land cost, the lower
the actual public cost would be.
In addition to land acquisition funding, a project designed to address the
rental affordability range of low-income families (model project "D11) would
require additional public funding in the form of "interest rate" write downs
below the level of tax exempt interest rates.' Presumably, althouqh yet to
be verified, general obligation housing bond proceeds could be used to
provide funding for such interest reduction purposes. The increased level
of public funding necessary is illustrated on schedule "D", attached.
The gross capital outlay required by the City varies considerably between
projects "C" (m..oderate income rental) and 11D" (low income rental). Net
income returned to the City in the form of additional property taxes generated
by the projects is essentially the same. The anticipated tax income schedule
for both projects "C" and "D" is attached (see exhibit "E").
As mentioned earlier, project models "C" and "D" anticipate the use of tax-
exempt mortage revenue bonds for interim and permanent financing. The model
pro formas indicate the overall project cost savings resulting from such
tax exempt issues. According to bond counsel, Florida municipalities can
issue tax exempt bonds for housing purposes. However, the authority of the
City to issue such bonds to finance privately owned developments operated on
a for -profit basis needs to be legally tested.
*Assumes a 15 year bond issue at 91/27
-5-
P 81 -569
a 1 t_ , j5 - C. i s a r rtr „� $t r 1 •rr � - j 1 t_ r} r ;_ P- �.i ifd .y r t r?..
a r i b ♦ t t >,i t<� �. 1 �r f r It } � „t tp
.s� ' $: „� `t%f',>c�•t:v[ 0,4
9: rI F,:+%?v 4•9
s,t ,:t, •.a•`s [� {�.• Tx,`;.u.=; ,,:t;, t- _Sr ih'=?'',.� I.:i�Txx ;rS'-^£,.:�,:• ,:Y,,
uwr-tiv3?X^„ ;;i r,.� -rd'., ,yc',. M ".%d..r :. t= <'ir;t .! .�.,:r . .4.E ..5''
Y.i'i'Y•,. .:h�;� .>.,ae �E:a�.f .,a,. .L_ ..:':a` ,•-�' ,,:v v-u ee,i-r y - 'r'ia,,�"-:.
,;,. ,.•,f�, p t •i Iry �, �w, �. a r. ,,# . ir• x.
±i"� :1 �i�'2 ::.kv>•:�;��wry :::{:.::�� d ,y':e a: y'o J_:.s �,. vS
.:tu t. fx-fujd, +v �,.� k:., :i��'-�'v y:T'•,l=1{,:. fl :i}: x',k.._ ..•�T-G ,tS: ,.-iO:.Y.+K.c-•� tf. , �.m. T:'�::'.
- fir,, -•rs.� ..�. '°�..�,' ,j�.�'.%`"a.� _6::°:yhry ...�:••n;. '.:i . , �;..,i+f{-�f: - i:. ..�=�, rt;�":�±�"' �� , [ . ,±:.s� �.g
Y+..-`:¢.:x„, r'a:. �:a •^:L ,:a:i .V;r, F�+�: ,..r• o._ �ti' ,-a :,., fib. <i ..Lz
:n>n2�>��aki .. _..�'`„•~;yc'� .� :•f>:#t' ,,, :,9 9.1 R'Y��. ;r, :-ds-; 3.. tit• .a'C�-..?:>-}.,,s .7 ".L .t. .r•:
-' ,>,P, � ins a .: .•�}� 4,r,=t, t� 1 � .r.< .>uf,.. � ' dhS+ i>.. f G �� n;, :6: �'''s'>. '�':fi= U 2,. die : � '`',5.. !C •.,.. iv? : '� rs}.,nt+w° r� di.� .5�;i,;n f �.x _1� �.. ..�'-- ±l.-d,.r: (. i •1`!:4 m.• uh .•�.. '�'�r. •'i zi'�,'.{"' .:nR't�":
r,
_ �'iF". F>. Yk''er. .ai .: ,{: .7r i• ,xe+ '.;{5'.. .F`.��?=.:}X
,1-.,fi'�+�.-o->;i:; l•i a-...,7•i, .4� "'ti'._r-..-z•'J,. _"S. ,�#?. „S' _3:,:..>{. .�- •�-a ...,r• •{Y.t-'�,c...c _Y T - _:i"iat'•1,. �`.:'v �lr ors:.. ,�U �.-. - -, 6,. �.h o��+h:,� ,.,r c. ..r s
:. `t .y�. ..4.:,iE... ,.:t.?�)`,3,v, .. F#i•�• an,ff -.1 .,i:5.. ,z `,r-}.i•,rY.i=3i;` -i+:�ifn`'Srfg•[p'•,,`;fpiq:; ki ,....yr,;::rS`a'q< .._wi::le�:�:•, uh,�Ni:::�°A�?^y„'p rr
rth'6.1§�s::: ,,JJ ,�7..�t-'. #,;,e •N1a i.. ;:I
,.r.- s:i>� '=��-,i.tn�„ F. x;. ,�t.a,. ;".fin }z•.:,
a-ara, 4 s' �'%� '4
,;., :;Y, '>h:f-, ,Y .J<, ..n,,. ;t a.,
, �ik t' .:!§tr'n=4 ,�''c •aw. ..:�2�t `a','i:k:; ,.H:n, lr ,.i, ., :t+t;*'�•k-
,',hk:e ',i;. .9'' "'a.' =,=h,.. _. r:e. •<'FJ)r-'�"Fs, .L '•i' ..ac• 3'Z;�`.,
• ."iS-,s,k I -� 'a., ' .';C?�. S,, �:Y,.. :a:Sr.0 t i:. .,I 'jJ;4r" si:5'+,.... "� Y•aS .}�> ±,: �.�.,,rs,; � i.. , `'h:n•d'• ;'•6 < -ry.. .t•.. -. `ri•.�, a.� .z^ !"•. , : �+n' �t .:'f. ,.J.E=ws , `pj'�..-.s±r �-.*
. 3:,rS.�s rf.s',' ai .s•:r „�:c i:.lt,.-';iF'�t�.n
:,'�,,.&,. *:Met.... ily.:p�n;r:8�t„ i::•,,�.cya' '-a�. :,:5��h...>.><5:r,,K_:• �'� I)-„t,, .lam,.u.,.,s„-:5,�:.;y'f;,,t,?:_���a.i.�'•<�:..:rj"�._.:uxt,. G{� '•;�,.t..� _ rllaiP: t::#.. ..i!.. ,..>.1,.,51'�.V. ((ttF��;;i: xr, o. ,,. .� :-3; F... �,t,'P:t- -:,o•C ;t�?�`.?�. t. uE:.t,n.. .�t...,.,.,..:c>Y�...t .:,Y'• -£' .Fr "a;Er�..
-':F :ak:,i f':,. .�M^, •�,'1 .-- :.`%:Y �i't.. _.li�� .jx�-*,�e . 4) � 'AK' S f.x ,C.":;• 2,t,n �: �"�. _I,.l�x.. ,.j t•,):.. „$. .Y.. �[• it' °rt 5.. r ''f a{.,. .!� F .,,y _ .I.� xx � i ':�, %rC 5 ��rt' k
,u�`?" e,4i., .f:• ',:1 ��mV �'. x=�..t. I-+w'�'i � _t:.:' ..I :�%. ;i1 f'} crk. .$h. Y"::;,"'^.kx .��^ a.'.1�v ...w: _:&'
!:?„t: „t.- :� .#. °.;y+;iR .r.> ,.ra.:,.... t� ,t ..2x „�:°,: i5; azi �.,+. .�z:� •u�.:', .+.L ,.r'•'1'ii2.1.,.nn,., '',a:.� i:.'rw., ,J, :. u�l ;i _ 7shi:,i ,��� 'r:•�,n•..;,,. , ; rk?,r:.,:,, ! ,.ar3' .
•.d'fi.:,,:. ',r^: :x'.,.s. ,-.:1zd" .,:mkt`-=4r.-et,.v wa'1 rl-r,':r'i,.::..�-f•.: .;rh.'-aF.i.,...d L .hr.^J" ,�Y-;±,,,. r'J'. i:; ,n. - =FS�.; t! 'i3`TSa .3;rsr3,.,i.;... �•Y•f" ,:3 vtµF;l'n� ^'�'it, t-
:•f. ...t .S-x ,-.5,: ';S�:e k•' ,8 Wrc .•lJx -A ni'^:•S.}
!A �, l s �T �:, i " ,ice ;,,...,,an � .'Mtit`t'z,} a.It•,.:-e . ''�e't: •
i, f
-�'.=,sr.•;,•....Sox�in" -::rJ. ..i _.:,S,r':•a _u?.:" ,,,wrc :�` :.;u.. J..� c. '.�, .sue ..v..tvA,. t.1 •,.#•a..
1 a.:'>vi . I`.,o,. _�ia:u,,,a . :; , :1KK-, ��i -' ,,.sou:,, �.. :�,.1..: =`'f:. r •_ .
"5,. ,;`f�':ii�.a.>',. - tat a., ��i�:o-'�*,,m;•vy�.n,, ✓.�•�'' --�u,,.,;:,�``•'=, "',tii tPa•sit< ri�c xe:-.r .-ax,. �, ,;''�-':
r; ,
:,�-.:i,t,:�.,-:iht..,,-r,.,i,."..1.,,,..o-;..,�...::n<,..:htsTf,�•.,:�s:.^ur.4:,t,r:,,. n,,..,.�wc-.i� s,ct .. 1'S'�'•I.s,..:,:�,.....,,�.�.--'K`-x"-....-1,.-r>.L.�:tt;1,..�x:ISt..v,.:..,.c.»�:?�7:`..,,.vJ,:�;..tt,...:S,h ruP>.l. irM!,_'}.i,Sh_...
W
At this point it should be mentioned that the undertaking of a project such
as the one described in this report would require close cooperation with Metro
Dade County. This is particularly the case where the City's general
obligation housing bond proceeds would be involved. The precise responsibi-
lities of the County and the City in implementing a program such as the one
described would require careful planning and cooperative agreements between
the two jurisdictions.
Not withstanding the public cost considerations involved in the production
of rental housing such as those described, the availability of suitable
vacant land is an important consideration, as well. Several suitable
privately owned parcels have already been identified. Their availability
has not yet been determined.
The model projects discussed in this report are intended only to provide a
framework for a discussion of methods by which the City, in the face of
diminishing federal housing assistance, can participate with the private
sector in developing rental housing for low and moderate income families.
The estimated development costs including land costs, construction costs,
and financing costs may vary depending on national market conditions and local
economics. The basic program hypothesis has yet to be tested.
The implementation of projects similar to those described will provide some
measure of relief to the extremely tight rental housing market. However,
given the need which is considerable, limited public funds will be exhausted
fairly quickly given the high level of assistance necessary to make each
project financially feasible, particularly if they are developed individually.
Substantial cost savings both to the private sector and to local government
can be realized through the development of a vaster rental housing development
Of 1,000 units or ^core. Lower development costs can be translated into
lower rental rates resulting in housing affordable to a wider economic group.
These cost savings are attributable to quantity materials purchasing, improved
labor organization, and lower permanent and interim financing costs.
With respect to project financing, a tax exempt issue of the scale necessary
to finance a development program of the 1,000 unit magnitude would attract
the interest of major institutional investors. It is not L►ncommon for such
investors to provide lower than market rate financing in return for equity
positions in projects they finance. The implementation of a 1,000 unit rental
housing project can be expected to attract the interest of major developers
with access to such financing.
Again, the availability of land for a development of this magnitude is a key
consideration. Depending upon building type and various site considerations,
W
fr6m 'ton to forty acres of land would be required, A development project
df this scale would have to be developed on several non-contiguous parcels,
Tho only site of sufficient size to allow for the development of a cont -
guous project is the 45 acre FEC site in the northeastern section of the City,
The ability of the City to acquire and deliver sites sufficient to produce
a 1,000 unit total development package is of major importance. The land
parcels that have been identified to date are in private ownership. Condem=
nation of many of these sites would most likely be necessary and is provided
for in the City's municipal powers.
Housing Bond proceeds could be used to provide funding for land acquisition
and it is reasonable to assume that, for a 1,000 unit package land costs
could be refunded, in part, with mortgage revenue bonds, provided the cost
of physical development was reduced by overall project scale and below
market permanent and interim financing.
Where such a development to occur place on the FEC site mentioned aboved, it
would be potentially feasible to use tax increment financing for site acqui.
sition and site preparation costs.
In summary, the City of 11•liami is facing the greatest rental housing shortage
in its history at a time when inflation and diminishing federal assistance
are working to preclude a response by the private sector and severely curtail
public housing development activity. The private sector is unable to produce
needed rental housing affordable to lli ar,i ' s low and moderate income families
without substantial public participation in project financing. The level of
public financial assistance provided will affect the affordability of rental
units that can be produced. The scale of development will have a direct
bearing on total project costs, the actual level of public participation
required, and rent levels that can be achieved. The City can provide
financial assistance to the private sector in two ways. The first is land
acquisition and disposition at belo'.r market values. The second is tax-exempt
project financing. The undertaking of a major rental develol:tment program in
a single financing could result in overall cost savings to the public sector
and to the city. These savings can be reflected in lower rents thereby
providing needed housing to a wider economic range of families.
The rental housing development program described in this report is signi-
ficantly different from the programs the City has employed in the past to
provide lower income housing resources. First, the program proposes the forging
of a new relationship between local government and the private sector in
producing rental housing. Secondly, it requires specific financial commitments
by the City in developr;ent funding assistance.
-7r
91-5F.
r x
_6
�.�yf,�{;��,., ,E,. i<t'�.wi x:.w�k T(f. a<"�:r!''Fa^: _•�:x=u:".x4ti}•»�+I,y�tF4?,,see'u�-"�:x;t �<f�te""-'' ;� ;;:€r4., _�i &F��.��a ;itr :[�:, �;� _
�'s„� :ri'f:' Win•.. _•-fi�:,•;x . � v a`ifi4;'rrrz 'ii?: �::'iib;�`> `'.i�, �t:Y;+`
k' 1Ln.. t •' a-�5
'.I:,ue ^.'%°•*„'.s'1e�izc wK''I-�'ei�t+^..`,>¢� t,p..,
:i?s.�:i'ar�ki'�i.;',`��•`:5j� FL ?$�i:� �:!•!- �, �j �' '
.,°. iil'7t+F:t'f, fi r' sr: r �, ,".l".• e`'?' �; M -
00EL-PRO F'OR�>1AS
4 'O uDALLiNA UNfTS C OMOOM APOTMtNit
Tho ffltwl pro formas provided are for the development of a 100 dwelIing
9trudture comprised of 650 square foot 2 bedroom apartments.
The following assumptions have been made in developing the pro formas:
Land suitable and of sufficient size to develop a 100 unit two
bedroom apartment complex would cost approximately S500,000,
Conventional construction financing interest rates are assumed
at 18" with permanent financing rates assumed at 14- •.
Tax exempt construction and permanent financing interest rates
are assumed at 11'.
Developer equity requirements for conventional project financind ire'.'
assumed at 25' of total development cost.
Developer equity requirements for tax-exerlrpt project financing are
assumed at 10" of total development cost.
"Affordable rent" is defined as 30:', of annual income.
foderate income" is defined as 80' to 120 of the median income for
the Metropolitan Dade County S,MSA (for a family of four, the moderate
incor;,e range is $16,560 to $24,840 incor!e per year).
"Low income" is defined as 50' to 80 of the median income for the
Mletropolitan Dade County SMSA (for a far,rily of four, the low
income range is S10,350 to S16,560 income per year).
Project construction costs are estimated at S43. per square foot.
81 -569
.0,
R K�
k tt('"
NO
§-"R si4"
MY-
INCOME STREAM
....AND.-MOURATE INCOME RE
Rent Per Unit
414
Number of Units
100
Monthly Receipts
I L
41,400
Er.
x 12
Annual Receipts
496s800
Less: YI: Vacancy
x .97
Net Annual Receipts
481.,896
Less: Operating Costs
-135,000
5ig?l IRV.
RATES`-
18
x 12
621,600
602,952
-135,000
Revenue For Debt Service 8346,896 $467t952
Bond Capacity Supported
By Revenue Available :$2t953,321 S3,983,539
Sit,
Ai,
Unit rents: Moderate and low income projects:
-KIP"
Hn,
Median Family of 4 Income x 30"'
Moderate Income: 100
�A, �Ift, I
N
=S20,700 x 30' 12 Months = S518 Per Month
.01
Lovi. Income: 80x Median Family of 4 Income x 3T'
1,
Wm- 1
�-VM-
=$16,560 x '30". it, 12 Months $414 Per Mon
ft
.,Z�g Xii
14 I, X'2"
R 2
' 'ir "RIV61 Mlg�
—1-
4
N A
0, E,
IRA g ffia pg,gQg,VM
n r-a "z
-9- 1 5 6
I. TPIIII�'.' 4"
5 Ila
`
j W "ol,
mx M","ih C', 41
fN,
qw ;P M. P;
M
4A
IN,
ti'0 11`�,151�1�
v
I
Y; -gq,
"R A g g
nN
-'PINANCf Wj Lc ANt) Mor)ERATE I
RtNTAL HOUSING DEVELOPMEW
IMf-
&$R I� --5 W-RMP, OM m ga
I t
4"P,
DEPARTMENr OF OOMMUNITY DEVELOPMW
OP MMMI
.. ... ... . III"
J?A N
Y4 A I. i�ll,�,�l,�,,,,,�,�i�"r��t.��lI kg�
A �T �,i� 06 L'Iw2`,�_ 1p" .
mg pi mpm _qg
gp g�m,
!�ffig
MR,
! " �f J,
a -21 M,
JP
ij,
-569
I =,
t ,
'•'NJ�'�'i`,`J.iR �.::yt�`" rr4° Y- 55 t:., "'-'L,'.:SS i' „-yJI-�\ t^ 5 tt'�}�'i !kii"i?31 r} }l, J' ; Q �2:4':yz' S}�, {i'�,;
,i' t �` ,. t,,4'. n°°= v •rr, , i a.•�r -,N kf F a` . ?4:[i: :.c -,, ;, - a ; r - w i l: t'�"��.rn� d�..,il, - I - i _ f r ez ,1y4'+i',. t`ls-''_i�'' edinjryt ;'"3.-th:�t,"ai=.R,..a, 'iii">'3•�' i�{e.i JrFx��t;',b:: ,,r`aia,,;:5,�•. .:ar r,.x}rr -r �i uv. zFi t, t ;:t�<�,',,:r- S
c {>i, ,�z,nf��' .4k,. „°1 �i>r �R, .r 4.F'<+..,t,1u:= ,; �[.�'ii :3. „�4' ,,•,in.fpr'.,: _,.r1., ��st{Z.- _ +•:,'
>. 5
,s°ie =�k .<`i.c,. ?p:i �.: �: :. <.. z:..;..F :, .i, a> :,FSi .�ye'�: 'S:,+ N Wit•;. ,:J:.' `�q LEoL WXJ"lT� `..W'se. a:,.n•�l>,. trz^,,n'�` .'{j," -a ifi�ii..,.t'er
?�ty�s:„�x�'„�f4wl,.i.�l.'=`,`rf�i�i;it�F�>„)�',["��''•r,��;f"" $ ,d���>;,.iri�i�'F�';.2"`3'rC, , 5 1'
�':,N: es«i-} � a'}h �a h- ��,7�ek4"�fa;!'i:� rx�t�`�r','�. !j%"��+y�'YN,.,;tiip'flfi�:.•�. rtk� a ,) �i..�tp; `°7s^�t�� k � =; Y
Ate, ri"iic `•" ,, ,n -I i t;, .. _ t 1A i y� t; d
r,= t 1 -Tim,. iy'f: Tx C''✓}t'Er'S�..m,l�'saA1�^fw,''s ':1s.,1'3..3-.' .'J
it Yul 4VFb• � r,J.: ,lJ,{N, i r f - 'S t '" Y-�rfFAi cif k 1�,• 1 J a+11
a,)tt%'S2r.d,frs4'"s{s-E)}y °rikF'fl.y,}}14 j1 to I�+q-groundf�}J•+ja"�iS
and S
'vf::nY�tvy�.'�.,•!'�' ':�'=yi„�.i{r's~ut�'_:�✓ -1 _ '� '; i 4 ��'� .J d T _ tt£ _ ,at�.
=SM,t^-,�?3,:,�}.•r�§�.,{}�1' i �y 'f 1 - ., � t:` .3I�"-,.'t� ��i, rq,, �vgf rF' , { _ J ,.t. �,`' -�"'.
"`;11:�'7ifi � �t ,t'i' v� I�. tup -� x Y S t , �'`a`•`,"_ �� �; 4} L` �, 5 � I r r _ , 5 s �w-t- li �;i
;�3l� �,',�'t' r•,�"`fs"�,;91,r:.?r,.,�;;�:J�� , , ` �f;�. ��r;�,l;x,;�?:.:r,?:�,r_ �'tv rrr��.- F -k a t r <<, � w , �":
.'r,`s.a•'t,x �' fp S,<•rY1 !! } r ,.+�.
f�,�.}��, :l ti s�'.y,',"..ti•F��'t. .."r�'�::�3 , t�L Lam �Su�t�.vn �,: r-;� ;,Ct-'•', ''�1 V'.j{k: a:�.'R,('r9;�,�i�1 � �y,, n,<y.Y3i?�`-,��,i;�i�M�`[
�e
},.tr ��'¢�;a.�" c,1}��"?..A'��„6+r � r,)x,' r ' ttfJkE '�41 ,';,,',,f, ':•a:r:�,,.};�:.e3'k r
Liutrih�eJ`txsF '�tF ' T
. { Prog-ram Models ; > r x �
[r,+r •i;:.i,l _ t - ti 4tr•,,,,% s v"i,t�"'` §a, 4=•+'
( ;•.1Y�• "Y'U`:_ l�tt i� s
x x t sc„ °a'�,
15'E •, �, s n✓,Lr�`k}'^,a""r: :=;y;f;',s?""tip�::�tr;jt '�➢iP�'��Sl: �
r" - 5•AitM�,`,'=N�{•..ax.;,z,r•Nt?'li'.tc?,'�Fn_.t„t'i.�:.i"tic r,'k?f,'i4•.aYs,{. .Yt : �';•;lit::k�7,ar,,:F�t'k" A � .',Y,: f. :,�; e�}`�`,k.:`L=L. r<�`�r, hr,' 1, riu.,
Annual Cost of 95% Land Writedown ; - vY
' + } i�
'.,•;�[ 5:6:;V1'!5'st;:"'.FF`r}i3'rezhu".'"•+',3��..x.»
on a $500,000 Parcel of Land
..'� ry,.. r, SX-,i"ti= ,;!n� - - - -'1„�„^t �'xu,,,' '��:•,:M1a,�:���+:� s.;.,,.. Kk
-,,:z: .,,:�-' ,.;s�i`�; - � - �i:., "`=.4.J r��ctr,•.�Ne , tyW" ": .• 3,� mac, %s:[:Ei= `��;' .r .,s. ,f,�';9E."M: �;s ,,� �; e.�,«�;
:,as'P, '
''qtr,+; `et.'�'�s 1. I ,# t='t`� vJ+,,�;};„� ;; k_;� ,, .t;aw•.FF�<;I�,iSw,,.:,: .r,.?: ,+r^r.-:.::A.
1'.} . 4�c„`Y'�•yY4Ty [,;, - ';";�'i .rv�. :� �}'i : -,>-1 ., .�5 ;� ^i'F.
' '•i-
.�a;✓.1. , Y - t "x:. '1YJ - r:i'.:*v.' :";�;':i:;., .�� sLv •,�';;,
[n�.„5'y.;r-a3,•'nk?C ,s.:,Fdri,.,w:. - - fit^.'"_- ic;(i, £ v ��;,....:x ,.,y, J
,..'�;:',dr>i .. Fl•';` . Jri':f '',` :•V _ .<4r S4 y}wfi`r e'FT-T"ys' �,? 'r
r ��'' ,n�„• `41 „- Additional Annual Costs of PYwidit�f'7 Rents
Ad "7 -';;`'j7i*i'`�',},'k•`�.w',:i?,s° ed�'-i.,'iN�•'k:�'au+;?T��g:>' >rr,.F:'i,t{��� h:J°.�:r.,
,. � 4 J: �'. ''£� .' 'G�:,i ::�; '�"� - � �': z1�'+"�iu°��i' a'L• 'i�rsa:s:`$�•z
,: 3.i r, S �}s.(�.,t-,'d, :' 't.^ •rzt'4,M�i:i:' - :s:Y".,c ;,f�„>c:* -i' pi.
Affordable to Low Income Tenants
s'`+`-,'P o, ,iFt.s :,s .a . ;'€S„t.iimt'iEit,,, ,3•' yMa . ,!. k
�,,. ,'<x_ .K+.b'�+• :'af , fi.' .1n.=t - ,i'3' .`<.c � :"rt:.
- - ::u.,i,:, J;,,ri r,4s, _.�.h f`u_r$c. .,f r:�:7k'«..J,
_far'
ktlTi'�s.:ailii''a, .,$'i'Ss�at is `Ki9't.='tr ,t.39, .. i`.,%f^_m};�,.,._.�:[n:i, ..s�!:3��K s.cf�.,ia�.is:.�.tut,ti..rr>1, .�':.,ts.�,esY .,.�.
t�"•ssi�: "-nr,= i 5� '.{ :'+i'� ^,, E4�'+' a'r.9� .:5:"; {:c, • . a, , t=.4}..Uyr,.n2�',,.e.S t;,>r ..a+r:.a,- :,i;
v,,;,{o-"',t. ,xh ,P'r„f4}iif,p., - .-e!, �`ys't!"� : f,:} .. i 1+•}si}:.^" .:�:`2.,..g..�e%.:: +F' - ,y,
t'n J4SS n"i!':•.. ""fit -.Y,s f.
-;i%N^:, d[ "''^i ._,.`:,i ^:l;t, FrYF •Se :t ` �u1jN"r;
V Analysis ,:c
Tax Revenue
.;:�" 1 t.5�} .;;;: '�i'i„4v$:°%` � - ,: i":d . `=:'t:icy:'}?•: Syr.. _sfik;ta ',�'-� '
M, ,.? ' n-T:?: ..s.. �'t;"„�;r`•�, y.:i,' 7.o„s:.,, :I�. i-x,,t.. "Lr'.r.':r�t .,d;.t�,.:g;. =y ';.` ?
•�. ,n , .0 1'Ei n 3, az- ?.f ,:.'Je'p;'+r;,r�'iit>;;.f•w,;rkr'1yA �,,.2ys'�'^3F"- , `ip.y .. Lax, J,
�d-,,;:J. Kia,'�,_
".as' : ,•.-. a �.,,,':;',' 1, E
i�'•.i;4a Fr,. ;� ; t' :zr+�'.u..�Y;;.t tA�i:�L, >rfit7".� [: Jt'a :..s.ex.§. E�,,.t- ..iq :1.. S .,3.��:,,.: ., S.Y»'S;,�:1a'a'�+'S'�.., d«.,..,e';
xz -
. fi �' air?:>„ �, b". •�.., ,
'�t "; 'a�a:,.• :§::t":.:�.;�¢J :f': •a7;;: •t� .3 ,h,-n^'£i.�.: .s,dr Cf. ,..�aY,!'. Y•^�. ,#L:....
.,ic' r,.��,.. s, .c-.;,;,,,:..,X:. - `::t >e (;Se - ;,,.� s..x...., ., :.�5'il:,.,k,,. �.•..,.I[7 >taF!i ;:,,a. :l:,:.r,:ilos6:'.cr"i=44]_.,i,.,c;..,?3:.w;,i;t':f'.a,,,..
-.a}re ".f:nc'ex'<:" ° s_ -rua• rk•� .,E, -
"adze„
yr '-f
� 3
>a,z '»ate ,: �
i - h r.t
sus ,t ks,
ni, u',:ii'r�" ;°j'!': ik'��.: ii9':'''f„yy�
..r.. r'�i �^.te:''r ,(� f. f::&yq; r;`s�,t,..,
,
S,, [ �,. s& .._•,: �.'xf(.: S ,.. ...,- ".,, -., ::.',:::. i�:' i[.�.y.:: J4+Y�. �',c'.' 3.,I'�.,w �f^; ''[. e,5r,'f::c'i�, ::,n',., ... .4. L�'f.�'i. ,k.:'..':: ,,_4 ':.Cs.:.
wl.,..?.. �-v.'.i=:':�V
•�?
t,
c
nti,�� „_.. ,r;:t`�fu„'i'-<r• :.i'. �"�=rf,;'`s,'.&:•:', ,..'teh`7'�"^ ,, F rx,•.;.=.a. :J:.a;hJ.
'?C l�Yw. y s5. -rr'� _ ,..1_ e"!�_} .-r. d •v.r',hFr-; +v"It ct
y
ye,lir,^ iuy" -S.S' -, ,j..l .,,; .; .. i'•."iN', : .C,7' "A mr=-'a:.+�:'^a I, '.e= .i, ar, .» :.n-•• �,
a £F..f"; r`a 4: . S :`"•. „- HCH' I' r.. r? e _��'+ f k^['r^,. a,. hi�..it,`tG =s Y.a.i�'...Ys.. �y C...4?':.
:.5,y. :,,+~1, ,.,,<': t,. ,-.a., ,.('t r?4'l;6�t.�,,'= ,�.:,> ,>>' k`t:��: •''Jf'ys:-� �:i},.,,,.:L._
Cs.:
FINANCING LOW AND MODERATE
INCOME HOUSING
iit, report was prepared in response to the City
`ektreite shortage of rental housing affordable to
iMilies and their expressed interest in actions
the production of such housing.
Cc timissiober's doiifeM Mr the
Miami's lava and ftderate inecte
the City can take to encourage
The shortage of rental housing resources within the means of low and moderate
income families is one of the major problems with which the City is confronted.
It is estimated that over 58,000 of the City's lower inccrne families are now
living in overcrowded dwellings, required to pay a disproportionate amount of
income for shelter, or are living in substandard housing (for a family of four,
"lower income" is defined as income of $0-16,560 annually). While a statistical
breakdown of the rental housing needs for the City's moderate income families is
not available, it is reasonable to assume that families in this economic range
are confronted with similar housing circumstances (for a family of four,
"moderate income" is defined as $16,560-$24,840 annual income).
It is well documented that the City of Miami has an overall rental housing
vacancy rate in the range of 1%. A combination of national inflationary factors
have virtually halted non -luxury rental housing development at a time when Miami
is experiencing an unprecedented population growth. The inability of many
renter families to enter the homeownership market due to extremely high
downpayment and mortgage costs has contributed to the already tight rental
housing market, as has the conversion of approximately 3,000 rental apartments
to condominium ownership over the last five years.
Traditionally, federal housing development assistance has been employed to
generate affordable housing resources for lower income families and elderly
individuals. Conventional public housing and publicly and privately sponsored
Section 8 housing have been the major federally assisted programs used.
However, compared to the need for such housing, available resources are minimal.
Miami's annual federal housing assistance allocation for fiscal years 1979 and
1980 was approximately 1,000 dwelling units. For fiscal year 1981, the City's
housing assistance allocation is approximately 450 dwelling units. Beyond
fiscal year 1981, the level of federal housing assistance is expected to
diminish considerably.
In recent years, the City has been agressive in pursuing "bonus" federal housing
assistance over and above regular allocations. Since 1977, the City has
received contract authority from the U.S. Department of Housing and Urban
Development sufficient to allow for the production of nearly 800 units of
Section 8 and conventional public housing by pledging its general obligation
housing bonds to assist in development financing.
While in the past public housing development has been the cornerstone of the
City's effort to provide housing for low income families, its future utility is
in question. The diminishing Federal commitment to housing assistance,
inflation in development and operating costs, the lack of sites suitable for
public housing development and unfavorable public reaction also contribute to
its reduced viability. Recent efforts by Dade County's Department of Housing
and Urban Development to develop available public housing resources
Oh scattered sites as a MasUre to avoid overconcentrating law income fatttilies
i
shd to provide some measure of locational housing choice have met with extreMely
public reaction. As a result, the City now has less dppoituhity to
de needed
provide housing resources.
Yet over 41% of Miami's 138,772 families# on the basis of the best available
i nforma t ion
$_w. . suu . ; , are in need of housing assistance. Approximately 25,000 Miami
" have registered f r .rt„4xr� families h vo housing assistance with Metropolitan Dade County.
Rental housing affordable t with incomes falling within
o Miami families wi the
area's "moderate" income range is not being produced at all. (In 1981, the area
median income for a family of four is approximately $20,700. For a two or three
bedroom a partment, a family of this size should spend no more than 30% of annual
income inc 8.00 per month for rent.) Condominium conversions are income or S51
working to reduce the already short supply of rental apartments in this
category. Rental condominiums are not often available to families with
children. The overall economic health of any city is to some extent dependent
upon its ability to provide housing resources for renter families in the
+r=u4Fzu.k5 try,rkr :; moderate income range; those families that have the purchasing power necessary
to sustain a city's retail goods and services industries.
The inability of rental housing developers to secure land at reasonable cost and
4.t4u`"iya` the high cost of construction and permanent financing are two of the major
factorscontributing to the halt of the production of iv g h p ct privately sponsored rental
housing. The City of Miami is in a position to provide the private rental
-
! housing industry with two of the most important ingredients necessary to spur
:y=rfs ;t, ;::yt the growth of rental housing resources -land suitable for new rental housing
production and below market rate permanent and interim project financing.
" aA.s K+'"}' With assistance b the City of Miami in these two critical areas, th '� y e private
rental housing industry can participate in meeting the City s rental housing
needs. The degree to r sector in these areas
e egr which the City assists the private
will largely determine the basic affordability of the units developed. The
r t.as eater the level of assistance provided by the Ctiy, the less the developer
ill require in project income to retire development costs and provide for
maintenance. " " Therefore
rt: These savings will be reflected in rent levels. ,
should the City elect to participate in the production of rental housing to meet
the needs of lower income families, public costs will be higher than those for
addressing the needs of moderate income families
To illustrate the levels of public participation required to achieve low and
moderate income rental rates, a rental housing development model accompanies
this report. The model project is a 100 dwelling unit oanplex of two bedroon
;:..:: non -luxury apartments of minimum acceptable size. A two bedroom project was
u'
selected for analysis as this size unit is deemed to be the unit in
Y greatest
demand. Certain assumptions have been made in developing the model which
approximate actual local economic conditions, but which are subject to some
amount of change. These assumptions are all listed on page 7 .�;;,��„x,,.�•� �•:;.{>�:{�-,;�
r;a r The project model does not seek to address the public costs associated with the
production of rental housing affordable to families with incases of $10,350 or
,yn.'#.'�;',1
�S^.fiie� tN� _y 3 { � 'i :��,zt@, by r,.i i}.i�f),. � t[, " lip•-rf?w i".
the model
pro forma consists of
comparative financial pro
formas
for four
identical
100 dwelling unit rental
projects. The variables in
each
of the pro
f0tMas are land costs and project financing costs. 'The
level
of public
financial
participation in each of the project pro formal is
different. The
unit rental rates necessary to pay
operating costs, debt service, and
maintain a
reasonable
net profit in each of
the pro formas reflect the
level
of public
financial
participation necessary.
Project pro forma "A" illustrates a conventionally financed project. The rent
required per unit of $700 per month is obviously not within the ability of
either low or moderate income families to afford. Nevertheless, project inccine
of this magnitude is necessary.
Project "B" illustrates the effect of limited public financial participation in
the form of tax exempt project financing on the rent levels required to operate
the project, provide for debt service, and return a reasonable profit to the
project sponsor. Even with below market financing, rents in excess of those
affordable to low and moderate income families must be obtained.
Project "C" illustrates the effect on unit rental rates of two forms of public
financial participation. As in project "B", project "C" is financed through tax
exempt bonds issued on behalf of the project by local government. Additionally,
project "C" assumes acquisition by local government of the development site and
its subsequent disposition to the project developer at 95% of value. With both
of these forms of public participation, unit rental rates can be set at levels
affordable to the City's moderate income families. While the net income
accruing to the project sponsor during the initial year of project operation is
substantially less than the 10% generally considered acceptable, other financial
incentives are available to the sponsor in the forms of development fees and tax
"lasses".
Project "D" seeks to address the development of a project with rent levels
affordable to the City's low income families. In order to achieve these rent
levels, public financial participation in project development must considerably
exceed that prm ided in project "C". In addition to tax exempt project
financing and a 95€ land "write down", project "D" includes a further reduction
in project financing costs through a permanent and interim financing subsidy
beyond that which can be obtained through tax-exempt financing.
Both projects "C" (moderate income level rental) and "D" (lower income level
rental) require direct outlay of local assistance dollars in addition to the
City's ability to provide for tax exemption in project financing costs through
public mortgage revenue bond financing. For both projects "C" and "D" the City
would be required to purchase a parcel of land with local funds and subsequently
convey the land to the project sponsor at a substantially reduced value. While
a long-term lease arrangement would serve the City's continuing financial
interests, imurediate capital requirements for land acquisition funding would
need to be satisfied. In any event, the capital outlay for land would be the
same for moderate and low income projects, as described above.
One source of capital for land acquisition funding is the City's general
obligation housing bond program. The City Ca=ission previously authorized up
to eight million in housing bond proceeds for this purpose. The City's bond
counsel has provided an opinion that housing bond proceeds can be used for land
acquisition for low and moderate income rental housing. Furthermore, bond
3
CdU tsel has issued an opinion that land acquired with housing bond proceeds can
bb disposed of toprivate entities provided certain procedural requirements are
followed and regulatory measures enacted. However, it may be necessary
the "public benefit" question of such a proceeds through sonre form
p t use of bond p 9
of validation proceeding, according to bond counsel
The project pro formas ac
companying this report assume a land cost of $500,000.
With the indicated ;y`��':_:'';•;` land "write dawn of 95$ (or a high bid on the project land
f value) $1,044,300 in general obligation indebtedness would
be accrued
b Yy the Cit y. * A bond retirement schedule accompanies this report ( page 10) .
Of course, the lower the actual land cost, the lower the actual epublic cost
would be.
rAI
=}t''Jr"''''< to addition to acquisition fund j geed to address land aoq funding, a project designed s the
2--' ' rental of fo
#;..; ``rdaLbili project ") would
> = tty range of low-ince�ne families (model ro ect D u d
u�x'`4''° r additional ublic fund �'
4,y:nU require p funding in the form of "interest rate write downs
$;k below the level of tax exempt interest rates. Presumably, although yet to be
verified, general g obligation housing bond proceeds could be used to provide
obli a e
for
Firs _,x.=i funding such interest reduction purposes. The increased
ased level of public
funding necessary is illustrated on page 10.
s'u�;, �,:• .fir`•.,,_ ' �jM1„
The gross capital outlay required by the City varies considerably between
projects C (moderate income rental) and D (low income rental) . Net income
returned to the City in the form of <.:•_.;•����s.�,�,.,;�;:;.;;: additional property taxes generated by the
projects is essential) the same. The anticipated
J Y tax incase schedule for both
3., x,.•- r ;„•r j is attached. (See e 11.)
Pro ects C and D page
As mentioned earlier, I'
a tier, project models C and D anticipate the use of
' tax-exempt mortgage revenue bonds for interim and permanent financing. The
�xa �µaa„�r,,Ks�•,,�;, .. = mP�-�p T1[7
model pro formas indicate the overall project cost
„ its p j savings resulting from such
KIN � rhw tax exempt issues. According to bond counsel, Florida municipalities can issue
exempt
tax mp bonds for housing purposes. However, the authority of the City to
t''ttj issue such bonds to finance privately owned developments on a
operated
Y;}•k,.Kti„'.:;'<`:7v: for -profit basis needs to be legally tested
=;,u •,Fz'r:A''r',_ At this point it should be mentioned that the undertaking of a project such as
x=r"}fi''4z''}' the one described in this report would require close cooperation with Metro Dade
NY;;r4Y ti:; County. This is particularly the case where the City's general obligation
housing bond proceeds would be involved The precise responsibilities of the
County and the City in
implementing a ,,„�,,,��4t,•a`�,,ir���,r,,._, , ng Program such as the one described would
require careful planning and cooperative agreements between the two
jurisdictions.
Not withstanding the public cost considerations involved in the production of
3Wk�_ rental housing such as those described, the availability of suitable vacant land
3 FE;:,,. • is an important consideration as well. Several suitable � privately awned parcels
have already been identified. Their availability has not yet been determined
The model projects discussed in this report are intended only to provide a
framework for a discussion of methods by which the City, in the face of
diminishing federal housing assistance, can participate with the private sector
in developing rental housing for low and moderate income families. The
estimated development costs including land costs, construction costs, and
financing costs may vary depending on national market conditions and local
economics. The basic program hypothesis has yet to be tested.
lf�Alby�„ -
u Assumes a 15 year bond issue at 9-1/2
i� *4
Ina irVleff*L=,htatioh of projects similar to those described will provide saw
ff'eAsute of relief to the extremely tight rental housing market. Howeverp given
R the heed, which is considerable, limited public funds will be exhausted fairly
quickly given the high level of assistance necessary to make each project
as. I
financially feasible, particularly if they are developed individually.
Q
1, a
the
Substantial cost savings both to
Again, the
availability of land for a development
of this magnitude is a key
consideration. Depending
upon building type and
various site considerations,
from ten to forty acres of land would be required. A development project of
this scale
would have to
be developed on several
non-contiguous parcels. The
only site
of sufficient
size to allow for the
development of a contiguous
project is
the 45 acre FEC
site in the northeastern
section of the City.
The ability of the City to acquire and deliver sites sufficient to produce a
lfOOO unit total development package is of major importance. The land parcels
that have been identified to date are in private ownership. Condemnation of
many of these sites would most likely be necessary and is provided for in the
City's municipal powers.
Housing Bond proceeds could be used to provide funding for land acquisition and
it is reasonable to assume that, for a 1,000 unit package land costs could be
refunded, in part, with mortgage revenue bonds, provided the cost of physical
development was reduced by overall project scale and below market permanent and
interim financing.
Were such a development to occur on the FEC site mentioned above, it would be
potentially feasible to use tax increment financing for site acquisition and
site preparation costs.
In summary, the City of Miami
is facing the greatest rental housing shortage in
its history at a time when
inflation and diminishing federal assistance are
working to preclude a response by the private sector and severely cut -tail public
housing development activity.
The private sector is unable to produce needed
rental housing affordable to
Miami's to and moderate income families without
substantial public participation in project financing. The level of public
financial assistance provided
will affect the affordability of rental units that
can be produced. The scale of development will have a direct bearing on total
project costs, the actual level of public participation required, and rent
levels that can be achieved.
The City can provide financial assistance to the
private sector in two ways.
The first is land acquisition and disposition at
below market values. The
second is tax exempt project financing. The
5
undertaking of a major rental development program in a single financing Ccxild
result in overall cost savings to the public sector and to the City. These
gavings can be reflected in lower rents thereby providing needed housing to a
wider eoncomic range of families.
The rental housing development program described in this report is significantly
different from the programs the City has employed in the past to provide lower
income housing resources. First, the program proposes the forging of a new
;.''.. relationship between local government and the private sector in producing rental
s housing. Secondly, it requires specific financial cananitments by the City in
development funding assistance.
i�'�;E INN
—
v
48 ,Ak�
I':�.7tt'Ka.�:3��`:r,
t
2
Ptogram Assumptions
No&-iir of apartment units: 100
i�41�'{ r•w x ' } � ! ei ? tp�xSt�� �'w�'?�Y'"�'y, ��.e14;; ba'
Bite of units: 650 square feet; 2 bedrocks
't�`�s?)ai�1jF'c��Vhf 1 �-
"� _ �' xt}q, stq ' ,>,4 �3£�'{, i�.'�'.,d •01 ,rs i,
, Non rentable space: 20% of rentable space
4. Construction costs: $43 per square foot
Land costs $500,000
RUNN1 C 5
;,ga fq -!j 7 q{jq"-�771c costs
'
7 K}a �r 6. Legal and architectural costs: 10$ of construction and lard
^ysrt�l,hfWti�; F�f$fk�l �!
r'a; 10$ of construction costs
i . Developers profit and risk allowance .
traf
s'n?;'rvExyu''' 8. Construction period: 18 months ,.
9. Vacancy rate: 3$011
r,•,s;Y��,+.�Sfi;v;,'i�;��� _'s..l�,.°`,` >,i, �it-� '?�` as
10. operating costs: $300 per room per year
;..e? Y!<sf�'.9:iv.°;�: �!�'•- � g - - Wz�ix�i5;:}':;':':Jo�7`:,�;`'y`2z:"��-'-'��r',$
�1>a' (4-1/2 rooms for a 2 bedroom apartment),, '
x y1 ! �
h
£M�ak�x,,= ]1. Developers' equity: 25% for conventional financing
E
10% for tax exempt financing
a1 '{g,
i,`.3�Ff4st ��'i!';i;it,_ �Sref T.,. p.0 � ���x��`•;s
u:,T,=l;r" c114 t
s� Construction interest rate: 11� tax exempt
fi��,. _ - 12i Wn$tru:.(`''�;'v<;,s?as„t:;�,-��av;;:;��6��`.1?:�4'�''E"�e ."GDU•.w„Y�sftu: 1{
18% conventional
:::,: �dlI+."€a,�yi,fropj?-,YatTl•.,: *;rh cs ?�?s^�Ci'.n •,.n...i,iq� .14Y; r', art{`
11 tax exempt
€ t ate: .t r 4 interest nt rmane� Pe
14% conventional ' N}
Term of mortgage: 30 years ��•
Annual rent increases are sufficient to cover annual increases in
operating costs.
Moderate income: 80% to 100% of the median income for the metropolitan
Dade County SMSA.
Low Income: 50% to 80% of the median income for the Metropolitan Dade ?
County SMSA.Icli MI,
hj
Affordable Rent: 30% of income.
.z_ � ..... I.._ ... .... _ •. - .�.. -.:- � .,. ,. yn_:,..-ems
7
••
__..
.f-:n-:"•,2;_.: _,,_., .r•r:w :".�. - _Cvr: +rt." 'M:,..o ..l.,i. -
;.:,.:.....s,..., L 110
- c . ,..,,L...-Y.. .: ... .. .. - .. y?'., "' .. �,'., , r..� -
.- . ..':.-,..- 7.t: ..r' �.. _�''d:'•-....,J ,e-c.,. xk s..r,=� xi'a3,. _
. - ..Su.,...r.. , .. s-�.. � = - ..._ .. .. - . -.. .. :..., t4-•-f:.� .rr'.i'.i`, a �,.e7i-�cfi:�'n` 'rv�: -Y..._.3is'
... _ iy
.. ..3,-��•.:. r a., a .a�5-�..0� ._.>,n.e, _.. �r. ,. •..-.:..,.. -.. .- s=1A. _�x1�'„>, iY.:^{r t':i'Sm v�„' aa{r:.,,=_ - ., :'^F.� .•t+,
"�S�'�
J I �, ,[t'.c t „ - --.. - ,. _ ,1-. a:•::':�,�':. ,iC,s'.'w'.yc,'� .=:'.'`t'xi,.`-'. _ - �,..ax' •f'S:: tilll,[:-t.. W., i.,� �ha%. .ei4': .^ i_>�:,z:a
..--.. -.-
..,,., -. ,r .,._,, ,.,s-_.:kt. m.` ->�_ _., -yn , .P�. ._ sr_Y.�.. .,.:a:..r-zv.�.,.-: ,5pT,r..,r+.._.;-.. '�s`.ch..-.,_....r.,..I_.w» � Ku:..:.-c,,.P«• _}. cn ....,.A. .x.•.., ._.:.r .__.n ..__.-• ...t..v...°,,.>_.:c.. ,:t.:.. .,...:........ .-- .. .•.._... .�_. :,-!_:.-.,.:. . ..-..- .. - .. _ .:_.- .. .• _ ......c. k4: -'69.�:.F.:• ^_j`-s:._ '.'
=S .l :z ?�n7
• R. r
;'�C_".' . -";�''%.h_."ts '�c-.t+��'G,'>-i,:t-•;-�::,a�":..i;.�:`",.
,.4L,'S:i,=f,'.:r•.r
.. >.:tn
'
-
�., • ., x..� .a:-;_ ._ >. F.. {_-,.. -, _ ...... ... . ..... ... - .... . - _.,- _ L.r'T ^.L.J �}`-�,=•4'u�=;� .n'1X ti'�^x:.C-. r _r-��,4:
.... - _ � tL v. 9 v . .. .. . .. . ... .. - ,... , . .. ., ..... ' . .. . ^. _ - _x',•,,nt^v"-r:.:.n,_'i „'J
.�' ?r+" 18. S r irC,,:.: ,'^...'•:-5,; :<.. �w.'a. �,cc� ,.>_ :2�„ ..S-y..
-_ .. - .t Yz. ,. aT ..._.-, _ <.-...._.. .. .. ,- .>-s �__ _. �_. _+_ _ ...... ,. :,ram.— - `+; t?.-^.ui...•
..... .�..r gym. ,..•.. - _ ,,. � - .,.,.,, t,,. , :�.., �"�Wr:—r ..`�,--•-r�a...,�
Pr
am Models -
an
IN
N
Ne? } PF�Jl7EC�' "A" PRQTECT "80 t �2'
mNO , � u PROTECT "C'" PRQtTEC�
s.. E
_-
-
Conventional Tax
x Exempt' •
Moderate Income)
me
(Low ncome-
r
Financing
Financing Tax Exempt Financing: Tax Exempt Finance°-
Land Aoquisition Land Aoquisitioril
Interest Reduction
- Subsidy =
Development Costs _~kV
A) Tond Costs $ 500,000 $ 500,000 $ 25,000 $ 25,000,
n) Construction 3,354,000 3,354,000 3,354,000 3,354,000j
C) Legal - Architect 385,400 385,400 385,400 385,400
D) Interim Financing 572,319 310,563 310,563 310,563
E) Builder Profit 335,400 335,400 335,400 335,400
Total Development Cost $5,147,.119 $4,885,363 $4,410,363' $4,410,363
Finance Summary
A) Total Development Cost $5,147,119 $4,885,363 $4,410,363 $4,410,363
B) Developer's Equity 1,286,780 488,536 441,036 441,06
C) Mortgage Amount $3,860,339 $4,396,827 $3,969,327 $3,969,327
Permanent Financing
A) Mortgage Amount $3,860,339 $4,396,827 $3,969,327" $3,969,32.7
B) Annual Debt Service 551,267 505,743 456,570 456,570
C) Cash Flow nefore Tax
and t)r-preciation 679,800* 554,088* 467,952* 346,896*
D) Annual City Contribution 12.1,056**
E) Not Cash Flow $ 128,533 $ 48,345 $ 11,382 $ 11,382
F) Monthly Rents 700 592 518 414
* See attached Schedule of Net Rental Revenues
** Annual Contribution for 30-year life mortgage.
0
.t:
;-=!._.:```-.,.F�€u-i
S-�;�. atd", 4: „w.�,.-.-'.�''x-,rf::-ti;:�,: _.�::._, .x,,:5.:..:•. - :;t=�: r:�;: _ .=,�'.r;F, .. +ti .w; �'m�.s-. :- -
.+r.
-, .I_.;,.r_a �,_,._„.. `r_�.�... .
%.. - - ..Y _: ".4`=h V,
bf =-N•:1Y-rz... *-.N.:;AtF-.,W:r,
>.sN_,�,,.,'.': � .5.:✓. ��1�`e. _.,E...v l.., .. is
"�f{[.�,,�� ��:��.szi r.,.-=era _ta'�',."-:.,-z-, i'w,,.- u_,rr'�•.... .':'fit``. �k, .4%r-`�i.': _➢ - 3h
x�ra
..,r .at s'_'.�``.�, t.:.?;v, r$...: cr*- _ 14}S�n.-...
... ..,,.d-L^`3'.",:r.-: 4 .. :.«_..
...s�"'-a.tz-:: m,,,<c'su*.; ��':�
.ar.^ _ _ _ .y:. __ -. � - '�ir'_�;,�" �:�€„ .,'�a: -.' 3�.^.:,,-'."'�.,-"'{e�'r ✓t�.A..�s,''.5,, ..vcskw_K�a�".. ,r,.,_ .w''i
..�d�b *. - - r::! f.-a€: r�T_.'«i' .•:'�':5 -''d-K:,",_�..G•,.: ..S .. t'%.-.`�',• �i .— 7 g;:
Y =
r
�'-��
,,, � : •-�, r-. ar...»:. ram_..: w^F._ �.,.:...'. - ' - _ --�'t-`a'
CITY OF MIAMI
zf_
Schedule Of Annual Net Rental Revenues
PRQTFXT "A^ PFWECT "B" PRWECT "C'" PR7E7CT' Mir
Monthly Rent Per';Unit
Number of Units
Tirms 12 Months
i,ess 3% Vacany
Less Operating Costs
Net Rental Revenues
Conventional Tax Exempt
Financing Financing
$ 700
x 100
x 106 -
70,000
59,200
x 12
x 12
840,000
710,000
x .97
x .97
(Moderate Income)
Tax Exempt Financing
Land Acquisition
$ 518 f l y
x 100
51,800
x 12
621,600i
x .97
(Low Income}
Tax Exempt Financier
Land Acquisition
Interest Reduction
Subsidy
$ 414> (1)
x 100
41,4010
x 12 __ = s
496,800 -
x .97
814,800
689,088
602,952
491,,8962 -
135,000
135,000
135,000
135,OOD
679 800
2554 088
46$z 79952
346,896
(1) Unit rents: Moderate and low income projects: _
f
Moderate Income: 100% Median Family of 4 Income x 30$
_ $20,700 x 30% - 12 Months = $518 Per Month
T;' z, 2.-T
a._.{'"+_ ..+,,5'
- ter-'-
0 x Median Family of 4 Income x 30$�
Lrxa Income: 8 $ y �..'
Annual Cost of 95% of Land Write DDtn Ott
A $500,000 Parcel Of Land
y�s
pia analysis assumes that the land write down would be ' f inancei fligith
" gale of 15 year General Obligation Bonds at a rate of 9-1/2�.
$475 000 Direct cost of
, land write down
11 250
Administrative and i costs
_ Admini issuance �► �$ ����;�k�°:;,�:�
48,000 Capitalized interest '•+
10,750 Discount on the bonds 2$
545 000 Bond sale size
'iA,
69,620 Annual debt service
x 15 ft5.
xfi brc3 , AG IRlmlwl
sw ` ti
$1,0444300 Debt service over the life of the
issuer
T y iry} }J M- l%
i
Additional Annual Costs of Providing
Rent Affordable to Low Income Tenants
Model D shows that the City of Miami would have to contribute $121,056 to the
program each year for the life of the mortgage to make the program viable for
low income tenants. This contribution would be in addition to the costs of
providing the 95% land write down.
An alternative to pledging $121,056 to the program each year would be to provide
an additional subsidy up front to write down construction costs by $1,052,438.
If the amount were funded by 15 year General Obligation Bonds at a rate of
9-1/2%, the following would result:
$1,052,438 Direct cost of write down
26,311
Administrative and issuance casts
(2-1/2$)
100,000
Capitalized interest
_
21,049
Discount on the bonds (2%)
$1,199,798
Bond sale size
{;+
$
153,266
Annual debt service`
x 15,
t ry
$2,
298 990
Debt service over the life of the
issue
10
^$ Ef'�'�
10
20
30
40
50
'POtel Estimated Tax Col lectioht
�tdcf1t. ,Land (1)
$ 4t795(2)
5t828
7,439
9,494
12,117
19,737
25,190
32,149
52,368
beyelopped Land(1)
$ 42,294(3)
51,409
65, 612
83,739
106,875
174,088
222,185
"^
283,571
461,907
ri'i'I'p '13 +i
= �
Assumes a
5% increase in assessed value each year, Aqq
k' u. r
`
(2)
$ 500,000
:.t'r..
Value per program mx3e1 � ="
x .80
Sf
lad
g&
$ 400,000i
x .011987 Mill rate 3 ��
$ 4,795
(3) $4,410,363 Total development cost per Models C and b.
x .80
$3,528,291
x .011987 Mill rate r
$ 42,294 �[J
,�5 ,
S't cu dt,4 ,rr �' �' l+�pP�§��'"
1-a{hrsy F't�c3f �.33;d�:�'.,.; „,.;,
P f, ¢f'ydli f'�Sr
1 y1 r y 't F� t{ t s[ 13cJ1kSd<a e;, snq`' ;dj)Y 7:�y ` ai' fir,:; =5P1 ��:s;e•'`: ylu f 3
............
�..,=,. ,- ��'� ���. ',�.x sai ... x,4:..�1E,<•._}. rvtT.+....r _?z.-,. r.e ry Kv d_J'S, rro,-SfS.AIr �.. tt.,..'�Gc,..;':,i'=q'IU�Jtt •t .�„r��!i[,t��t:f ��wE^E��A �neY.�.,y;5,..+�St�?,?
3, *f 4'4fi tya
� I
r� '{
11
al
CITY OF MIAf 1I
PROJECT "A" PROJECT as
Conventional Tax Exempt
Financing Financing
y
„r ii Phi `� a.t"k, fr,� }"s�tiy.e �.• c-
De ve l o ,me- v t iCQs
A) Land Costs �
t,) Construction
C) Legal - Architect
D) Interim Financing
E) Builder Profit
Total DeveIoprrent Cost -
*Annual Contribution for 30-;ear life of mortgage.
►,
PROJECT "C" PROJECT '"'�t � � �F s F 3
'^iY'Ry *',{;"ter
t�foderate Income) (Low Incomes :�
r:=N.
Tax Exempt Financing, Tax Exempt Financingl 'z
t YYi
Land Acquisition. Land Acquisitiorr
Interest Reduction
- �_------ - - -- - Subsidy
> 500,000 25,000 S 25,000
3,354,000 3,354,000 3,354,000,
385,400 385,400 385,400
310,563 310,563 310,563
335 400
335,400 t r ,' fiEECry
335,400 �
4,ja
y4,885,363 4,4I0,363 $363
,410^
tUld j s. s .,
ts.4 a
- - - fiyi� S l2
$4,885,363 $4,410,363 S4,410,363 ,
488,536 441,036 441,036
4,396,8273,969,.32 S3:,969 ,3�
S4,396,8275'°
969„iz
�
505 743 456,570, 456. 57
554,596 467,952 346,8'96x
' 121,056* 'gins
" .- - -
48,853 5 : 11,38� � 11.38Z N