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HomeMy WebLinkAboutItem #05 - Discussion Item•,c:.—!_ _ .1E,'Cc2 Richard L. Fosmoen City Manager Atoll Dena Spillman, Director Department of Community Development January 14, 1981 Alternant Housing Corporation Proposal Below are our comments on the proposal submitted by Ed London recently to the City Commission to provide low cost rental housing within the constraints of current market conditions in Miami. We feel that the proposal has a great deal of merit in its basic concept. There are several points where we feel that more thought or research needs to be done before we can assist Mr. London in turning the proposal into a working project. A key problem, in our view, is the size of the units proposed in the plan. The proposal calls for a three story building with 30 units of approximately 250 square feet each on a floor space of 3,200 square feet or ten units per floor. We have had a sample sketch done for an apartment of 250 square feet. We do not feel that the 250 square foot unit is an acceptable size for an apartment with even a small amount of furniture.Circulation space in the unit of this size would be minimal. Storage space is also a problem. We are especially concerned with the psychological problems that are associated with crowding people into small living spaces. We feel that Miami's current crime problems partially stem from the overcrowded living conditions in certain neighborhoods. We cannot agree to compounding the situation by providing cramped living units. However, we do feel that smaller units will be the trend of the future and that society will have to adjust to the smaller living spaces. We are willing to endorse a project with unit sizes in the 350 square foot _range. Such living units can be constructed on thy• proposed site without substantially affecting costs. However. even if relief from the zoning ordinance could be obtained, allowing for a 350 square foot efficiency unit (the minimum efficiency unit now allowable is 400 square feet), Metro Dade County would have to provide relief from Countv housing code requirements for unit size in order to award a Certificate of Occupancy for the structure. We recognize that this will reduce the number- of units on the site and increase the rents. We have calculated the rent for a 350 square feet unit at S231. We do not find this rent to be greatly out of the range of a low-income person, we also assume that the person will be spending 35 of income on housing, a not unreasonable expectation in today's rrrarket. We do not find acceptable the proposal that the City suspend the offstreet parking requirment. There are enough problems Oith parking in the city without encouraging developers to put in new housing without providing adequate parking. Richard L. Fosmoen =0 January 14, 081 The city is simply not prepared to provide alternate parking areas in lieu of on -site parking. We have no objections to waiving the other requirements except as noted above. With respect to the financial/operating aspects of the proposal, we feel that the method for calculating rental increases is vague and may be too high. The way we read the proposal, rental increases are -tied directly to the increase in the cost of living over the twelve month term of the lease. We do not feel that this is reasonable. We would like to see a proposal that regulates the rate of return after expenses with provisions for upward adjustments in times of severe inflation. We are afraid that the proposal would soon make the units unaffordable for low-income families with the continuing high inflation. Also, we do not feel that the proposed maintenance allowance of $25 per month is adequate for the lone -ranee of the building. We agree that as a new building the amount proposed will be adequate for a time but see no provision for a long term maintenance and/or improvement fund. We would also like to see proposed building plans to comment on their adequacy. Finally, a Grey feature of the financing plan is a form of tax abatement whereby the City purchases the subject property and leases it back to the sponsor. We are uncertain as to the legality of this procedure without open competative bids from all developers interested in such an approach. Further, we are also uncertain if this procedure will guarantee relief from all property taxes. We are aware of several city owned parcels where property taxes lust be paid. This matter will need to be researched adequately before the city can commit itself to this aspect of the proposal. The bidding question is now being researched, by the City attorney's office while the tax question should be resolved by_ sponsor's attorney. Again we want to emphasize that we feel substantial merit. Our comments touch proposal and we will proceed work with viable one. /so that the basic concept proposed has on the major concerns we have with the Mr. London on the development of a more ALTERNATIVE HOUSING CORPORATION (THE CORPORATION) A NON-PROFIT CORPORATION There are no alternatives in housing for residents of the City of Miami who must live on a moderate income. Federally Subsidized Section 8 Housing is not an alternative, during 19SO there were no new Section 3 apartment rental units constructed in the City of .Miami. The private sector under the present local governmental regulations and taxation cannot construct low cost apartment units in the Citv of `Miami. The State of Florida has reco,niZed this problem and has empo%.ered a group to aide in solving the crisis that exist in low cost low rent housin;. The States maior con- tribution will probable be through the issuance of tax exempt bonds and the issuance of below market interest rate mortages for builders of rental apartments. We in the City of ;`liami cannot wait for the State government to help us. he must act in our best interest. We must act to create rental housing today. The City of Miami has the ability through its charter to work with us and other prix•3te developers or a;,en:ies in the Citv to create additional low cost, low rent housing for its residents. We have purchased the first site on which we would like to con- struct a demonstration project to show the private sector and the City that working together the private sector can build and operate low cost, low rent apartment buildin4;s within the City of Miami. This demonstration project wiII cost the City of 'Miami nothing. In fact as the exhibit attaced demonstrates the City will gain a tremendous amount of tax rQvenuc in a relationship to the re- venue it now collects from the existing structure on this site. Rent control is not a solution to the problem which now exists. It will only aggravate the problem: the shortage in the supply of affordable housing for that sector of the community that cannot participate in the free market as it now exists. 4 • ALTERNATIVE HOUSING CORPORATION PAGE TWO If the City of Miami agrees to work with us, to change their rules and regulations, to a no greater extent that are now in effect in the existing housing stock in certain areas of the City, then we will demonstrate that the private sector can build housing economically and affordably for that sector of the economy which can now not afford decent housing. I. PURPOSE II, A. To demonstrate to the private sector and the City of Miami that individual entepreneurs and investors will participate in the construction of apartments within the limits of the City of Miami that can be rented for sums of money that individuals can afford and entrep- reneurs can profit at. B. When the purpose of A above is completed the corpora- tion will stay in existance only as long as it is ne- cessary to create and maintain a land bank that the private sector will be able to draw upon for sites on which to build low cost, low rent housing as defined above and below. REQUIRED CHANGES IN CITY ;TONING AND BUILDING CODES f A. The requirement for all offstreet parking will have to be waived in order to make low cost, low rent housing possible. Therefore, variance or a new zoning clas- sification will have to be created which will not re- quire off street parking. B. The current minimum square footage requirement for newly constructed apartments will have to be changed or waived so that the efficiency apartments of approxima- tely 250 square feet of living area can be constructed. C. Requirements for the handicapped will have to be waived or changed so that only a minimal number of apartments on the first floor will accomodate the handicapped. If handicapped requirements are required for all apartments then the additional cost will make this project unfeasible. 4 ALTERNATIVE HOUSING CORPORATION PAGE THREE D. Zoning density and setback requirements will have to be changed so that on our initial demonstration project we - will be able to construct 30 efficiency unit. The lot size of the demonstration project is 50 X 100 or 5000 Sq.Ft. The initial building will cover 3200 square feet (40 X 80) and be three stories in height. The sideyard setbacks will be five feet and the front and rear setbacl:s 10 feet. These setback requirements and densities are no different that are already found in the neighborhood where the demonstration site lies. 111i EXISTING LEGISLATION MAKES THIS PROJECT FEASIBLE i A. Initial demonstration project 1. The corporation has acquired in the City of Miami a single family residence in the -area where there presently exists old apartment buildings that have a density of between 150 and 300 units per acre and in which the income level of the current residents are such that most families do not own and/or operate a car. 2. The corporation will sell the land to the City of Miami for its cost which will include the purchase price (t35,000) plus all the costs of acquisition and earring charges. The Cite has the right to acquire the land under the Charter. 3. The City will pay the corporation for this property by issuing a mortgage note secured only by the subject property. The mortgage note will be tax exempt in regards to Federal, State and Local income taxes. The Cite has the right to issue dept instruments under the Charter. 4. The payments that the City will make to the mortgage note holders will be equivalent to the rent the City will charge the corporation for the rent of the land. The corporation will purchase the mortgage notes from the City and will be responsible for either holding them themsel�-es or selling them to third parties. ALTERNATIVE HOUSING CORPORATON PAGE FOUR S. The corporation will submit plans for apartments to be built on this site which will have to be approved by the Building Department as to safety and building code; the City will then issue a building permit. 6. The corporation will borrow funds for the construc- tion of the apartments in the private sector and will build the apartments for residents of the area. The corporation will receive no rental subsidy whatsoever from any governmental body. 7. Upon completion of the.construction, the apartments will be rented for a sum of money which will be equal to the rent to be paid to the City for the land and the carrying costs for the mortgage to be secured for the construction cost and operationg expenses (assuming a 50 vacancy). we estimate the cost per unit for efficiency appartments to be built in the Little Havana;' Ovetow,j area is S1000 to $2000 for the land: S6500 to $9000 for construction; $20 to $30 per month for operating expenses (no property taxes or individual utilities included) which +ill make it feasible to rent efficiency apartments in these areas from $150 to $150 per month. we estimate that we will be able to rent the efficiency apartments that we will con- struct in the demonstration project for the rental sum of between S160 to $170 per month. S. The rents may be increaed annually. The rent may be increased to an amount which will be calculated by multipling the existing rent by a fraction whose numerator is the cost of living index and the date of the rent increase and whose deno—minator is the cost of living index on the date of first occupancy. Twenty-five percent of the increase in the annual rents shall be paid to the City for services in lieu of paying property taxes to the County, City and School Districts. The other seventy-five percent of the increase Shall 4be retained by the corporation as capital to acquire more sites for the above mentioned ALTERNATIVE HOUSING CORPORATION PAGE FIVE land bank and as a reserve for a replacement in the demonstration project. 8. NORMAL OPERATIONS AFTER DEMONSTRATION PHASE IS CO'•1PLETED 1. Sites shall be made available to private developers to bid for the right to develop and construct rental apartments. 2. Developers will bid against a standardized set of plans. There will be alternate facades to relieve the monotony of creating standardized buildings. 5. The rent for the site will be determinded by the acquisition cost and the City's cost incurred in servicing the debt on the mortgage notes it issues. d. The corporation shall assist the City in the selling of these notes if necessary. 5. The developer who bids the lowest rent per month shall he awarded a lease for the site for 99 years. 6. The developer shall be responsible for securing his own construction and permanent financing. 7. The annual rent increases shall only be collected if the developer maintains the lluildin,,s in a condition acceptable to the Housing Department of the City of Miami and that there are no outstanding building code violations against the property. S. The selection of tenants can be done by the developer and/or in cooperation with the City of Miami Housing Department or in any other w:iN- that would assure that those people who needed the housing most would re- ceive a priority position on the waiting list for such housing. The ultimate decision as wheather to rent or not to rent to the tenant would be the responsi- bility of the developer. If. THE CORPOR:'1•CION IS NON-PROE'I'F AND THE DIRECTORS SHALL DONATE THEIR TIME: AND E.NLRGY IN SPIRIT OF COMMUNITY SERVICE AND SHALL KOT BE COMPENSATED. 4 ALTERNATIVE HOUSING CORPORATION PAGE SIX We believe our plan is feasible and desirable. It can provide affordable housing to that sector of the economy that cannot afford decent housing. No new rental housing is being built by the private sector under the current building and zoning regulations because the cost incurred cannot be recovered in the rents that the residents can afford to pay. Federally sub- sidized section eight housing has created no new units in the City in the past year. The waiting list is endless. The State is just beginning to work in solving this problem we cannot wait until they do something. Our economy functions best when all people profit. We believe the profit motives will draw many entrepreneurs and developers into this program, even though the initial cash return :ill be low or non-existant. They will still invest due to the fact that they will receive tax benefits and future cash benefits as the rents are increased. The tenants will benefit by having affordable new low cost efficient housing made available to them. The City will benefit by helping to pro- vide housing for its residents and by collecting greater revenue because of this project than it would otherwise collect as the property stands today. We ask for your approval of this demonstration project and your support so that we may move forward toward the creation of affordable housing for many residents in the City of Miami, ALTERNATIVE HOUSING CORPORATION PAGE SEVEN 421 S.W. 3rd Street, 'Miami, Florida Tax parcel number 010219-15 PROJECT COST: Contract price for a home on 50X100 foot lot - $35,0V . Demolition, site and legal expense - 1010()'. Construction cost not to exceed - 245,0(' Interest and soft costs - 50,0(' TOTAL PROJECT COST $340, 0t',` . ANNUAL COST: Debt service $295,000 hard and soft cost X 14%K = $41,1n Land lease $ 45,000 land lease X 110E Maintenance $ 25.00 per month X 30 units X 12 months= 9,00". TOTAL COST PER YEAR $55,25,J. _ 50 Vacancy and Collection Loss 0 ��: Total Revenue Required for Project UNIT COST PER MONTH: Total Revenue Required of Units 50 ANNUAL. COST PER UNIT $19" MONTHLY COST PER UNIT TAX PARCEL # 01-0219-18 1980 ASSESMENT Land $ 2 1 , 2."'. Building $10,0:.. Homestead Exemption ($15,�!' Taxable Valve $16. City Mi11age 1 1980 TAX REVENUE Assume 12 % increase per year $1 ALTERNATIVE HOUSING CORPORATION PAGE EIGHT EXISTING STRUCTURE DEMONSTRATION PROJECT 1981/82 $207 0