Housing affordability remains a top concern for elected officials at the local and state level. In fact, Florida has a critical need for more affordable housing with a shortage of 400,033 rental homes that are affordable and available for extremely low-income renters.
In order for a new apartment community construction project to break ground, a developer must secure financing from investors, who demand a specific rate of return in exchange for their investment. It is difficult for developers to achieve the necessary rate of return for affordable apartments, which are rented below market rate. As a result, it can be extremely challenging for a developer to secure the financing needed to make an affordable housing construction project feasible.
Because of these challenges, developers rely on a combination of state and federal tax incentives along with private funding. However, the process of obtaining these government tax incentives is extremely competitive, with a very limited number of projects ultimately receiving this type of funding each year.
Florida law currently lacks clarity regarding a municipality’s ability to waive or reduce local property tax rates for affordable housing, which is an impediment to encouraging the construction of affordable apartment communities at the local level.
How This Impacts the Apartment Industry:
According to a recent research study conducted by the Florida Apartment Association, regulatory requirements and municipal policies can increase the rent required to operate an apartment community by 12%-17%. To put this in perspective, local policies can shift affordability from requiring a household to earn $64,000 annually in order to afford a two-bedroom apartment to requiring a household annual income of $75,000 to afford the same apartment.
As a result of rising construction costs and the challenges associated with obtaining the limited number of state and federal tax credits that are currently available, many housing developers are unable to construct new affordable apartments. In light of the dire need for more affordable housing, the Legislature should take action to provide local governments with the authority to offer additional tax incentives at the local level at their discretion.
The Florida Apartment Association urges the Legislature to pass SB 674 (Sen. Ana Maria Rodriguez), which provides local governments with the ability to waive or reduce property taxes for affordable housing units.
Where does this bill stand?
SB 674 was introduced on January 15 and has not been assigned committee assignments yet. FAA expects a House companion bill to be introduced shortly. FAA will share additional details about this legislation's committee activity as it becomes available.