As COVID-19 continues to exacerbate existing housing affordability challenges across the country, industry advocates will find value in a new report published by the Florida Apartment Association (FAA) and HR&A Advisors which highlights multifamily housing cost drivers. According to the report, more than 48,000 new apartments are required to meet housing demand in Florida. From 2010 – 2018, Florida’s four largest cities (Miami, Orlando, Jacksonville, Tampa) experienced population growth of up to 20 percent. The report makes clear that the dramatic increase in new residents to the state has been one of many factors leading to the high costs now associated with housing development.
“While FAA's research study is Florida-specific, the cost drivers identified in this report are universal factors that contribute to rent prices nationwide. FAA hopes this report will encourage municipal governments across the state, and even the country, to carefully evaluate how a proposed policy change will impact the cost of housing before it is ultimately enacted,” says Josh Gold, Executive Vice President of the Florida Apartment Association.
The report begins by addressing market factors that influence the high cost of development and adversely impact housing affordability. As previously mentioned, Florida’s largest cities are skyrocketing with demand, especially amongst high-income households. Surging demand and the shrinking supply of available land has also bolstered land prices, layering additional costs onto the development process. Tack on rising construction costs associated with severe workforce shortages and developers face a difficult choice: Bring new supply to market with higher rents that can support the cost of construction or seek development opportunity elsewhere. Either way, the result is a clear lack of affordable housing.
The study also addresses municipal and regulatory barriers which have a direct impact on the affordability of housing. Noteworthy are the restrictive zoning policies of jurisdictions that limit higher density development. The report finds that half of Miami’s available land excludes multifamily development, while more than 90 percent of Jacksonville is zoned for single family exclusively. Developers also face soft costs which must be reflected in the financial viability of a new project. These include high property tax assessments, local impact fees, entitlement fees and fees associated with conducting lengthy mandatory studies. Housing advocates must remember that while regulatory barriers are a significant cost driver for housing, fair and equitable regulation can actually facilitate the development of new affordable housing.
The FAA and HR&A report make a series of policy recommendations to ease cost restraints for new housing. By-right development for multifamily housing, which streamlines approval processes for new projects, should be adopted in jurisdictions to reduce overall development costs. Notably, by-right development can eliminate requirements for public input, thereby reducing NIMBY opposition that may otherwise extend development timelines. The report also places value in smart use of public subsidies. In Florida, the Sadowski Affordable Housing Trust Fund is often used to tackle state priorities other than housing. Dedicated use of this funding source will further help off-set rising housing costs.
The National Apartment Association (NAA) applauds the work of FAA and HR&A Advisors for identifying critical cost drivers to housing development and FAA’s ongoing advocacy on behalf of the industry. This report will help drive policymakers in the state to make more balanced, data-driven decisions in their housing policy.
Last year, NAA released the U.S. Barriers to Apartment Construction Index which ranked relative ease to develop in nearly 60 metropolitan areas. By understanding the cause of rising housing costs, all stakeholders are better equipped to engage on a solution.
To learn more about the FAA 2020 Report on Drivers of Multifamily Housing Costs and Affordability in Florida, please contact Amanda Gill, Government Affairs Director, Florida Apartment Association or Sam Gilboard, Manager of Public Policy, National Apartment Association.