Affordable housing crisis continues as many search for answers

Emily Griffiths had been owning this whole adulting thing: Seeking to avoid big college debt, the recent University of Florida grad earned scholarships, worked a job and secured a good internship that has led to a full time job with engineering firm Kimley-Horn. She starts at the firm's Sarasota office in March. 

Now the 22-year-old has hit an adulting speedbump, a hiccup quickly reaching crisis level in the region, if not across most of Florida: the lack of housing — homes, condos or apartments — at price points that meet what's long been the standard rent-to-income ratio of spending 30% or less on your domicile. Griffiths, echoing the thoughts of many — from Tampa, where apartments in some of the priciest neighborhoods are going for $5,000 a month, to Naples, where the median home sale price of $445,000, up 20% over 2020, recently landed it as the No. 1 on the The Wall Street Journal/Realtor.com Emerging Housing Markets Index — sums up the situation with this: “These are New York City prices!”

Griffiths, who grew up in Sarasota, is living with her parents. While others take that option when feasible, "living with your parents" isn't a viable, sustainable answer to the core problem a host of business, civic and nonprofit leaders, not to mention lawmakers, are grappling with: As housing prices have shot up in the past couple of years, an ever-widening divide has grown between those who can afford to buy in this market and those who can't.

The affordable housing crisis is also a dynamic issue, including wages, land prices, zoning rules and notably, an ongoing battle in many localities over growth policies. In turn, that has twisted supply and demand dynamics into a Gordian knot, exacerbated by migration patterns that validate Florida's throne on dozens of "best places" to live and retire lists.

Read more about affordable housing across the region.

“I think (finding affordable housing solutions) is something we need to lean into; I think we all have a responsibility to try to help our community be better,” says David Ellis, the director of business development at Heatherwood Construction in Bonita Springs, who has served as president of the Immokalee Friendship House, a homeless shelter, and chaired an affordable housing commission for Collier County in the early 2000s.

“Everybody is not going to live on the water and have a yacht," he adds, "but at the same time they ought to have a decent place to live with safe environments so kids can grow and learn.”

How We Got Here

Like Griffiths, Alyssa Barnsley, also a Gator, moved back to her family within the area in 2019 after college. Going on three years, with the pandemic delays, Barnsley remains at home, where, she says, she's saving money and is content — for now. Optimistically speaking, Barnsley says she might find a place to live over the summer of this year. But if rent prices continue to skyrocket, then she’s going to stay put.

Stories like those from Griffiths and Barnsley abound in the region. 

Consider Nathan Hagen. After growing up in the Tampa Bay area, Hagen moved to Gainesville for college. When he tried to move back, he couldn’t find housing that fit his budget. “Every time I raised my budget, the market changed its cost,” says Hagen, co-founder at Tampa software firm Admiral.

Like many in his generation, Hagen rents a place over owning a house, and he's nervous that if rent keeps going up, like it is in many markets, he will have a problem. “I could not justify paying the market rent price.” 

Hagen decided to research the problem. He compared previous housing market crashes and then charted the number of new houses built over time. “We have stopped building new homes,” he says, noting the increased population size in the Tampa area. “The net new supply of housing has not changed.”

Hagen isn't sitting idle about the issue. He helps lead the Tampa chapter of Yes In My Backyard (YIMBY). YIMBY Tampa is a local chapter of YIMBY Action, a national  nonprofit focused on enacting equitable policies that advance housing affordability for all. Its name is a play on the concept of NIMBY — Not in My Backyard — a euphemism for another factor in the housing pinch, when longtime residents of an area or neighborhood protest new housing projects or zoning rules. 

Nathaniel Bittman, a Tampa Bay area branch manager for Linthicum, Maryland-based NFM Lending Co., offers another perspective. He says the federal government has gone to great lengths to control inflation by raising interest rates, scheduled to be raised again in March. Yet at the same it has expanded the limit on loans available through Fannie Mae and Freddie Mac, the Federal Housing Administration lenders that specialize in mortgages for first-time home buyers.

The result? A classic Catch-22.

“We have a massive shortage of housing in the marketplace,” he says, “and then we have excessive demand for housing. The conundrum that a lot of people face, at least from a mortgage standpoint, is they’re simply priced out of the market.”

Bittman spends a lot of time studying the causes and effects of the affordable housing crisis. In addition to working in the mortgage industry since 1995, he’s also an educator, teaching “boot camps” for new loan originators and real estate professionals throughout Florida.

Another factor in the issue, Bittman says, is the the cost to build has gotten “exponentially higher” because of supply-chain issues that are driving up the price of raw materials. Longtime homebuilder Pat Neal, whose company, Lakewood Ranch-based Neal Communities has built some 18,000 homes from Lee to Manatee counties over the past 50 years, highlights that issue when he talks about the affordable housing issue. 

“Builders are passing that cost along to the consumer, which they should do,” Bittman says. “That’s just basic economics, but it further deteriorates buying power.”

The trickle-down effects of the affordable housing crisis, Bittman adds, are and will continue to be felt acutely by hospitality and service industry businesses that rely on workers who are being shut out of the housing market. High-end housing developments, he explains, tend to spur the construction of restaurants, bars, hotels, big-box stores, etc., but the people who are needed to work at such businesses won’t be able to afford to live in the area, and they might balk at having to commute long distances for an hourly, low-wage job.

“These businesses could fail from the fact that they just don’t have employees who can afford to come to work,” he says, comparing the crisis to a “runaway train.”

He adds, “We have massive inflation. Now you need wage inflation to keep up because people have to get paid more money just to live.”

Chain of Command

Bittman believes governments should do a better job of incentivizing builders, via tax credits and subsidies for material costs, to focus more on workforce housing such as apartments and townhomes; however, that doesn’t solve supply-chain problems. “Then there’s the waiting game,” Bittman says. “You have to have a builder feel confident enough that they can build a development and then sell it out quickly enough.”

"The focus is getting people to live in a Class A building and be able to afford it." — Marshall Gobuty, Pearl Homes

Government at the state level plays a role in the solutions as well, say many business and civic leaders. The focus there is on the state’s Sadowski Affordable Housing Trust Fund. Created in 1992, Sadowski imposes a 20-cent surcharge for every $100 paid on real estate transactions to generate funding for affordable housing. The problem? During the 2000s, legislators began diverting Sadowski revenues for other purposes, “sweeping” more than $2 billion from the fund between 2002 and 2017.

After fully funding at $387 million in 2020, Gov. Ron DeSantis in 2021 wanted all $423 million in projected Sadowski revenues for affordable housing. But lawmakers, instead, reduced the transaction tax amount dedicated to Sadowski, with up to one-half annually earmarked for wastewater and “resiliency” infrastructure. The governor's 2022 budget request earmarks $355.5 million in affordable housing initiatives, including $95 million for the State Apartment Incentive Loan (SAIL) and $220.5 million for the State Housing Initiatives Partnership (SHIP) programs. The CEOs of multiple chambers of commerce in the region, in addition to other pro-business lobbyists, support full utilization of the Sadowski fund.

Work the Problem

One sub-issue underlying the affordable housing crisis in many specific markets in the region is the downtown vs. suburb battle. That plays everywhere from Sarasota to Naples to Tampa. In St. Petersburg, the problem is becoming more acute as the number of high-dollar developments keeps pushing those who can’t afford the new housing out of downtown.

City officials have begun to address the issue. It's in the second year of a 10-year plan to rein in housing costs and increase homeownership. This plan includes helping low-income families and individuals become homeowners by providing 150 lots to build on and down payment assistance. And City Council is working on a dedicated zoning district that will allow the construction of multifamily units where they normally wouldn’t be allowed.

One of the linchpins of the plan is the construction of 2,400 apartment units. These will be affordable and workforce housing, where rent is based on a person’s income along with market rate apartment. The city has partnered to fund 650 units, which are under construction. The $60 million project is city funded but, according to the detail on the city’s website, “since most of these funds are sourced by taxes already paid to each level of government, everyone is contributing to this important solution.” 

Jared Meyers, founder and chairman of Salt Palm Development in St. Petersburg, says the private sector has as much responsibility for addressing affordable housing as the government does.

Meyers, whose company calls itself a socially conscious developer of sustainable housing, believes that in order to keep housing affordable there needs to be more focus on what’s causing the problem. That means making sure employees earn a livable wage and creating a network of businesses that are “a force for good.”

He says these companies would offer “high-quality jobs with dignity and purpose, reducing inequality, alleviating poverty, protecting local environments and supporting communities are essential.”

“I am very proud of what we do at Salt Palm Development,” he says, “but when it comes to directly creating affordable housing, we aren’t there yet.”

The Tampa Housing Authority, meanwhile, is in the process of building several developments which will provide workforce and low wage housing for huge numbers of residents. The authority has a department within its system solely dedicated “to provide a unified containment of affordable housing for our residents.”

According to the website, the office of Real Estate Development “is positioned to build new housing or acquire developments of mixed income, mixed-used and market-rate quality.”

The idea is for it to be creative in how it approaches housing.

As part of this effort, the city is working with one of the biggest developers in the country, Miami-based The Related Group. The developer, which is building the Ritz-Carlton Residences on Bayshore Boulevard, where prices for condos start at $1.6 million, is working on the 120-acre West River Tampa affordable housing development and won an RFP last year to work on the Rome Yard development, another affordable housing project.

The secret to these types of developments, officials in Tampa and elsewhere say, is to offer more than just homes priced at a certain range.  

Jon Paul Pérez, Related’s president, told the Business Observer in October that “what we’re trying to do is not just do mixed-income housing, but to bring in commercial, retail, so there is economic opportunity for the people living in these neighborhoods. So that it’s not just housing.”

In the Trenches

Like most homebuilders, Ian Schmoyer, president and CEO of Cape Coral-based Christopher Alan Homes, says between rising material costs and supply chain issues, everything is getting passed off to the buyer. In response, Schmoyer says the best way to tackle the affordable housing crisis is by getting more new homes on the market and submitting permits in a timely manner. 

In Bradenton, north of Christopher Alan Homes, developer and homebuilder Marshall Gobuty is addressing the affordable housing issue with the Met. It's a $20 million project being built by Gobuty's Bradenton-based Pearl Homes. The Met is a workforce housing project with 199 apartments. On the 3.3-acre site of the former Manatee Inns at 1405 14th St. W., the development is in the heart of the Village of the Arts. The Met is also an in an Opportunity Zone, an investment program created by the Tax Cuts and Jobs Act of 2017 that provides tax advantages for certain investments in lower income areas. The rental prices have not been determined yet, but will follow the HUD average monthly income for the area.

While it's somewhat marketing semantics, Gobuty says he prefers to label the project workforce housing. "There’s a bad connotation with affordable housing,” he says, “just like section eight housing.” 

He plans to create market-size apartments by making every square foot rentable area. There’s no gym, pool or any other amenity that one might find at other complexes. But there is going to be a liveable space for nurses, firefighters and other working professionals to call home, he says. “The strategy was, do we need a big reception area? Sales office? Lounge?” Gobuty says. “No.” 

Gobuty emphasizes that making the Met without amenities doesn't mean he's cutting corners. It will be a Class A building he says, with several green and environmental features to boot. 

Take Action

Another warrior in the affordable housing battle is Mark Vengroff, managing partner of One Stop Housing in Sarasota. Like his late father Harvey Vengroff, a prominent and colorful businessman well-known in the city of Sarasota for his battles over zoning and housing regulations, Mark Vengroff has a model that proves affordable housing, with the right regulations and strategy, can be profitable. The Sarasota-based company specializes in buying and converting hotels, offices, schools and other property types into apartment buildings whose units are priced below market rates. It operates in Bradenton, Kissimmee, Orlando, Sarasota and Memphis, Tennessee.

“We’ve been around for about 38 years, doing 100% workforce housing,” Vengroff says. “It’s a for-profit business with a very philanthropic focus. We’ve got to make money, but we don’t have to get greedy about it. It’s very tempting for developers to quickly go into the market-rate product because the margins are bigger and more attractive.”

Vengroff says One Stop Housing has turned a profit year every year it’s been in business, even during the early days of the pandemic, when rent payment delinquencies skyrocketed. Even during tough times, “we haven’t taken any government subsidies whatsoever,” he adds.

One Stop Housing maintains ownership and management responsibilities, adding value in the form of what Vengroff calls “wraparound services” — everything from financial literacy, self-esteem and job interview courses to financial assistance, free meals, help with procuring furniture and even food and toy drives around the holidays. Those services are delivered by the firm’s nonprofit arm, One Stop Cares. 

Mostly due to high — and getting higher all the time — land prices, in addition to impact fees and other costs, One Stop Housing focuses on repurposing existing structures. It currently has about 3,000 units across 14 properties, nine of which are in Manatee and Sarasota counties. Manatee County alone, Vengroff says, has a deficit of 14,000 workforce housing units. The situation has worsened to the point where some residents have given up hope of having their own home.

A member of the Manatee County Affordable Housing Advisory Board, Vengroff recently heard from a teacher who moved to the area and wound up having to crash on someone’s couch. “He can’t afford to live anywhere in the area,” he says, “and he’s not alone.”