This month, Related Urban Development Group, The Related Cos.’ affordable housing business unit, started working on two housing projects for low-income seniors that are funded by $46 million in tax credits it was awarded in December by the Florida Housing Finance Corp. (FHFC).
Over a six-month period last year, Miami-based Related has garnered $106 million in tax credits for six projects with 781 units. The company says that’s the largest amount of credits awarded in one year to one developer ever in Miami-Dade County, where there’s currently a waiting list of more than 54,000 people for affordable housing.
Last June alone, Related was awarded $60 million in tax credits for four public housing sites.
Since 1986, the federal government has been appropriating money for low-income housing tax credits, which are allocated by individual states. Recipient companies such as Related are allowed to sell those tax credits to investors that want to defray their tax liabilities in a given year. The payments for the credits are then used to build affordable housing, explains Sharon Dworkin Bell, NAHB’s senior vice president for multifamily and 50-plus housing.
Bell, like many other housing officials, decries the chronic shortage of affordable housing nationwide as the result of the relatively meager amount of tax credits available. The National Council of State Housing Agencies (NCFHA) estimates that the states’ housing credits authorizations fell by 17% to $1.1 billion in 2010, the latest year for which data were available. That sum, which included $186.9 million in bond-financed properties, produced 91,092 affordable rental units.
With the expiration that year of the Housing and Economic Recovery Act of 2008, which had provided an additional 20 cents per capita in state housing-credit authority for 2008 and 2009, Congress reduced each state’s cap to $2.10 times its population or $2,430,000, whichever is greater. Garth Rieman, NCSHA’s director of housing advocacy and strategic initiatives, tells Builder that the data “suggest” housing allocation and production were about the same in 2011 as in 2010.
During 2011, FHFC awarded $13.7 million in noncompetitive 4% tax credits to non-profit recipients, which funded 2,986 housing units. But it did not allocate any competitive 9% tax credits to for-profit entities that year, after awarding more than $92 million in credits that helped fund 7,384 units for low-income residents during 2009 and 2010.
Alberto Milo, a principal and senior vice president at Related Urban, tells Builder that Florida actually hasn’t had a tax-credit cycle since 2009, and any monies awarded between that year and 2012 were either left over from previous years or, in Related’s case in 2012, forwarded from 2013.
Milo formed Related Urban in May 2009 as a joint venture with Related Cos.’ CEO Jorge Perez. The products it redevelops or builds are all mid-rise or high-rise apartments that are typically one-bedrooms or studios in the 600-square-foot range.
The two newest tax-credit-funded projects that Related Urban has in the works are a 200-unit public housing complex for elderly residents called Jack Orr Plaza, which Milo says is in the permitting stage; and a 117-unit nonpublic housing project called Collins Park Apartments in Miami’s Allapattah neighborhood.
The other four projects Related is currently working on are all public housing sites.
Among the investors to which Related has sold its tax credits are Bank of America, Citigroup, and Boston Financial. “They understand the product and the market. And this is, after all, still a real-estate transaction,” he says.
“Affordable” in Miami-Dade means that a tenant is paying no more than 30% of his or her gross income for housing. That translates into rents of under $200 per month in public housing, and under $600 per month in nonpublic buildings. “This is housing of last resort for a lot of these people,” says Milo.
Demand for low-income housing is not likely to recede anytime soon. But the tax-credit arena is highly competitive, so Related, says Milo, “needs to be in the forefront” when it’s applying for housing credits in the future.
John Caulfield is senior editor for Builder magazine.
Learn more about markets featured in this article: Miami, FL.