Miami is spending $4.1m on six homes, to be sold at a loss. Is this good affordable housing policy?
WLRN 91.3 FM By Daniel Rivero
Residents for years were told a park would go on the lot at 12 SW 47 Ave. after the city purchased it and demolished the house that used to stand there. Now, the new city-built home there is being sold at a major loss to taxpayers.
On the corner of SW 1st Street and 47th Avenue, a new, modern house has popped up with an unusual developer: The City of Miami.
The four-bedroom, three-bath house was built by the city as part of its effort to address the affordable housing crisis, at a time when Miami has become the most unaffordable city in the nation.
The ultimate goal is to sell the new home to a lucky resident for the unheard-of amount of $300,000, at a time when the average home in the city sells for $579,500.
The catch: Each of the homes will be sold for a substantial loss for taxpayers, once the cost of the land and development is factored in.
Six of these homes are currently planned for development and sale in the city, using $2.5 million of $100 million in funds for affordable housing from the Miami Forever Bond, which was passed by city voters in 2017.
Overall, the plan to build six single-family homes in District 4 will cost taxpayers a total of $4,174,787, once the cost of purchasing the land and bond money used for development are combined. That comes out to $695,797 per home, each of which will be sold at a substantial loss.
A visual comparison of the six homes being built in Miami's District 4 with $2.5m in Miami Forever Bond funds and the 120 apartments built at the Residences at Dr. King Boulevard in Liberty City with $2m of bond funding. The District 4 project will cost a total of $4.1m, all taxpayer-funded, while the Liberty City project cost a total of $36.7m, most of it coming from private funding.
The tale of how the city has decided to develop single-family homes and sell them at a loss as part of a strategy to address the affordable housing crisis offers insight into what experts warn could be a city government that fails to see the big picture, and is throwing money at pet projects instead of spending taxpayer money effectively.
“We really need to kind of calibrate: Where is our need? Who are we serving? And what is the best mechanism to serve the widest number of people?” said Robin Bachin, the Director of the Office of Civic and Community Engagement at the University of Miami.
“There is a place for single family homes,” she said. “But when you have an enormous amount of resources that go into developing single family homes at the expense of multi-family housing, that's where the issue is. Just cost effectiveness.”
In many ways, criticism of the project is reflective of a crucial decision made in 2020, just before the COVID-19 pandemic took hold.
“When you have an enormous amount of resources that go into developing single family homes at the expense of multi-family housing, that’s where the issue is.”
At a special meeting that January, the city commission rejected a comprehensive plan for affordable housing that it paid researchers at Florida International University to develop. That plan called for the creation of an independent Miami Affordable Housing Corporation that would use the available money from the Miami Forever Bond to rapidly build the most possible affordable housing units for residents across the entire city.
City commissioners balked at the plan, which was supported by Miami Mayor Francis Suarez.
Commissioner Alex Diaz De La Portilla called the proposal a power “grab” that would shift decision making away from the commission to an unelected body. Then-city commissioner Keon Hardemon agreed, saying commissioners should be able to direct the money in their own districts.
“We decide what projects are going to be done and how we’re going to do it,” said Commissioner Manolo Reyes. “We are the ones that are going to decide.”
Reyes later decided that the city should build and sell the homes at a loss using the bond money.
The six homes
The city bought the lot that the West Flagler home was built upon in 2016 for $274,000. In the resolution that released funding to buy the land, the city claimed that it wanted to build a park on the large corner lot in a neighborhood that needs more park space.
When the city bought the plot, a house was on the land. The city demolished it in 2017, according to public records. Neighbors wondered when the long awaited park was going to be built, and what it might look like.
“My wife called the city to see what kind of park it might be. For dogs? For people?” said Juan Carlos Gonzalez, who lives a few doors down. “Until now, they came and put up a sign saying they were going to build a house.”
The house that has sprung up here sits on the large corner lot with four mango trees, two oak trees, three gumbo limbo trees and light landscaping touches that run up a tile path towards the front door. The house is painted white, and the roof made of metal. Floors are of a light ceramic tile that stretch upwards onto the bathroom walls.
Inside the city-built 4 bedroom, 3 bathroom home that has sprung up at 12 SW 47 Ave. “They insisted that we go the extra mile here,” said Pepe Cazas, the developer for the properties who was hired by the city.
“They insisted that we go the extra mile here,” Pepe Cazas, the developer for the properties who was hired by the city, told WLRN on a recent tour. “Everything is [American Disabilities Act] approved. Everything is brand new of course. Energy efficient.”
At some point over the last few years, homeless people started to sleep at the lot when it was empty and it became known as a kind of neighborhood nuisance. Two times, Gonzalez said, he had to personally go there to cut the grass and clean trash.
“I actually would prefer that there’s a house there now and people will live there, so we won’t have the empty lot,” said Gonzalez. “But they never told the residents they were going to do this. They just did it and that’s that. There’s no argument you can make with them.”
The house is currently under contract to be sold for $300,000, the City of Miami told WLRN. The winner was selected by lottery of 197 residents who applied to benefit from the program.
The six houses built for the “infill” homes program for District 4 will be sold to families that make as high as the median income for the county — $72,300 for an individual, and $103,200 for a family of four.
So far, the city has only completed construction of one other house, on SW 27th Avenue and 13th Street. The land is zoned for a duplex, yet the city built a single living unit there — another four-bedroom, three- bath home it plans to sell for $300,000. The city told WLRN that the surrounding houses are single family homes and so it opted not to build a duplex “in keeping with the neighborhood.”
Four of the five lots that will one day have city-developed single family homes on them through the program were originally purchased to build parks. The large lot at 130 SW 51st Place was bought by the city for $415,000 in 2016 with plans to construct a park; two homes will be going on that lot.
Likewise, the city bought properties at 632 SW 63rd Ave. and 700 SW 63rd Ave. in 2019 for $358,000 and $385,000, respectively, with plans to build a park.
Homes on both those lots were demolished by the city in 2020.
“They tore it down and it's been vacant like that,” said Orlando Sanabria, gesturing to an empty lot next to his house on SW 67 Avenue. “It was an old house, but it had a lot of illegal things done on it. So they got you for that.”
The city bought two lots on Orlando Sanabria's street in 2019 with the intention to build a park. The city then demolished the houses that stood on those lots in 2020, and now plans to build new homes in their place. A park is still planned on other lots that the city owns on the block.
Since 2015, the city has spent $3,033,000 buying up nearly the whole city block for a new park, property records show. The city tried to buy out Sanabria and two of his neighbors for the mid-$300,000s, he said, but they refused.
“I said, no, I don't want to sell. What am I going to buy with that kind of money? Where am I going to go? Middle of the state?” said Sanabria.
His mortgage payments were locked in decades ago, before property values exploded, Sanabria added: “I pay 500 bucks a month. Who the hell pays 500 bucks a month?”
A park is still planned on some of the other lots that the city has purchased on the block.
Commissioner Reyes was elected in 2017, and faces reelection in November. Reyes told WLRN that a lack of community support for building parks on all the land the acquired by the city in his district led him to shift to housing.
Most zoning in his district only allows for single-family homes to be built, he added.
“I decided that with the very few amount of money that we had, that we could get some families — low income residents — and give them the opportunity to become homeowners,” he said. “I think that it’s very important that we provide low-income residents the opportunity to own a home. That is my belief. It's my philosophy.”
A similar infill homes program already exists through the Miami-Dade County government. It consists of handing publicly-owned lots over to non-profit and small developers to sell to low and moderate-income residents. A total of 50 of those homes were sold to families in 2022 for as low as $195,000, according to the latest available data. Those projects require nothing more than the county providing the land; the government does not build the homes.
“You have to have the biggest bang for your buck. And I understand that this is the biggest bang for the buck.”
For comparison — in terms of dollar for dollar impact of spending $2.5 million in Miami Forever bond money for developing the six homes — $3.5 million of that bond money is being pumped into a project called Wynwood Works on North Miami Avenue and 20th Street that will feature 120 income-capped living units. That project is currently under construction.
Reyes rejected any criticism of the price tag for the six houses, and the fact that they will be sold at a substantial loss.
“You are going to get detractors all the time and people are going to criticize. But if they're going to criticize me by offering and by providing home ownership to a family, that their children can grow up in their own homes and they can live in a comfortable house — I take that criticism,” said Reyes.
“You have to have the biggest bang for your buck. And I understand that this is the biggest bang for the buck,” he said.
Public development
For Paul Williams, it is a good sign in theory that the city has decided to become a developer. But he argues the city might be missing the mark.
In his research as the executive director of Center for Public Enterprise, Williams pushes for local governments to be creative by directly developing multifamily housing projects for renters instead of relying on private companies and vouchers from federal or state governments. Some governments like Montgomery County in Maryland and Atlanta are already moving in that direction, while Rhode Island is considering doing this at the state level.
Those governments have taken cues from social housing programs developed by cities like Vienna in Austria, which has some of the cheapest major-city rental rates in the world.
The federal government capped the amount of federally funded public housing projects that can exist more than two decades ago. With federal funds no longer an option for adding units to public housing supply, one of the only ways to increase the supply and drive down costs is for local governments directly getting involved in development, said Williams.
“There's some single family public development that has happened in the past. I don't hear too much about it these days,” said Williams. “The most bang for your buck you're going to get as a public agency, your public authority on doing development work — is going to be in mixed-income, multifamily.”
“The reason for that is that you can do these projects on kind of a break-even basis where you're not sinking any investment that you're not getting back. And you're still coming out way on top in terms of increased affordability production and increased overall production,” he added.
A total of $2 million in Miami Forever Bond money was invested into creating 120 income-capped units for developing the Residences at Dr. King Boulevard in Liberty City. Miami-Dade County also contributed $3.8 million for the project. The two buildings (one pictured) are now fully leased out.
In a broad sense, he said, public developers should think big, not small.
“Urbanized, large metropolitan areas like Miami don't strike me as a place where single family [homes] are going to be a major part of the solution to the supply constraint. Especially with the homeowners and property insurance issues that we've seen coming up recently,” said Williams.
The flip side to Williams’ proposal to build public and build big is the fact that places like Vienna have extremely low levels of homeownership. Since rent is so cheap, many people simply opt to rent instead of own.
Uncomfortable reality: Miami is a city of 'renters'
But in Miami, people are stuck renting because they simply cannot afford the skyrocketing cost of owning property.
In the City of Miami’s affordable housing masterplan that was rejected by the city commission in 2020, FIU researchers rang the alarm that extremely low ownership rates are already a reality in Miami. Between 2007 and 2020, the report found, the city's homeownership rate had decreased by 17%, as the city’s population grew quickly.
“Miami has become a City of renters,” the report concluded. “The city’s homeownership rate, at 30%, is the lowest among large cities in the U.S.”
Speaking before the city commission in 2020, just before the COVID-19 pandemic, FIU researcher Kevin Greiner said the question between renting and owning is “not an either or proposition.”
“Investing in renter housing is actually a pipeline to developing future owners. You’re getting renters into properties at more affordable rates, they’re immediately saving,” said Greiner. “You’re actually building your homeownership base through building affordable rental housing.”
READ MORE: Signature Miami-Dade affordable housing program off to a slow start
The city desperately needed to invest heavily in affordable rental housing, stressed Greiner. Miami was already considered the most unaffordable housing market in the nation before the pandemic, which only exacerbated those problems.
“It's a clear market failure,” said Greiner, referring to a lack of affordable homes being developed by the private sector. “There’s no developer doing this out of their heart. There are no developers doing this who are not making a profit. Government has to intervene in some way.”
“You’ve got to invest now or pay a bigger price later,” he pleaded.
Several Miami commissioners were uncomfortable with the proposal’s focus on rental properties.
“We have been kicking the can in America with rental, rental, rental and rental. And what we need to be speaking about in Miami and in the rest of America is homeownership, homeownership, homeownership,” said Commissioner Joe Carollo.
Miami Commissioner Manolo Reyes, pictured here in 2019.
Commissioner Reyes added: “If we want ownership — which I really believe it is very important — we have to create a system of building it and also financing it.”
For Reyes, homeownership was key. And so the bulk of affordable housing bond money he decided to spend in his district has gone towards homeownership projects.
On top of the $2.5 million for six single-family houses, at the commissioner’s direction, the city commission has approved using up to $460,000 in bond money to buy a plot of land on SW 71st Avenue and 1st Street in order to later build a duplex for homeownership. Constructing the duplex would require future funding. Another $390,000 has been approved in unspecified “land development” in the district, and $1,505,000 has been approved to buy land for an unspecified 40-unit development for rentals.
“I believe that homeownership programs are as important as rent,” said Reyes. “They are not mutually exclusive.”
$100m 'can be squandered really fast'
The $400 million Miami Forever Bond was passed by voters in 2017. In the six years since then, only $55 million of the bond’s $100 million dedicated to affordable housing has been approved to be spent. Only $40.6 million of that had actually been spent as of June. In the meantime, Miami is experiencing the most acute housing crisis in the nation.
“There's been a real astonishing lack of sort of high level planning” for the use of the bond money on affordable housing, said Annie Lord, executive director of Miami Homes For All, an advocacy group. “I think that's problematic considering that we're in a crisis.”
When governments or voters approve new bonds for specific purposes, Lord said, it’s considered best practice to highlight a few large scale projects residents can rally behind and track. As a positive example, she pointed to Miami Beach’s $159 million arts and culture bond that voters approved last year. The city identified specific projects it planned to fund, with timelines attached.
The grand hope for creating the proposed Miami Affordable Housing Corporation was that a professional staff would move to quickly use the Miami Forever Bond money to identify specific projects that would have the maximum possible impact on the entire city. When commissioners decided not to create the corporation, they instead split bond money between five districts, with elected commissioners making decisions about how to spend it. It came out to $20 million per district.
“There’s been a real astonishing lack of sort of high level planning ... I think that’s problematic considering that we’re in a crisis.”
If the city had adopted the masterplan, housing policy in Miami would be more focused on the big picture, said Bachin of the University of Miami.
“Rather than politicians feeling like they have complete control over their district and what happens to land use in their district, you think more comprehensively, broadly and collaboratively about public land for public good,” Bachin said. “Not just what's best for District Five, but what's best overall at a municipal level.”
In an interview, former City of Miami commissioner Ken Russell, the lone voice who supported the creation of the corporation, called the decision to split the money off between districts “a lost opportunity” that amounted to creating a “political piggy bank” for each elected commissioner.
“If it was going to go into the hands of anyone else to make those decisions of how that affordable housing money would be spent, that reduces the political leverage of elected officials,” said Russell.
“The greatest risk is that the money's gone in a couple of years and you have one or two projects that don't really affect the need. The goal of the study was to create a seed fund that would actually be used to leverage that $100 million over and over and over again with matching dollars grants, state, federal, private land, and really just make a generational plan out of that $100 million,” he added. “Instead, it's going to get split up.”
Commissioner Ken Russell speaks during a special meeting at Miami City Hall in Coconut Grove, Florida on Thursday, April 28, 2022.
In 2019, the City of Miami announced a goal of creating or preserving 12,000 affordable housing units by 2024. The city is clearly behind that goal, though exactly how far behind is difficult to measure.
Some large-scale affordable and workforce housing developments are starting to come online, like the Platform 3750 project in Coconut Grove, of which 78 out of 191 rental units are income restricted. The city used $3.5 million in bond funds for that project; Miami-Dade County chipped in $8 million and provided the land for developers. Over 10% of construction costs were publicly funded. All 120 income-capped units in Liberty City’s Residences at Dr. King Boulevard — paid for in part with $2 million in Miami Forever Bond funds — are fully leased out.
The Sawyer Landing project in Overtown that will create 578 income-capped apartments for seniors is more than halfway done with construction, in part thanks to $7.5 million in Miami Forever bond funding.
Former commissioner Russell warned that if no one closely scrutinizes how the remaining Miami Forever Bond money is being spent to make sure it impacts the most possible residents, its impact in the real world could be negligible.
“$100 million seems like a lot, but it's not,” said Russell. “It can be squandered really fast in a city of our size with the affordable housing needs that we have.”
Daniel Rivero is part of WLRN's new investigative reporting team. Before joining WLRN, he was an investigative reporter and producer on the television series "The Naked Truth," and a digital reporter for Fusion. He can be reached at drivero@wlrnnews.org
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