City officials and a developer have a new affordable housing formula. Will it fly?
Miami’s old Omni district seems to have everything needed for a concerted attack on the city’s housing affordability crisis — acres and acres of vacant land just north of downtown, and a public agency that gets millions in tax revenue to combat poverty and blight. But for years, the much-criticized Omni Community Redevelopment Agency failed to spend a cent on housing.
Now, amid a gradual turnaround, the Omni CRA has been working on novel ways to spur the creation of affordable housing that its leaders say could produce thousands of low-cost apartments in a few years. Among those is a new rule that requires developers to include units in new residential projects in the neighborhood for low or middle-income people.
The CRA’s latest idea: Teaming up with a private developer on a plan to build 252 affordable and workforce high-rise apartments, with a financing twist that officials say could speed up production of so-called income-restricted housing in the area.
The CRA’s administrators are proposing to inject $15 million in direct subsidies into the $75 million project by developer NR Investments, the private partnership that built the new Canvas condo in the neighborhood.
In return, the developer would restrict all of the apartments in a planned tower abutting Canvas to people with low and moderate incomes. What’s unusual is that NR Investments principals Nir Shoshani and Ron Gottessmann bought the lots where they plan to build at market rates, and the developers are not among the handful of firms that specialize in affordable housing, often in deals using publicly owned land. The CRA plan deliberately eschews the complex, time-consuming and increasingly hard-to-get federal tax credits that are key to the business model used by firms focused on affordable housing.
The traditional, federally supported model is the one Miami-Dade County’s housing agency has embraced in a much-ballyhooed plan, unveiled earlier this week, to take a bite out of the affordable-housing shortage. Both the county and CRA initiatives come as local governments seek to mount major responses to the affordability crisis amid growing public alarm.
In the county project, Miami-Dade will provide Related Urban Development, the affordable-housing arm of developers The Related Group, with 22 acres of valuable riverfront land that’s now the site of three rundown public housing developments for seniors. Related Urban is cobbling together tax incentives, private loans and some financing from the federal government to more than triple the number of low-income and workforce units on site to 2,600. That project has been in the works for eight years.
The 17th Street Omni CRA project would also be among the first in the city specifically designed to take advantage of new federal Opportunity Zones that provide tax breaks to developers who build in them. Unlike the housing tax credits, however, the Opportunity Zones do not require that new residential projects meet any affordability guidelines.
That’s where the CRA, which gets its revenue by capturing a portion of property taxes generated by new development in its district, comes in. As new apartment towers finally rise in the neighborhood west of the old Omni mall and the Arsht Center for the Performing Arts, the agency’s coffers are filling rapidly.
The CRA proposes to provide NR Investments an estimated $8.5 million in property-tax rebates and a $6.5 million grant. That would cover much of the drop in income the developers expect if they keep rents low instead of charging market rates.
The developer would legally commit to limiting rents for half the 252 apartments so they’re affordable to people with low incomes, defined as 60 percent to 120 percent of the Miami-Dade County median household income of just over $50,000. The other half would be defined as “workforce” housing affordable to people making up to 140 percent of that median income — usually described as cops, firefighters and teachers.
“It’s one good initiative,” said Miami Commissioner Ken Russell, chairman of the CRA. “The opportunity zones are all carrots and no stick. It’s hard to make them do what we want for the community. It may not be the type of development we are seeking for a particular neighborhood.”
There is one hitch. The developers would keep rent limits in place until 2047 provided that the life of the CRA, now scheduled to sunset in 2030, is extended until then. An extension request from the city is now pending before the Miami-Dade Commission, along with a proposal to expand the agency’s reach to West Coconut Grove.
If its life is not extended, the developer would still keep rent limits in place, but only until 2038, and would reduce the number of units at the lowest rent levels.
Russell said it’s a good deal for the city. The amount of CRA subsidy would be around $50,000 per unit, far less than the cost to build them, he said.
“That’s very efficient,” Russell said. “We’re getting an incredible bang for the buck.”
But the proposal may have to overcome reservations from some other commissioners. The five-member city commission, acting as the CRA board, approves all its spending.
At a CRA board meeting on Oct. 30, the proposed tax rebates were approved by a 2-1 vote. But Commissioner Keon Hardemon, who dissented, questioned whether the city was getting enough in return for its money, and said the proposed tower — consisting of all studio or one-bedroom apartments — should have some larger units to accommodate families.
Hardemon’s opinions may be critical to the plan’s moving ahead. Hardemon is chair of the Overtown Community Redevelopment Agency, which has issued a $60 million bond to subsidize affordable housing development in that neighborhood.
The $6.5 million grant NR Investments is seeking requires a supermajority of four votes in favor. Because of the requirement, the board decided to delay consideration of that piece of the financing until the Omni CRA’s next board meeting, which does not yet appear on the city’s schedule online. But term-limited Commissioner Wifredo Gort, the other vote in favor of the tax rebates along with Russell, will be out of office by then, adding uncertainty to its prospects. His replacement will be determined in a Nov. 19 runoff election.
Russell said NR Investments should stand ready to satisfy Hardemon’s concerns. But he added that he believes the proposal would add a solid component to the CRA’s affordable-housing repertoire that could be replicated elsewhere in the neighborhood. The agency has worked with another private developer, Avra Jain of the Vagabond Group, to subsidize renovation of a clutch of apartment buildings in exchange for keeping low rents and existing tenants in place. That’s another formula that CRA officials say can take advantage of a large stock of existing but rundown apartment buildings in the area.
The CRA also worked out agreements with the Melo family, which has built several apartment towers in the district, to set aside some units as workforce housing — at the high end of the income range — in exchange for permission to build more units than existing zoning allowed. That success led to approval of an inclusionary zoning ordinance that requires all new Omni residential projects to do the same.
The agency has also negotiated an agreement with the school board, which has sought to redevelop approximately nine acres it owns in the neighborhood. Under the agreement, the CRA would help the school board or a development partner finance affordable and workforce housing on the properties. A plan to carry out that vision is now being finalized, a school board spokeswoman said.
The string of initiatives marks a turnabout for the agency, which in 2016 came under heavy fire from a Miami-Dade Grand Jury report that slammed the city’s CRAs for wasting money on politicians’ pet projects instead of focusing on fighting poverty. Since helping bring in new staff at the agency, Russell said he has sought to apply the panel’s recommendations.
“We righted the ship and now we’re sailing it,” Russell said. “It had never done one unit of affordability. We realized that’s our goal. There is so much opportunity. It’s been about finding those new concepts.”
NR Investments wants to go further than Melo or the CRA have to date in extending affordability. Principal Shoshani said he is already planning a second all-attainable housing development in the Omni, which has been rechristened as the Arts and Entertainment District, using CRA subsidies.
The district is a still-gritty area between downtown Miami and Edgewater that’s home to the Arsht Center, the multi-block Miami-Dade School Board headquarters and the mostly empty old Omni Mall, as well as a cement plant, the Homeless Assistance Center and acres of vacant land, including the site of the demolished Miami Herald building. The neighborhood also encompasses the northeastern quadrant of historically black Overtown and a smattering of historic buildings, including the restored fire station that houses the Omni CRA.
“We looked around and we saw 20 or 30 blocks of nothing, and we saw an opportunity,” Shoshani said in an interview.
Shoshani and his business partner, Gottesmann, began investing in the neighborhood in 2012, when they took over the shell of the unfinished Filling Station Lofts and completed the project before undertaking Canvas. They see the neighborhood, at least the portion off the water, not as a luxury housing market but as ideal for young workers and public employees — especially city workers and administrative staff who are now priced out of downtown and close-in neighborhoods.
“You need to have them stay in the city, and have the city serve those who serve the city,” Shoshani said. “Here, you are within the central business district but not in downtown, where it’s expensive. But if you want me to do this, you need to help me somehow, to create something meaningful and sustainable.”
Gottesman and Shoshani said they’ve watched as speculation and development led to a rise in land prices in the neighborhood from $100 a square foot when they arrived to $250 a square foot today, making attainable housing economically harder to create without some kind of government help.
He notes that anyone who purchases the Melo family buildings could lift rent restrictions, but his proposals would not allow that. Though NR Investments would give up some income and profit, they would also be insulated from drops in the market, Shoshani said
“It’s not the best deal in the world for us, but we saw it as safer,” Shoshani said. “You make less money as a whole, but you have a product we believe people will always need.”
Shoshani and Gottesman say they consider their mission as developers to create a community where none exists. Canvas, for instance, has shared business space and other amenities that encourage residents to meet and gather. The plan for their attainable tower also entails engaging “positive psychology” proponent Tal Ben-Shahar to help conceive of common spaces and activities that lead to what Shoshani called “a happy building.” Happy residents, in particular those who are public servants, can help spread happiness around to others they encounter, the theory goes.
“We saw the need for something different,” Gottesman. “We really believe we can make a difference in the community.”
This story was originally published November 18, 2019 at 4:30 AM.