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SoBe, so long: After $59 million apartment sale, locals dread rent hikes

Video: South Beach apartments sell for record-breaking $59 million

Fifteen working-class apartment buildings in South Beach just sold for $59 million. The new landlord plans to renovate the units and raise the rent by as much as 50 percent -- that means many tenants will be forced out.
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Fifteen working-class apartment buildings in South Beach just sold for $59 million. The new landlord plans to renovate the units and raise the rent by as much as 50 percent -- that means many tenants will be forced out.

Henry Williams’ rent is going up in South Beach — and the black heels and burnt-orange wig lying in his living room won’t be able to cover the monthly bill.

“I have to leave,” said Williams, who works as drag queen Tiffany Fantasia at Palace Bar on Ocean Drive. “It’s not worth it. There’s no way for me to be able to afford living here and be able to save and do the things I need to do in life.”

As South Florida rents rise as high as the tides, its working and middle classes are struggling to stay afloat.

It’s happening across the region, in Little Haiti, Miami Beach and Little Havana: Developers have caught the scent of profit in Miami-Dade’s less wealthy neighborhoods. Gentrification follows, leaving current residents in a tightening squeeze to find affordable homes near their jobs.

In South Beach, many of the workers who power the booming tourist economy live in a swath of modest but historic buildings where rents have stayed on the edge of manageable.

But that’s changing fast.

On Wednesday, a new landlord bought the aging building where Williams lives — along with 14 other low-rises in Miami Beach’s Flamingo Park historic district, which sits north of Fifth Street and south of Lincoln Road and features many examples of the Beach’s iconic Art Deco style.

Total price? $59 million, the largest multi-housing sale in South Beach’s history.

I have to leave.

Henry Williams, tenant

The new owner, Boardwalk Properties FL, plans to renovate the 240 apartments it acquired — and raise rents between 35 and 50 percent. Boardwalk, now South Beach’s biggest landlord with 425 units, says it is improving the area’s housing stock and sprucing up the neighborhood.

But when the renovations are over, badly needed as they may be, Williams won’t be back. He can’t pay for a rent hike. Not with the crumpled pile of $1 and $5 bills scattered on his coffee table, tips from the previous night’s dancing. The $1,300 he already spends a month on his modest one-bedroom apartment, busy with costumes and shoes, is a stretch. If Boardwalk raises the rent even 35 percent, to $1,755?

“I’m out,” said Williams, who’s lived in his apartment on Euclid Avenue for 18 months and in South Beach for 15 years.

That means a new kind of tenant will move in: richer, hipper, and possibly less connected to South Beach’s distinctive past.

In a Wednesday interview, Boardwalk’s manager Adam Walker described the tenants he wanted to attract as people “who drive Porsches.” But he later said that he had been misunderstood — and that he has no plans to vacate entire buildings at once.

Walker said the Porsche comment described newcomers to one building he had earlier renovated on West Avenue. And he added that some of the new tenants drive less upscale models like BMWs.

“I’m not looking to usher everyone out in one shot,” said Walker, who comes from a Toronto real estate family and now lives in South Florida. “That is not to my benefit from a business standpoint ... We approach this gradually from as sensitive a standpoint as we can. We try to offer our tenants units in our other buildings at a similar price.”

Tenants in other Miami Beach buildings he has purchased and improved have stayed on, he said.

35 to 50 percentProjected rent increase for Boardwalk’s 15 new properties after renovations

But many residents in his newest properties said they would not be able to stay in South Beach if the rent went up. Some are already doubling up in studios to save money.

Rents across the 15 buildings — which offer studio, one-bedroom and two-bedroom units — average about $1,400. Those prices are hard to find in the area. The real estate website Zillow puts the average rent in Flamingo Park at about $1,900.

“They will be kicking us out,” said one tenant who works in South Beach’s hotels and restaurants and asked not to be named. “I can’t afford to pay more.”

She doubts she can find a new home in South Beach. “The studios I see start at $1,200,” she said.

We’re not trying to hurt anyone.

Adam Walker, landlord.

Across South Florida, rents are going up.

Zillow predicts that in 2016 rents in the region will grow to an average of $1,886, up 3.5 percent. Only six metro areas in the country will see bigger hikes, including the tech-fueled boom towns of San Francisco and Seattle.

Wages aren’t keeping up.

Since 2011, average hourly earnings for locals have actually fallen by 10 cents to $22.87. During the same period, inflation rose 5 percent.

Last year, another study concluded that two-thirds of Miami renters are “cost-burdened,” meaning they pay at least 30 percent of their income in rent. That made the city the toughest place for renters in the nation.

Miami Beach, where a hedge-fund mogul recently spent $60 million on a penthouse duplex, scores worst of the lot. The city has the most unequal housing market in the country, according to real estate brokerage Redfin.

Squeezed out

Williams and his fellow tenants are the people who form the backbone of Miami Beach. They valet cars, bus tables and fold towels. They live in small apartments, relics of the Art-Deco era, tucked away on the city’s less desirable streets. How much longer can they hang on?

“We’re seeing a situation where lower-income people and the working-class can no longer afford to live here,” said Frank Schnidman, a professor in the School of Urban & Regional Planning at Florida Atlantic University. “That puts a huge stress on businesses, on traffic, on services, on quality of life.”

The hot real estate market is pushing working residents further and further from their jobs.

Schnidman said he fears that South Florida will end up like the Florida Keys, where blue-collar workers have been squeezed out.

“Look what’s happened to the service workers, the school teachers, the police and the firemen,” he said. “They can’t afford to live there.”

Lower-income people and the working class can no longer afford to live here.

Frank Schnidman, professor

Miami Beach isn’t there yet.

Older buildings in North Shore and Normandy Isle still offer decent prices, said Joshua Cadillac, a Realtor and landlord who owns properties in North Miami Beach and Miami Beach.

“You can still find studios for $700, $800, $900,” Cadillac said. “And one-bedrooms for not too much more than that.”

Zillow puts the average rent in North Beach at $1,900, roughly the same as the Flamingo Park area where Boardwalk invested.

But rents are on the rise in North Beach, too. As Miami Beach gets more expensive, its working class tenants will look to cheaper parts of Miami-Dade for housing, driving up prices across the board.

“It’s forcing more and more people into an already tight rental market,” Cadillac said. “There’s so much competition with all the development happening in Brickell and Midtown and the Beach.”

Older Beach residents like John Fisher, 69, have seen the area boom and bust through the decades. The fashion photographer was one of many who helped build South Beach’s sexy brand during the late 1980s and early ’90s.

"Now, we’re victims of our own success," he said.

Already living in close-quarters with his three-member family, he says he won’t be able to find a two-bedroom apartment in the Beach that he can afford. And staying in his current building, one of the properties scooped up by Boardwalk, isn’t realistic when the rent goes up.

He might find another place on the mainland, but he’s also dreaming of a fresh start.

"I’m leaving to Cuba as soon as I can," Fisher said.

Calum Weaver, the broker who handled the sale of the Boardwalk properties, disputed the characterization that the company was forcing tenants out.

“This is not a case of kicking out people,” Weaver wrote in an email. “[Boardwalk is] improving the units to fit the rental demand ... and putting money into buildings that are in extremely poor condition and improving the living standards for people.”

 
Photographer John Fisher, 69, stands outside his apartment in South Beach. Fisher’s home is one of 15 working-class apartment buildings that just sold for $59 million. Fisher will not be able to afford rent in South Beach when it goes up. AL DIAZ / adiaz@miamiherald.com

He said the area badly needs well-kept, mid-range units that are more expensive than Flamingo Park’s old, run-down buildings but cheaper than the luxury highrises on West Avenue, which overlook Biscayne Bay.

“There is a clear void on South Beach for this product type,” Weaver said.

MIAMI HERALD INTERACTIVE TOOL: WHERE CAN YOU AFFORD A HOME?

Some of the buildings Boardwalk acquired are old and need repairs. Most were built in the ’30s, ’40s and ’50s. One dates to the ’20s; another to the ’60s.

Almost all the buildings are protected by the city’s historic preservation codes, making it next-to-impossible to tear them down.

Some lack central air, security cameras, hurricane windows, granite counter tops, washer/dryers and other amenities. Others need new roofs.

“[But] most of them are in pretty good shape,” said Walker, Boardwalk’s manager. “The old owners kept them up.”

Walker plans to renovate the buildings over three years. That means some tenants will leave as soon as their leases expire. Others will have longer. But as they wait to leave their well-priced units, rents around the city will keep getting higher.

Should government step in?

Bobbie Ibarra, executive director of the nonprofit Miami Homes for All, said Florida is “known for having little to no protections for tenants.”

But she added that “Miami-Dade County is looking seriously at this issue and exploring innovative solutions” to increase the county’s affordable housing funds.

While legislation is floating around at the county level, previous efforts have failed.

Miami Beach is the most unequal housing market in the country, according real estate brokerage Redfin

A Miami-Dade grand jury report released Thursday said that special county taxing districts meant to fight blight actually operate as near “slush funds” for elected officials while failing to create affordable housing

Bruno Barreiro, the Miami-Dade County Commissioner whose district includes South Beach, said that he was well aware of the affordability problem.

“We’re trying to see what we can do,” Barreiro said. “We’re looking at proposals for inclusionary development,” which would created mixed-income housing.

Miami Beach officials were also disheartened to hear that higher rents could displace many Beach workers.

Miami Beach Mayor Philip Levine said private industry should shoulder much of the blame.

"The fact that [people] work and live in Miami Beach and can’t afford to live here means to me that our hotel and hospitality industry isn’t paying enough," he said.

Newly elected Miami Beach Commissioner Ricky Arriola advocated for building workforce housing despite the general disdain many residents have for new development of any kind.

“The city needs to take [the problem] seriously and stop just complaining about it,” he said.

Maria Ruiz, the city’s community services director, says skyrocketing rents are creating a worrying gap between the lowest-income levels and the better heeled.

Workers are being forced off the barrier island, which means unless they find new jobs on the mainland, more people will have to commute to the traffic-plagued Beach and pay for parking.

Less than $1 million Size of Miami Beach’s federal funding for affordable housing

The Beach has started looking into building workforce housing for middle-income people who work in the city. The city is looking for a partner to redevelop Barclay Plaza Apartments, across the street from the Miami Beach Convention Center, for working-class families.

But there are few existing city-controlled units that can be converted to workforce housing, and it’s nearly impossible for the city to buy new properties given high land prices and a lack of federal funding.

"Our allocation of federal dollars is less than $1 million," Ruiz said. "That doesn’t do a whole lot in a market like ours."

Once upon a time, Miami Beach had rent control laws, primarily aimed at helping the elderly. So did Hallandale. But the state Legislature banned the ordinances in 1977 and various courts struck them down in the 1980s. Other cities including New York and Washington, D.C., have maintained a rent-control system for certain apartments.

End of an era

For Tim Locker, a bartender, Boardwalk’s purchase likely marks the end of his time in the neighborhood.

“If they raise the rent, nobody who’s in my profession is going to stay,” Locker said. “Our income has stayed the same for the past 10 years, and actually gone down a little bit ... [The people who live here] will move up north. A lot of people I know have already moved downtown.”

Added Locker, in a crack at his new landlord: “No one who drives a Porsche is going to move into this building ... There isn’t even anywhere to park it."

Another resident, photographer Bill Wisser, said he had already decided to leave his well-kept duplex on Euclid Avenue when he was told his lease would not be renewed in March.

(Neil Rollnick, an attorney for Boardwalk, said the company had not made any decisions on leases yet. “If the prior owner said something, it didn’t come from Boardwalk,” he said.)

It’s about time Miami-Dade County starts a rent control system, because this is getting out of hand

Henry Williams, tenant

Wisser said he’s tired of two-hour thunderstorms that cause ever-worsening flash floods.

One deluge left water high enough to climb up the three steps to his front door. Another soaked cars up and down the block. South Beach is a different place from the one he moved to in 1992.

“It used to have this amazing energy of artists and photographers and musicians,” Wisser said. “No more.”

Walker, the new landlord, said he isn’t responsible for the gentrification of South Beach. “We’re not these big monsters who come in here and try to push people out of their buildings.”

He said he bought groceries for one of his elderly tenants after the man’s wife died. And he added that Boardwalk wouldn’t convert the units into condos, which would be more profitable but put further strain on the rental market.

“We’re not trying to hurt anyone,” said Walker, who now owns roughly 700 apartments in South Beach, North Beach and Bay Harbor Islands.

Jerry Shapiro, who lives in a Boardwalk building on West Avenue, says Walker is the best landlord he’s had since moving to South Florida from Philadelphia four years ago.

Boardwalk renovated Shapiro’s unit at his previous building on Lenox Avenue, redoing the kitchen and windows in his one-bedroom apartment and raising his $1,300 a month rent by $500.

For Shapiro, a director of manufacturing at a patent company, that wasn’t a problem. He makes good pay at a good job. So good that when Boardwalk offered him the chance to move into a newly-renovated two-bedroom on West Avenue for $2,400 a month, he jumped at the chance.

“They even helped me move,” he said.

But for many South Beach residents, waking up one day with enough cash to pay nearly double the rent is a fantasy.

Shapiro’s life isn’t like theirs. Neither is his car. What does he drive?

“A Porsche,” Shapiro said. “It’s Miami Beach.”

Nicholas Nehamas: 305-376-3745, @NickNehamas

Joey Flechas: 305-376-3602, @joeflech

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