Market Rate Developers Take Note: Florida’s “Live Local Act” Incentives

On March 29, 2023, Governor Ron DeSantis signed Florida Senate Bill 102, called the “Live Local Act” (Live Local or the Act) which becomes effective on July 1, 2023. The Act includes incentives that may appeal to market rate developers such as flexibility to use commercially zoned property to develop multifamily housing if a minority percentage of the units are used for affordable and/or workforce housing.

LIHTC/Affordable vs. Live Local/Workforce

While the Act includes incentives for developers who typically build affordable housing, which is generally affordable to households making 60% or less of area median income, Live Local also aims to increase the supply of workforce housing (for households making 120% or less of area median income). 

The federal low-income housing tax credit (LIHTC) is the largest production vehicle for affordable housing. Thus, to develop affordable housing, developers apply to the Florida Housing Finance Corporation (Florida Housing) for a reservation of LIHTCs, monetizing the dollar for dollar reduction in federal tax liability by bringing in an investor who makes an equity contribution in exchange for the allocation of the LIHTCs, and likely restricting the property for 50 years pursuant to a recorded restrictive covenant. LIHTC developments require additional financing that often comes in the form of loans requiring the recording of additional restrictive covenants on the use of the property for certain populations and tenant income set-asides.

Live Local offers incentives to development outside of the traditional affordable/LIHTC model. Rather than waiting for Florida Housing to issue a Request for Applications to support housing development for a specific population (e.g., homeless) and/or location (e.g., medium and large counties affected by Hurricanes Ian and Nicole) and hoping to receive an allocation of the highly competitive LIHTCs for a development to be feasible, a developer may proceed anywhere, including in areas where residential development is not a permitted use. A county or municipality must approve multifamily and mixed-use residential projects in any area zoned for commercial, industrial or mixed use as long as certain conditions are met. This allows developers greater flexibility to repurpose commercially zoned property (e.g. shuttered or under-performing or vacant/abandoned retail projects) for residential purposes. Similarly, developers may benefit from higher density and increased height restrictions in those developments. One of the conditions of developing mixed-use residential and multifamily where it is not so zoned is a 30-year restrictive covenant applicable to 40% of the residential units. 

With Live Local, developers may also benefit from a tax incentive other than LIHTCs. Effective January 1, 2024, portions of property in a newly constructed multifamily project are eligible for property tax exemption of 75% or 100% of the assessed value of the portion used to house persons or families whose annual income is not more than 120% or 80%, respectively, of the median. We discuss other valuable components of Live Local and the details below.

The Specifics of Live Local Act

I. Use, Density, Height & Parking

Multifamily and Mixed-Use Residential Allowable in Any Area Zoned for Commercial, Industrial or Mixed Use

A county or municipality must authorize mixed-use residential (where at least 65% of the total square footage must be used for residential purposes) and multifamily as allowable uses in any area zoned for commercial, industrial (unless defined as recreational and commercial working waterfront), or mixed use if at least 40% of the residential units in a proposed multifamily rental development are, for a period of at least 30 years, affordable. This means that monthly rents or monthly mortgage payments including taxes, insurance, and utilities do not exceed 30% of the median adjusted gross annual income for the following households (all as specifically defined in Fla. Stats § 420.0004):

• Extremely-low-income persons (30%).
• Very-low-income persons (50%).
• Low-income persons (80%).
• Moderate-income persons (120%).

However, (a) for proposed multifamily developments in an unincorporated area which is within the boundaries of a multicounty independent special district that was created to provide municipal services but is not authorized to levy property taxes and less than 20% of the land area within such district is designated for commercial or industrial use or (b) if a municipality designates less than 20% of the land area within its jurisdiction for commercial or industrial use, the county or municipality must authorize a proposed multifamily development in areas zoned for commercial or industrial use only if the proposed multifamily development is mixed-use residential. 

Highest Allowed Density Where Residential Development Is Allowed

A county or municipality may not restrict the density of a proposed development below the highest allowed density on any unincorporated land in the county or on any land in the municipality where residential development is allowed.

Height – Higher of Three Stories or Highest Currently Allowed for a Commercial or Residential Development Within One Mile

A county or municipality may not restrict the height of a proposed development below the highest currently allowed height for a commercial or residential development located in its jurisdiction within one mile of the proposed development or three stories, whichever is higher.

Potentially Reduced Parking Requirements When Proposed Development Is Located Near a Major Transit Stop

A county or municipality must consider reducing parking requirements for a proposed development authorized under the Act if the development is located within one-half mile of a major transit stop, as defined in the county’s or municipality’s land development code, and the major transit stop is accessible from the development.

A proposed development must be administratively approved and no further action by the board of county commissioners or governing body of the municipality is required if the development satisfies the county’s or municipality’s land development regulations for multifamily developments in areas zoned for such use and is otherwise consistent with the comprehensive plan, with the exception of provisions establishing allowable densities, height, and land use. Such land development regulations include, but are not limited to, regulations relating to setbacks and parking requirements.

It should be noted that the above incentives expire on October 1, 2033.

II. County and Municipality Identification of Prospective Project Sites

By October 1, 2023, and every three years thereafter, each county and municipality shall prepare an inventory list of all real property within its jurisdiction (other than an area of critical state concern) to which the county, municipality or any dependent special district within its boundaries holds fee simple title which is appropriate for use as affordable housing. Each county and municipality shall make the inventory list publicly available on its website to encourage potential development, but the benefits under the Act are not limited to properties on such inventory lists.

III. Property Tax Exemption

Effective January 1, 2024, portions of property in a newly constructed (defined as an improvement to real property which was substantially completed – meaning that the improvement or some self-sufficient unit within it can be used for the purpose for which it was constructed – within five years before the date of an applicant’s first submission of a request for certification or an application for an exemption, whichever is earlier) multifamily project are considered property used for a charitable purpose and are eligible to receive a property tax exemption of

• 75% of the assessed value if used to house natural persons or families whose annual household income is greater than 80% but not more than 120% of the median annual adjusted gross income; and
• 100% if used to house natural persons or families whose annual household income does not exceed 80% of the median annual adjusted gross income

if such portions:

1. Provide affordable housing to natural persons or families meeting the income limitations;
2. Are within a newly constructed multifamily project that contains more than 70 units dedicated to housing natural persons or families meeting the income limitations; and
3. Are rented for an amount that does not exceed the lesser of (a) the amount specified by the most recent multifamily rental programs income and rent limit chart posted by Florida Housing Finance Corporation (currently here) or (b) 90% of the fair market value rent as determined by a rental market study.

This first applies to the 2024 tax roll and is repealed December 31, 2059.

To receive an exemption, a property owner must submit to the property appraiser an application on a form prescribed by the Department of Revenue by March 1 annually, accompanied by a certification notice from Florida Housing Finance Corporation obtained by submitting a request on the form provided which includes all of the following:

1. The most recently completed rental market study.
2. A list of the units for which the property owner seeks an exemption.
3. The rent amount received by the property owner for each unit for which the property owner seeks an exemption.
4. A sworn statement, under penalty of perjury, from the applicant restricting the property for a period of not less than 3 years to housing persons or families who meet the income limitations under this subsection.

Portions of property are not eligible for this exemption if: (a) the units subject to a recorded agreement with Florida Housing Finance Corporation to provide housing to natural persons or families meeting the extremely-low-income, very-low-income, or low-income limits, or (b) the property is receiving a county and municipal affordable housing property exemption pursuant to Fla Stats. §196.1979 (that may be adopted for projects containing 50 or more units, at least 20% of which are affordable at no greater than 60% of median income). 

Conclusion

The Live Local Act covers many incentives and appropriations in great detail. This advisory focuses primarily on a high-level summary of benefits that may appeal to market rate developers. Buchanan’s multi-disciplinary team of attorneys and government relations professionals maintain regular communication with lawmakers at the state and federal level, and leaders from across the industry to ensure our clients are in the loop on the latest trends and legislation to help developers evaluate Florida’s affordable housing process.

A special thanks to Mallory Harrell, Principal in Buchanan’s Government Relations practice, for her role in tracking this piece of legislation.