and other affordable housing deals
It came and went as fast as no-see-um bite on your ankle. After a year of Peary Court debates, proposed inspections and a failed referendum, the Key West City Commission approved $12.5 million of County Land Authority funds to be handed over to a private corporation, the Cornfeld Group. And a May 18th approval by the BOCC seems inevitable.
There are certainly valid arguments from supporters and dissenters. Supporters will point to the preservation of 157 units of workforce housing. In addition, the $12.5 million incentive will deed restrict the entire property and future development in perpetuity.
Dissenters argue there was not ample time to make an informed decision. In addition, Key West City Commissioner Sam Kaufman continues to question whether County policy allows for Land Authority funds to be allocated to private entities. Regardless, anyone who has examined the affordable housing crisis in Monroe County understands that unless taxpayers are willing to, or can, bear the entire expense, private investors need to be incentivized to build.
Some will point to the $12.5 million for the Cornfield Group to deed restrict Peary Court as affordable housing an example of incentive. But, here’s the important part, it’s not the only profitable aspect of this deal.
Keep in mind that Peary Court has approximately 107 “market rate” allocations and once the buildings are deed restricted, those allotments can legally be moved “off” of the property for new developments, increased density on another lot or sold to other developers. While it’s unlikely another developer will buy every single one in a single deal, keep in mind the allocations in question have a conservative value of $75,000.
Are you doing the math yet? The conservative value of the market rate permits hints at an additional $8.2 million to go along with the $12.5 million in Land Authority Funds — thus gifting the Cornfeld group a $20 million incentive on a $60 million property. That’s $40 million for Peary Court for those without a calculator, which is not bad for a project for which the City was willing to pay $55 million.
Before the investors can sell, or move, the market rate allocations from Peary Court, they must replace them with affordable housing allocations, either petitioning the City of Key West or Monroe County. And there’s still plenty — Key West still has 700 affordable housing permits to give out before 2023, the state-imposed deadline for Keys “build out.”
No one can blame the Cornfeld Group — or any other developer in Monroe County to come before or after — for exploring such a great investment. But the taxpayers and voters deserve to understand this wrinkle before a future development agreements are made. Similar deals have already been structured in Monroe County, most recently with the Oceanside property on Stock Island along with Marathon businessman Brian Schmitt’s proposal to deed-restrict existing housing in order to move market allocations to new construction.
There’s no conspiracy looming over Peary Court nor is it a bad deal for anyone advocating for affordable housing. However, the county and Keys municipalities have serious, untapped negotiating power within these deals.
For example, before dishing out affordable allocations, governments could dictate that portions of monthly rents on affordable housing units be deemed “low income” — effectively setting a low monthly rent. Or the bargain could include the investors giving back a portion of the market rate allocations to avoid the looming dark cloud of “taking” lawsuits when the Keys run out of permits before it runs out of buildable lots.
Everyone — taxpayers, citizens, developers and officials — need to be aware that a misstep here can have serious affects on housing value, affordable housing stocks and hurricane evacuations times. And one can only hope that governments utilize the incredible, and seldom talked about, market rate incentives hidden within deed restricted properties — because one can be assured that investors are eager to expoit the opportunity.