Market turbulence threatens affordable housing initiatives 

Affordable housing market headwinds have reached gale force due to tariffs, legislative uncertainty, labor shortages and general cost increases.

The City of St. Petersburg plans to help 33,800 residents secure affordable housing or remain in their homes by 2030. Providing 25,000 people with tenant assistance is a new goal as monthly rents for an 880-square-foot apartment have surpassed $2,000.

City council members heard a much-anticipated update Thursday on the Housing Opportunities for All Plan. While St. Petersburg is on pace to meet most of its objectives, the per-unit public subsidy needed to facilitate construction has reached $100,000. That number could continue climbing.

“We see the federal budget shrinking in terms of money coming to states and localities,” said Councilmember Lisset Hanewicz. “They are cutting people at the state level, which means that even though they have money, that money may not make it here.

“We’re facing the same pressures as everyone else.”

The city is five years into its decade-long housing plan. Goals include creating and preserving 3,200 affordable apartments, providing 350 workforce units with density bonuses, offering 500 people down payment assistance and helping 3,200 residents rehabilitate their homes.

Officials also hope to facilitate 400 new accessory dwelling units (ADUs). Homeowners have built 189, and 69 more are in progress.

Amy Foster, housing and neighborhood services administrator, said financing ADU construction is now more of a challenge. “So, I’ve kind of downgraded my confidence on this one. We’ll see what happens next year.”

The extensive discussion began on a predominantly positive note. The city has helped create and preserve 882 apartments, and 1,443 are in progress.

St. Petersburg will soon surpass its affordable single-family home goal (150), as 49 are complete and 147 are under construction. Over 14,000 renters have received tenant assistance, although that well is running dry, and Foster noted a “huge need for it.”

A graphic highlighting the city’s progress toward meeting its housing goals.

An unprecedented hurricane season exacerbated issues by shrinking the city’s already limited housing supply. Renters can request a city inspection if they believe their apartment is in disrepair, and Foster said those numbers have “consistently gone up since the storms because there’s a lot of landlords who haven’t repaired their properties.”

Foreclosures have also increased, and Councilmember Brandi Gabbard said those residents “have nowhere to go.” The We Are St. Pete Fund and homelessness prevention programs could provide some relief.

Councilmember Deborah Figgs-Sanders stressed the importance of helping longtime homeowners remain in place through rehabilitation programs. However, the city struggles to secure skilled workers who could make more money in the private sector rebuilding storm-damaged homes.

“If we’re trying to keep our residents in their homes, small projects grow to big projects,” Figgs-Sanders said. “And then they’re calling us asking for more money and more time.”

Hanewicz credited Foster and her team for their efforts “given what’s happening in our world.” She also noted they could not be a “panacea for all the world’s ills.”

Low-income tax credits support affordable home construction, and Foster said those values have plummeted. Tariffs could increase per-unit costs by at least $10,000.

Mark Van Lue, housing development manager, said those numbers are “all over the place.” He said developers, investors and lenders seek certainty – “and that’s in short supply these days.”

Van Lue added that constantly evolving trade tensions “cause a lot of havoc.” Stakeholders are reticent to invest in projects with no endgame in sight.

“Even the immigration policies and people being deported are going to impact the labor market,” Van Lue continued. “Whether they work legally or illegally, they are getting jobs done. It’s going to further exacerbate project timelines … and time is money in construction.”

Per-unit subsidies range between $50,000 and $100,000. Van Lue said the city is exploring offering low or no-interest construction loans.

Scott McDonald, executive director of Blue Sky Communities, is a prolific affordable housing developer. He said tax credits were worth $1.10 in 2016, before the president’s first administration.

The value dropped to 95 cents “overnight” due to impending corporate tax reform. That increased project costs by about $3 million, and McDonald said tax credit prices are now at 82 cents.
“It’s as low as it’s ever been in my career,” he said. “A lot of that has to do with uncertainty and potential additional tax rate cuts.”

Councilmember Richie Floyd believes the city should forego market-based solutions that require profitability. He supports offering construction loans and suggested selling bonds to create city-owned housing that would generate wealth.

Floyd said the city would have equity in those units and could “refinance them later on when rents make sense to do it.” Van Lue explained that the city could serve as an investor while a company builds and operates the development. He is researching that model.

“I think we’re doing a better job than most communities in Florida, that’s for sure,” Floyd said. “If not all, to tell you the truth. I think there’s a reason for us to be happy, but … we can have bigger, more systemic conversations.”