Cost Concerns Keep Real Estate Atop Florida Policy Agenda
A New York developer has hit Hollywood, Florida, with a state court suit accusing the city of improperly interpreting the state’s Live Local Act to block the developer’s proposed 17-story beachfront project after falling short in efforts to get the affordable housing law changed.
The 2023 law, which offers developers entitlements to build bigger and with limited local control in exchange for including a percentage of affordable housing units in projects, has generated considerable buzz, but also a number of disputes over local governments’ implementation. The current controversy landed on Friday in the Seventeenth Judicial Circuit, brought by developer Condra Property Group, which sued Hollywood over the denial of its site plan approval for a mixed-use project on Hollywood Beach over height concerns.
Here, Law360 Real Estate Authority looks at ways Florida public policy may shape real estate in 2025.
Affordable Housing
The entire nation has been grappling with a housing affordability crisis over the past few years, but for Florida, the situation has been magnified by an influx of people to the state and a crisis over property insurance rates and availability.
The Legislature in 2023 passed the Live Local Act in an attempt to address that reality. In addition to pouring more money into affordable housing funds, the law also aimed to incentivize development of affordable housing units through tax breaks and zoning entitlements that expanded the eligible location and size of projects while preempting some local review.
The law, which received significant adjustments in 2024 regarding building density and parking requirements for properties near transit, has caught the attention of even market-rate developers, who say the available incentives can make the difference in projects making financial sense.
“They’ve embraced the Live Local Act,” said Iris Escarra, a shareholder at Greenberg Traurig LLP in Miami and co-chair of the firm’s land use practice, noting that she and her colleagues were in the midst of doing modeling on eight or nine projects to gauge its applicability and have seen developers choose to pursue its benefits over other incentive programs.
But uneven application across different local jurisdictions, including strong resistance in some places, has others questioning its usefulness.
“I think every developer is interested. It’s just, how real is it?” said Vivian de las Cuevas-Diaz, a Miami-based partner and the deputy section leader of the real estate practice at Holland & Knight LLP. She noted that while some local governments have publicly voiced support for the law, in practice, they have made it very difficult for applicants to advance projects.
Government Law Group co-founder Keith Poliakoff said that while there have been applications filed to apply the Live Local Act throughout the state — and there is litigation pending on some of those — it is hard to find any developments built based on the statute because of the local pushback.
“Although everyone would like to utilize it to expand and to increase the amount of workforce housing throughout the state, the local governments have worked in so many ways to water down the bill and to prevent its applicability that the current utilization of Live Local is somewhat useless,” he said.
Developer Henry Torres, president of Miami-based Astor Cos., told Law360 Real Estate Authority that because of shifting promises and unexpected hurdles, such as the city of Miami requiring developers to present residents’ income tax returns to qualify for tax breaks, he expects to drop plans to pursue Live Local Act benefits for his next multifamily project, Havana Enclave in the Little Havana neighborhood.
“I’m going to go out and do this building market, because they have not finished figuring out how they want to run this thing. The state mandates one thing, the cities do another, and we’re in the middle,” he said. “It’s uncomfortable. The businessman who’s making the concession to the people is put in a position where he thought he was going to make X and now he’s making Y, and we’re behind the eight ball.”
It is common for such a far-reaching, complex piece of legislation to require some tweaking, and more could come to the Live Local Act in 2025. Rep. Vicki Lopez, R-Miami, one of Live Local’s major proponents, told Law360 in an interview earlier in the fall that some revisions may be needed for how local jurisdictions are grouped to measure whether they have a deficit of affordable housing and must offer the law’s tax breaks. And de las Cuevas-Diaz said a clearer process that everybody can follow is needed, including to move the needle on lenders feeling comfortable to finance these projects.
Bill Sklar, a partner at Carlton Fields, said he expects the Legislature to consider acting to limit local governments from imposing moratoria on development, a step some have taken to counter the preemptions in the Live Local Act.
The design of the Live Local Act also has proved more conducive to adding units at the higher end of the affordable range, what is typically called “workforce housing.” Lopez said that she expects to explore pursuing additional affordable housing legislation outside the Live Local paradigm in an effort to target lower income residents and to get projects to market more quickly, possibly through incentives for building renovations and rehab as opposed to ground-up development. Among the first bills filed for 2025 was Senate Bill 84, from Sen. Jay Collins, R-Tampa, which would entitle construction of housing on farms for legally verified agricultural workers. The Legislature unanimously approved a similar measure last year, but DeSantis vetoed it, saying he had concerns it lacked sufficient language to prevent housing of undocumented immigrants.
Condominium Reforms
Affordability has also become a major focal point regarding recent reforms to laws governing the state’s more than 27,000 condominiums developments, which saw a key deadline arrive at the end of 2024.
Acting in response to building safety concerns after the deadly June 2021 partial collapse of the Champlain Towers South condominium tower in Surfside that killed 98 inhabitants, the Legislature passed a series of laws requiring that condos over three stories and at least 25 to 3 years old, depending on proximity to the coastline, obtain structural inspections and reserve studies and start collecting reserves for certain structural components’ eventual repair or replacement.
The recent legislation set a deadline of Dec. 31, 2024, for buildings to obtain those reviews and required the collection of reserves to start in any budget approved after that date.
Concerns soared in 2024 as stories spread about buildings receiving reports calling for costly repairs or large reserves that would require their associations to hike up monthly maintenance fees and impose special assessments ranging into six figures.
With condos traditionally a popular choice among retirees on fixed incomes or younger residents before they might start a family and move to a roomier house, condos had become one of the more affordable housing options on the market, but these events turned that notion on its head. Fears over how residents will be able to cope with these new financial burdens prompted calls — including from DeSantis — for the state to take action.
Outgoing legislative leadership declined to call a special session, and the incoming leaders said they preferred to take the time to look closely at the data during the annual two-month session.
“The question shouldn’t be, ‘When?’ The question should be, ‘What?” Perez told the press after his introductory speech. “What is the solution that people are offering to the issue before condos?’ It’s an issue we’ll be discussing during session.”
On Monday, the governor pushed back on his fellow Republicans’ approach and called on lawmakers to come up with some relief for unit owners at a special session opening Jan. 27 that he said will be focused primarily on readying the state to support what are expected to b dramatic immigration initiatives coming down from Washington when President-elect Donald Trump returns to the White House.
“The Legislature should not be doing anything that’s going to cause someone to flee because of an artificial mandate,” DeSantis said of the need for swift action on condos.
The governor said he did not think there were any agreements yet on what that should be, however, and the speaker and Senate president said it is a complex issue that should be addressed during the regular session.
One idea could be for the state to issue or back low-interest or no-interest loans, similar to a smaller-scale Condominium Special Assessment Program implemented by Miami-Dade County in response to the new reforms. Carlton Fields’ Sklar noted that a Florida Bar task force on condo safety policy that he led in the wake of the Champlain Towers South collapse had supported allowing a longer phase-in period for building up recommended reserves. He also said there are questions about the potential for pooling reserves saved for other purposes.
For some condominiums, especially those built 40 or 50 years ago, it may prove financially unfeasible to make the necessary repairs and collect reserves needed to come into compliance, Government Law Group’s Poliakoff said. In that case, terminating the association and selling the property to a developer may be the only or best option.
“I think that if the law stays as is, you will see multiple condo associations throughout the state seek disbandment and to sell off their properties to enable their owners to cash out,” he said. But a March 2024 ruling from the state’s Third District Court of Appeal cast a chilling effect on terminations by temporarily blocking Two Roads Development’s efforts to redevelop the Biscayne 21 Condominium in Miami via what had been considered an acceptable practice of developers acquiring enough units in a building to amend the rules and then voting for a termination. Developers, condo owners and lawyers are waiting to see how the court rules on Two Roads’ motion for a rehearing.
Property Insurance
Florida’s long-troubled property insurance market showed some encouraging signs in the past year, with national carriers Progressive and State Farm committing to staying in the state, a number of carriers filing stable or decreased rates, decreases in reinsurance costs, and Citizens Property Insurance, the state’s insurer of last resort, getting its policy count below 1 million through “takeouts” by private carriers.
“Things are looking up, actually,” Fred Karlinsky, a shareholder and chair of Greenberg Traurig’s Global Insurance Regulatory and Transactions Practice Group, said in December. “The legislation that the Legislature and the governor put in place at the end of 2022 and beginning of 2023 regarding litigation reform have really made differences. Last year for the first year in the better part of a decade, insurers in Florida made money. Last year and again this year, we’re seeing rates either stabilizing or actually lowering.”
But high rates and tight availability remain major concerns for owners on both the residential and commercial sides, as well as for developers. While the state dodged worst-case scenarios in terms of the impact from Hurricanes Helene and Milton in 2024, experts have told Law360 that policy costs are likely to go up as a result of these two major storms, and Karlinsky noted that other global catastrophic events, such as the wildfires ravaging the Los Angeles area, could exacerbate the situation in Florida. And the perennial threat posed by hurricanes only looks likely to worsen with climate change.
“Florida cannot continue to excel unless this issue is taken care of,” Poliakoff said. “There are too many individuals, too many companies that can no longer afford to be in the state and can no longer afford to build because the property insurance rates have gone out of hand.”
High rates have pushed a number of homeowners and even owners of larger properties in South Florida to “go bare” and self-insure for wind, Poliakoff added, setting up what he called a potentially “disastrous” scenario for the state if South Florida takes a significant hit from a storm.
Critics have also complained that while the reforms the state enacted to reduce insurance litigation in response to fraud and frivolous claims have led to a reduction in cases, the new laws swung the pendulum too far in favor of the insurance industry.
It is possible that the Legislature continues to wait to see how those reforms play out, Karlinsky said, but the incoming speaker did include a line in his opening speech about Floridians not wanting their insurance laws to be written by insurance companies.
A solution must come from the government working with the private sector, because the private sector does not have enough money to do it by itself and the government could provide some financial backing to help Floridians buy more reasonably priced polices than they could otherwise, Oscar Seikaly, CEO of NSI Insurance Group, suggested.
“They can help with the funding, they can come up with the financial engineering so it’s not all the private sector. So it’s a joint effort. That’s what’s going to resolve it or help it,” he said. “Nobody is going to force anyone to remain in the state.”
Poliakoff and others said it will be up to the state, not the federal government, to address the issue.
H.B. 13, filed by Broward County Democrat-turned-Republican Rep. Hillary Cassel, proposes to remake Citizens by requiring it to offer hurricane coverage to all residential properties while having private carriers handle other, less catastrophic risks. A similar proposal failed to gain traction last year, but this version has attracted bipartisan support and been referred to two committees.
Further tweaks to building requirements in parts of the state or programs to incentivize hardening or building more resilient buildings could also help. A pilot My Safe Florida Condo program that will provide free inspections and grant funding for wind mitigation improvements reached capacity in a few days, and $200 million appropriated last year to the existing My Safe Florida Home program was quickly exhausted.
Among the early bill filings, Sen. Ana Maria Rodriguez, R-Doral, has proposed a new tax credit for owners of “resilient buildings” in S.B. 62.
Also Worth Watching
In addition to these three areas, there are several other topics where public policy and Florida’s real estate landscape overlap and that should be interesting to watch in 2025.
In addition to its actions on building safety reforms for condominiums, the Legislature moved in recent sessions to crack down on fraud and misconduct in homeowners and condominium associations, spurred in large part by criminal charges being brought over an alleged multimillion-dollar fraud ring involving board members of a large homeowners association in the Miami suburbs.
Lauren Fallick, a partner at Kluger Kaplan Silverman Katzen & Levine PL, said she expects some immediate impacts on financial transparency from the new law, which took effect July 1, but also some chilling effects on residents’ willingness to serve. She also pointed out that the recent legislation did not include requirements regarding law enforcement’s response to claims.
She expressed doubt that lawmakers will move quickly to address that issue in 2025 but added, “It’s going to be interesting to see the fallout of all of this when you’re seeing people getting arrested on television, and other homeowners associations or condo association owners have made similar reports with backup and nothing happened.”
The Legislature sparked significant controversy in 2023 with its passage of S.B. 264, a bill that restricted property ownership in the state for people “domiciled” in seven foreign countries, including more extensive restrictions regarding China. There is still a lot of interest in the topic, Holland & Knight’s de las Cuevas-Diaz said, including the impact on investment funds that may include members from the restricted countries. But with two lawsuits pending, including one currently on appeal before the federal Eleventh Circuit, lawmakers may wait for the outcome in court.
The controversial trend of investors buying up large numbers of homes to rent has not been addressed yet by the Florida Legislature, but the incoming speaker also commented in his introductory speech that Floridians “want to own their own homes, not be tenants to private equity firms.” When asked about the topic, however, Senate President Albritton said this sounds like a free market issue to him.
Lawmakers may also look to address a number of issues related to land management and development, according to Carlton Fields’ Sklar. He pointed to concerns over municipalities’ liberal invoking of an “extraordinary circumstances” provision to exceed a statutory cap on impact fees for development projects, a desire to reduce inconsistencies between counties’ comprehensive land-use plans and local land development regulations, and development challenges arising from shortages of wetland mitigation credits that developers can purchase to allow building and protect environmentally sensitive lands in certain parts of the state.
The governor’s call for a special session provided a clear indication that federal policy under the incoming Trump administration could also affect Florida through changes on various topics including immigration, labor and the environment, as well as funding made available for areas like transportation. Sources said they expect the state to benefit from the incoming president tapping multiple Floridians, including Sen. Mario Rubio, Rep. Michael Waltz and former Florida Attorney General Pam Bondi for important roles in Washington.
“I think it confirms kind of where Florida sits,” de las Cuevas-Diaz said. “I think it could be in the long run a good opportunity for us. … Even with hurricanes, we still seem to be a state where people want to come. We’ve just got to work through our issues.”
–Editing by Rich Mills
Article Link: Cost Concerns Keep Real Estate Atop Florida Policy Agenda
Author: Nathan Hale