The city of Orlando is considering new policy that would require multifamily developers seeking a density bonus to dedidate units for affordable housing, a move that would impact development costs in downtown more than any submarket.
The new policy is part of a bigger regional effort to address housing affordability, which is concluding after two years of collaborative study by local city and county governments. Orlando's staff committed to addressing, via code amendment, how market rate developers could be compelled to participate in affordable housing.
Orlando's Municipal Planning Board will consider staff's recommended amendment on Tuesday to the land development code, which would require all density bonus requests to include a percentage of affordable housing units.
Under the recommended requirement, if a multifamily developer asks for a density bonus they would need to set aside 20 percent of the bonus units for low-income households. If they're willing to target very low-income renters the requirement drops to 10 percent.
That agenda item could be pushed to June if the MPB meeting runs long. Staff anticipate it going before City Council by September, with the potential to be adopted by year's end.
Hundreds of such programs have been implemented by cities and counties across the United States, most focused in the northeast and California where state laws encourage affordable housing requirements.
But even in Florida, cities like Tallahassee, Key West, St. Petersburg and more have added "inclusionary housing" requirements to their land development code.
City staff don't anticipate this policy making a big dent in Orlando's affordable housing deficit, because of its focus on a small subset of housing development that makes density bonus requests.
Not many Orlando multifamily developers have asked for density bonuses in the past decade, with most being necessary in the downtown submarket. On a scale of approximately 17,000 housing units built city-wide during that time, about 1,800 density bonus units were approved, and of those only 700 were built, said Elisabeth Dang, city planner.
Because market rate apartment developers may not be experienced in affordable housing programs, the city staff are requiring they enter an agreement with some third-party nonprofit housing agency with the experience of screening tenants to make sure fair housing laws are met.
Size of the affordable housing units must be comparable to what's being offered in the market rate units, Dang said. City staff can enforce that during the Master Plan review process.
Developers will also be encouraged to adopt a "floating units" system for the affordable quota, giving the property manager flexibility for leasing and unit maintenance.
All of this is prompted by the big-picture concern about housing affordability in Greater Orlando. Staff presented data to MPB members in March, showing that 44 percent of Orlando households are "cost burdened," paying more than 30 percent of their monthly income toward housing costs.
Average rent in Orlando is $955 per month for a studio apartment, while rent affordable to a minimum wage earner is only $421 per month. Market rate rents are also increasing faster than wages.
At the new 200-unit Pendana at West Lakes mixed-income community opening in west downtown, more than 8,000 prospective tenants applied to get in.
"Pendana is the latest example, we know the demand is there," Dang said.
The city may find some multifamily developers opt to avoid urban projects because of the new policy.
Most new downtown Orlando apartment proposals will not work without the density bonus, developers contend, because it helps make up for increased hard costs associated with urban construction and higher quality architecture standards imposed by the city.
A 99-year deed restriction in the proposed new policy, and the requirement to have affordable units managed by a third party, could also complicate matters for lenders and equity partners that a developer must secure.
At the southeast corner of Livingston Street and Rosalind Avenue, Banner Real Estate's planned 13-story, 382-unit Class A apartment building sought density bonuses while earning city approval last year. If the new policy was in place, Banner would have had to dedicate 26 units as affordable housing.
Banner has a track record of developing and managing affordable housing, and agrees with the importance Orlando is placing on it, said Tom Suminski, development director.
"However, with respect to this particular development, it would not be able to happen if we had to keep 26 units as affordable," he said. "It simply would not be financially feasible."
More recently, plans filed in late March by developer Property Markets Group proposed a three-tower residential project in downtown with 867 apartments, which will require a density bonus.
That group may be ahead of the curve, though, with 25 percent of its units planned as four-bedroom co-living apartments where strangers seeking a small low-cost space are paired up and share common space.