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Multi-Family Residential Developments

Could lengthy government approval process for new apartments factor into high rent? Developers say yes, call for change

Construction crews work on the roof of the Addison Longwood complex under construction that will be a 277-unit garden-style apartment community near the intersection at East State Road 434 and South Ronald Reagan Boulevard in Longwood, Fla., Wednesday, Aug. 24, 2022. (Willie J. Allen Jr./Orlando Sentinel)

At a time when thousands of more rental units are needed across Central Florida to meet the growing housing demand, local developers are baffled by how long it’s taking governments to give final approval to multifamily projects.

And as some elected leaders scramble to address rising rent rates with controversial measures, those same developers say the protracted governmental process contributes directly to the high costs ultimately handed to tenants.

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A joint study by the National Homebuilders Association and the National Multifamily Housing Coalition in June found that 40.6 percent of the cost of multifamily development is directly tied to government regulation and the delays those regulations cause.

With all of the government oversight and push-back from residents who oppose new apartment construction —which further delays the process — developers in the Sunshine State are left waiting as long as two years in many cases for the city or county to finally hand over building permits, according to the Florida Apartment Association. That slog costs developers between $1.5 and $4 million in soft costs, the association estimates.

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“Time is money,” Lee Steinhauer, the general counsel of the Apartment Association of Greater Orlando, told GrowthSpotter. “With every delay, every additional hurdle, it’s just costing more and more and that ultimately goes into whatever the rent is going to be.”

Developers are calling on all Central Florida cities and counties to speed up the process so they can get more multifamily units added to Orlando’s inventory quicker.

Orange County is responding to that plea for help.

The County Commission is holding a work session on Aug. 30 to discuss the approval process and ways to speed it up.

“We have a responsibility to always be looking at our process,” said Alan Marshall, an assistant director of the county’s planning, environmental, and development services department. “We are always trying to make sure we move people through the process efficiently and that everyone is treated with respect through the process. We want to figure out how to get more units through the process faster.”

On Wednesday, Marshall and other county employees met with roughly a dozen developers and land-use attorneys to discuss the matter and hear concerns.

Among attendees was Steve Ogier, a leader with Altamonte Springs-based multifamily developer Contravest.

Before the company broke ground on the 266-unit Addision at Lake Bryan community near Disney World, he waited 14 months to get approval from Orange County.

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In comparison, his Addison Longwood project was approved in just eight months. For this 277-unit apartment community, which is currently under construction, he first submitted plans to the City of Longwood in October 2020 and received his first building permit in June 2021

“The main reason rent values are going up, and they are way up, is because there is excess demand and not enough housing,” said Steve Ogier, a leader with Altamonte Springs-based multifamily developer Contravest.

Orange County alone needs roughly 55,000 additional apartment units by 2030, according to the Florida Apartment Association.

It took Contravest 14 months to get approval from Orange County to start its Addison Lake Bryan apartment community, shown here.

“The hurdles and multiple levels of approvals required restrict the new supply,” Ogier added. “They (government agencies) hold the key to the safe. It is their job to clear the way for more housing, not just say, “rent control.”

Rising rent rates have been front and center in Orange County Commission chambers in recent months as officials have hashed out possible solutions. In July, the commission moved to put a controversial rent control measure on the general election ballot in November after a four-hour public hearing. If approved, the proposed ordinance would impose a one-year cap of rent hikes for potentially 104,000 apartments in Orange County at 9.8%, a percentage equal to the increase of the Consumer Price Index for urban consumers in the South for a 12-month span, which ended June 30.

No other Florida county has adopted a rent stabilization ordinance, and the apartment association has sued to stop it.

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The county also recently implemented its “Housing for All initiative” which aims to address housing affordability and supply by removing regulatory barriers, creating new financial resources, targeting areas of access and opportunity, and engaging the community and industry, according to its website.

State Sen. Randolph Bracy pitches his idea to charge out-of-state real estate investors and homebuyers a special tax during the Orange County commissioners meeting in Orlando, Fla., Tuesday, Aug. 9, 2022. (Willie J. Allen Jr./Orlando Sentinel)

The purpose of the hourlong Aug. 24 web meeting with developers was to “help identify opportunities to accelerate and encourage the investment and development of multifamily and apartment products,” according to an email obtained by GrowthSpotter sent out by Marshall.

The email asked developers to answer a number of questions, such as:

  • What specific actions can the County take to accelerate your project?
  • Which (part of the approval process) is the most challenging to navigate (what should we focus on)?
  • What is the assessment about working with the County, or what might keep developers from investing here?
  • How do we compare with other jurisdictions? Who has it figured out (policy, process and codes, staff attitudes, speed)?
  • What specific examples can you provide about permitting failures?

“They (developers) want to make sure the system is consistent and predictable, ” Marshall said a day after the meeting. “They want less hoops in the process. We’ve got to look at our process and see what makes sense.”

But he noted some challenges with the county’s efforts. For example, the county’s permitting team has 50 vacancies at a time when they’re handling a large volume of development requests.

“We are trying as hard as we can to work smarter with less,” Marshall said.

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Multifamily development projects are moving at a slower pace across the country for a number of reasons. On the construction side, developers are all going after the same materials, resulting in a shortage of supplies and increased costs. After a multifamily project receives authorization, it takes developers an average of 17.5 months to complete construction, according to the 2021 Survey of Construction from the U.S. Census Bureau.

But even before construction permits are handed out, it’s often a long road for developers to get their plans approved.

To Amanda White, the director of government relations with the Florida Apartment Association, many government bodies appear unwilling to work with multifamily developers through the permitting process.

“Local development companies and local developers take significant risk and would like to partner with municipalities in order to provide housing to the community,” she told GrowthSpotter. “Unfortunately (some) seem to see the development community as an adversary and make the process much tougher and arduous than it should be.”

The lag in the approval process is not a problem exclusive to Central Florida or even Orange County. It’s happening everywhere, national experts say.

“Rising costs, construction delays, and labor shortages—never mind more regulatory barriers and rampant NIMBYism—are making it more and more difficult to build the housing our country so badly needs,” Doug Bibby, president of the National Multifamily Housing Council said in a June report.

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Aside from basic safety standards for structures and workers, many of the requirements and regulations governments impose on developers are “excessive,” said Paul Emrath, the VP of Surveys & Housing Policy Research with the National Homebuilder’s Association.

“There are things that really do seem excessive and it seems like there’s no appreciation sometimes on the part of local government as to the cost of what they are doing,” he said in an interview.

He led the national study in June that found that nearly half of the cost of a multifamily project comes from government regulations.

“When regulation constitutes an average of 40.6 percent of a project’s development costs, this raises questions about how thoroughly governments are considering the consequences of their actions. Are they aware of how much regulation currently exists?” he wrote in the report. “Do they realize how multiple regulations with conflicting standards can cause delays and increase costs? And do they understand the extent to which these increased costs translate into higher rents and make it difficult to build new housing that families with modest incomes can afford?”

The government approval process has frustrated several local multifamily developers.

“It’s ridiculous,” said Dwight Saathoff, the president of Project Finance and Development who has partnered with other developers on multifamily projects. “And we wonder why we can’t have more affordable housing and keep up with the demand.”

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He said developers, in many cases, are being put “through a two-year ringer” by government staff before their projects even get to the city or county commission for a final vote. And then, there’s no guarantee the commission will give approval.

“The longer something takes and the more uncertainty there is, either to the requirements placed on you or the outcome, the more the capital that goes into that venture requires a bigger return,” he said. “I’m going to require that when it does go through that I make a pretty good return because of all the risks associated with that.”

Another risk developers have to contend with: Residents who don’t want apartments near their homes. That opposition adds more months and costs to what’s already a sluggish approval process.

The June study by the National Association of Homebuilders and the National Multifamily Housing Council found that “Not in My Backyard” (NIMBY) opposition to multifamily development adds an average of 5.6 percent to total development costs and delays the delivery of new housing by an average of 7.4 months.

So while developers are hopeful cities and counties streamline the approval process so apartments can rise faster, they also want residents to change their mindset on apartments.

“A lot of people look down on apartments,” said Jon Wood, the senior managing director of Legacy Partners.

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The multifamily developer is currently seeking approval from the city of Daytona Beach to convert a section of Volusia Mall into a 350-unit luxury apartment community.

“They think (an apartment) is going to bring crime into their communities or it’s going to bring a lot of extra traffic, but the reality is that a lot of apartments are being rented by choice by people who want to live in a community with a lot of amenities.”

He added, “I don’t think there’s enough of an understanding and appreciation for multifamily housing and the kind of product that we bring to the market.”

EDITOR’S NOTE: The original version of this article misstated the length of time it took the ContraVest to receive permits for Addison Longwood. The review process was eight months.

Have a tip about Central Florida development? Contact me at (407)-800-1161 or dwyatt@GrowthSpotter.com, or tweet me at @DustinWyattGS. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.


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