The median single-family home price in Palm Beach County reached $305,000 in June, the highest since 2008 and up 3.4 percent from a year earlier. That puts homeownership out of reach for many, if not most, of the county’s residents, experts say.
“Affordable housing is a huge problem in South Florida, from the Keys to Stuart,” Rick Gonzalez, president of REG Architects in West Palm Beach, told The Real Deal. “Land values and the cost of construction are so high that we have a crisis of affordability. If we don’t address it now, it’s going to be a real bad problem in five years.”
Gonzalez is involved with a 99-unit affordable rental housing project for seniors in West Palm Beach that is just breaking ground and already has a waiting list of more than 500.
Jack McCabe, CEO of McCabe Research & Consulting in Deerfield Beach, agreed. Median household income totals $53,000 in the county, and he said that a rule of thumb is that you shouldn’t buy a home that costs more than three to three-and-a-half times your income. That would put the maximum affordable home price at $159,000 to $185,500 for a median household.
“So half of the population needs something under $200,000,” McCabe told TRD. “Any new construction under $200,000 is basically a studio condo.” The median price for a townhome/condo soared to $149,450 in the second quarter, up 8.3 percent from $138,000 a year ago.
McCabe points to the same factors as Gonzalez. “When I talk to affordable housing developers, they all tell me that with land and building costs, they can’t make a profit.”
So what’s the solution? McCabe and Gonzalez say government involvement is necessary to create more affordable housing. “The only way affordable housing will be built is through private-public partnerships,” McCabe said.
A municipality can donate land or lease public land at a favorable rate, he said. And the tourism tax can be raised by 1 percentage point – to 7 percent – over the next 10 years to generate revenue for affordable housing.
Governments can offer incentive zoning to blend market rate projects with rent control, Gonzalez said. “Give a density bonus if a developer keeps some units affordable.” Municipalities can buy foreclosed and decrepit properties to provide land for affordable housing developers.
“Real places have rich and poor working and living in the same neighborhood, not gated communities and high-end condos like in Miami,” Gonzalez said.
But West Palm Beach real estate lawyer Harvey Oyer of Shutts & Bowen is skeptical of government intervention, pointing out that past efforts have done little to solve the problem. “I’m inherently skeptical of government solutions,” he told TRD. “My experience is that governments trying to involve themselves in capital markets haven’t had a good result.”
Oyer noted that multiple housing projects have been proposed for the western part of the county and says they would likely produce affordable homes. “These new supplies may meet demand without any government intervention. When something is needed, the market usually delivers.”
All agree that the stakes are high. “We are losing our brain trust,” McCabe said.