Why Miami is hit the hardest in America’s rental housing crisis

K. Brown, a high school English teacher in Miami-Dade public schools, rents a one-bedroom apartment 20 miles from her job in downtown Miami for $1,370 a month, about half her salary. net, and she shares her single bedroom with her teenage son.

However, she is grateful. People signing new leases at the same complex pay $1,500 to $1,700 a month, she said.

“When I was little, it was perfect,” the single mom said with a sigh. But now her son is 14 and still sleeps on a metal loft bed above her queen-size bed. The room is cluttered with Target shelving and storage bins.

“He’s getting older,” Brown said. “I need to move.”

Rising Rent: Why Prices Are Only Going Up

Across the United States, nearly 60 percent of renters faced rent increases in the past year, and about a third faced price increases of 10 percent or more, according to a Freddie Mac Poll released in August.

However, only 38 percent saw an increase in wages, and of those, 32 percent said the increase is not enough to cover the rent increase. In Miami, the median household income is $44,581. However, rents in South Florida increased 24.61 percent between July 2021 and July 2022, at an average of $2,841, which is equivalent to $34,092 for one year. RentCafe found that 97.6 percent of apartments in Miami-Dade County are occupied, and each vacant apartment has 31 potential tenants vying for it.

Buying is out of the question for many: the The median home sale price in Miami is $600,000. In late June, US Secretary of Housing and Urban Development Marcia L. Fudge declared the city “the epicenter of the housing crisis in this country.”

Brown, who spoke on the condition that his full name not be used, hopes that by next year he can find a two-bedroom apartment in Miramar, north of the Miami-Dade county line. Otherwise, he will consider moving to the West Coast of Florida or Atlanta.

Mortgage rates exceed 6 percent for the first time since 2008

“I just hope that they start to see the teaching profession as a real profession, and start paying teachers and treating them differently,” Brown said. “They are going to lose all the residents.”

The current rental crisis is the product of several forces converging in Miami.

South Florida is bounded by land between the Atlantic Ocean and the Everglades, and the scarcity drives up the prices of available parcels. The city has long been an investment magnet for Latin Americans from politically unstable countries who would rather invest their money in real estate than banks in their homeland; Recent left-leaning elections in Chile and Colombia triggered a new wave of buyers.

In recent years, Miami has attracted an influx of high-profile financiers drawn by Florida’s lack of income taxes, as well as people who moved during the pandemic from other parts of the country, drawn by remote work prospects. Meanwhile, construction costs are rising and insurance prices are skyrocketing.

But while there is huge demand for middle-class housing, those combined forces make it challenging for private developers to build.

“It’s like a perfect storm right now is happening in Miami,” said Masoud Shojaee, a real estate developer whose firm, Shoma Group, has been active in Miami since the 1980s developing everything from single-family residences to commercial properties. .

As Florida home prices rise, middle-class residents wonder if they can afford to stay

Although developers have tried to add housing supply, he explained, they face certain limitations.

On August 1, the company completed an apartment building called Shoma village in Hialeah’s traditionally working-class Latino neighborhood.

“We really wanted to give that city something for the [young adults] — to stay inside the city,” said Stephanie Shojaee, wife of Masoud Shojaee and president of the Shoma Group.

Rents in Shoma Village start at around $2.90 per square foot, with studios starting at $2,060 per month.

Typically, Shoma attracts tenants to properties by paying commissions to brokers and giving tenants a free month’s rent. In today’s market, that’s not necessary, and the company has had to bring in additional leasing teams to handle demand.

Rents have to be quoted around the market rate to allow developers to obtain tens of millions of dollars in financing to build a building, Masoud said. “You have to show a comeback. If the yield is too low, it’s very difficult to get a loan because the lender will say, ‘Well, I’m taking a big risk. If something goes wrong, you have no room to do anything.”

For Salim Chraibi, CEO of Bluenest Development, a small company that builds homes for low- and middle-income buyers, the problem comes down to land.

His company builds homes that sell for up to $352,000 for buyers earning between 80 and 140 percent of the area median income.

While the program, which works with the county, is a boon to eligible buyers (buyers only have to put down a 1 percent down payment and receive help with closing costs), it has done little to alleviate prices in the rental market, he said.

The program operates “on the condition that this is their first home and that they go to live there. So they can’t rent them.”

Ian Bruce Eichner, who developed perhaps the most recognizable building on South Beach, the Continuum, agreed that unless governments provide property or other incentives, the private sector is unlikely to find solutions to the crisis on its own. .

“It’s not even a question of ‘Can you make money?’ Can you just have a lender write or make a loan? he said. “If the earth is a damn fortune, and the density is [low] and interest costs are set, you don’t have to go to Harvard Business School to know it can’t work.”

Rents are going up everywhere. See how much prices have risen in your area.

Albert Milo Jr., senior vice president of the Related Urban Development Group, which focuses on affordable housing, said his company uses tax-exempt bond financing, low-income housing tax credits, city and county grant programs and more. “These transactions require four or five layers of financing to do. They are quite complex,” he said.

And while Florida has a trust fund that is supposed to be used for affordable housing, lawmakers have taken $2 billion since 2003 and directed it to other uses.

While supply is catching up, perhaps demand will slow down?

Ryan Shear, managing partner at Property Markets Group, says that’s unlikely.

PMG has several projects in the works, including a Waldorf Astoria condominium development, where 85 percent of the units are already sold and what’s left starts at $4 million. But it has also developed apartment buildings. at a lower price, like X Miami and Society Las Olas, where people can rent a bedroom and bathroom in a shared unit.

“Our original thesis there, seven or eight years ago, was, ‘Hey, rental rates are getting a little expensive all over the country. Let’s create a product where a three-bedroom apartment [has] three individual leases versus one lease.”

The model worked so well that PMG is developing similar projects in Nashville, Atlanta and Orlando.

“Florida is not going to fall,” he said. “I’d be the first to tell you if we saw it. We can see it in the front line, just by the number of people who enter the sales center. … [August] has been crazy. And I just don’t see it changing.”

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