“Why do our city leaders keep allowing more and more luxury developments when there’s no demand for them, but there’s demand for affordable [units]?”
That’s a question that is on a lot of our readers’ minds as they look up at the city skyline and at their rent payments every month. So we spoke to a couple of experts who told us that the answer goes beyond city leaders, and that the current state of the real estate market is causing a bit of a shift in what’s being built.
Is it just about the market?
Ultimately, developers will do what’s profitable based on what the market demands, and while there are more vacancies and fewer tenants in many luxury housing developments — things have not completely dried up.
Ned Murray, the associate director of FIU’s Metropolitan Center, has kept tabs on our local housing market for decades. He points to continued interest from overseas buyers and investors as one reason the Miami market is staying hot.
“There’s a market for high-end investor types of properties and that’s an outsider and a global market,” Murray said. “And that market really has nothing to do with the typical Miamian or South Floridian who lives and works here.”
So if you still see cranes in the sky, it’s partially due to that outside market. And in a lot of cases it’s because those projects were planned or approved way before the market changed — although some realtors think slowing demand could soon catch up with the fast rate of construction.
“Many of those developments that are on the drawing board are probably going to be holding back a bit,” says realtor Chris Zoller, who works with EWM Realty International. “I think the next wave of development will be for more affordable properties and for more rental properties.”
That’s good news for the rest of us. Especially given that analysis from FIU and other organizations shows that the City of Miami needs at least 30,000 more affordable housing units to provide housing for the average Miamian, especially those residents making less than $52,000 a year.
So did city leaders approve all of this building?
Indirectly, yes — but not on a building-by-building basis.
In many cases the luxury development that you see around Miami-Dade wasn’t formally voted on by city officials. Many developers are able to build because the zoning in a particular section of the city allows it, and those zoning codes are established by city staff and can be changed through laws and resolutions.
But unless a project requires an exemption or some sort of change — say the building is going above the height that’s allowed in a particular zoning area — commissions and planning boards aren’t involved in issuing permits for individual developments.
“You can’t really stop it — it’s the market and the private sector,” Murray said. “And, short of a moratorium, you’re not really going to be able to hold that up.”
Some recent big examples in the City of Miami are projects like the Miami Worldcenter and the Magic City Innovation District. Worldcenter — the massive real estate project that takes up 10 city blocks and will include retail and luxury condos — is already well underway, and was approved long before the current leadership was around.
The Magic City plans, which include 17 acres of commercial, retail and residential development in Little Haiti, haven’t been given final approval and will be discussed again next month.
And why have big, luxury developments been approved in the past?
It’s a mix of factors, but elected officials are often sold on the idea that large-scale developments can boost surrounding property values. Since property taxes are a huge chunk of a city’s budget, officials may choose to support a project that can boost those values, even if the development doesn’t provide housing that average residents can really afford.
Folks like Zoller, who previously chaired the Coral Gables planning board, says those kinds of projects will probably be looked at with a closer eye in the future. In the City of Miami, their inclusionary zoning program — which requires developers in a specific area of the city to create affordable housing — is a plan to offset some of the larger development in recent years.
“When there is an opportunity to give some constructive criticism, I think new commissioners will continue to do that,” Zoller said. “We all know that there’s an oversupply of luxury housing.”
Want to learn more about affordable housing in Miami? Check out our breakdown of the basics here.
This story has been updated.