Peebles: Inflated Land Prices A Detriment To Affordable Housing In Miami TODs
A prominent East Coast developer is bowing out of the Miami development scene until land prices justify affordable housing projects near transit stations.
Don Peebles said some people seeking to live at transit nodes cannot afford the luxury prices of new apartment developments, which behooves developers to add affordable and workforce housing units in transit-oriented developments. But land costs prevent developers from offering those in many cases, Peebles said.
“If you think about it, it's been the luxury waterfront condos that has driven the market there,” he said. “We would not look at residential rental because the rental market for TODs is soft, and there's not enough of a margin between costs and … the rents you could collect.”
Peebles comments come a day before he is slated to make a keynote address at Bisnow's A New Frontier: Transit Oriented Development in South Florida event. Last year, Peebles reached an agreement with the Southeast Overtown Park West Community Redevelopment Agency to develop a massive TOD project in the Overtown section of Downtown Miami known as Block 45 and 55.
Block 45 was slated for 900K SF of commercial space, including 350 apartments, a 150-room hotel and office. Block 55 was a twin tower development totaling 500K SF. Some of that was to include affordable housing units. But Peebles pulled out of the project last year, reportedly because the developer could not come to terms with the redevelopment agency.
Peebles said it is hard to make TOD projects pencil out when including affordable units in Miami at current land pricing. That was the case at the Block project, and was one of the reasons why Peebles backed out of the negotiations to buy the land.
Peebles said other cities are farther along in making sure affordability in housing is attached to major TOD projects, including in Washington, DC, and Boston. But in Miami, luxury developments rule the skyline.
“That's why the gap is going to get further and further because developers are more motivated to make money,” he said, adding the county needs to expand tax incentives to encourage affordable housing developments at transit nodes. “Miami-Dade needs to be more creative with the land that it has.”
Adler Group CEO Michael Adler also has numerous projects in the works, including two TODs: Motion at Dadeland, which is a 294-unit multifamily mixed-use project adjacent to Dadeland North Metrorail Station; and Link at Douglas, a mixed-use project with retail, residential and office at the Douglas Metrorail Station. Both projects are being developed in a joint venture with 13th Floor Investments. Link at Douglas has a workforce housing component.
“As land prices rise, the ability to provide affordable housing becomes more difficult. If affordable housing is desired around transit, government agencies need to create an environment that makes this use feasible by providing incentives to developers,” Adler said. “Forward-thinking governments and municipalities, including Miami-Dade County and the City of Miami, are providing incentives to drive development around transit in order to create more mobility, decrease traffic and provide [options] for residents. There currently isn’t a rental premium but there is a economic advantage that affects the overall lifestyle of the resident.”
Peebles said his firm would consider doing market-rate projects, including hotels and office or even condominiums in Miami. But he said he wants to see the new supply in Miami absorbed before that happens. One good thing, in Peebles view, is the slowdown in condos is having "downward pressure" on land prices that could give the firm opportunity to find future projects.
"As land goes down, we're going to look to buy a couple of key sites for the next development cycle," he said.