There was no discussion and no public comment, but on Tuesday Lake County became the first municipality in Central Florida to deny property tax exemptions for affordable housing developments that previously qualified for such incentives under a tough Florida pro-housing law.
It was an early salvo in what could be dozens of silent strikes from cities and counties across Florida on the so-called Live Local Act, a law meant to encourage more affordable workforce housing and prevent the types of double-digit rent spikes Florida has seen in recent years.
Winter Park’s City Commission voted unanimously on Wednesday to do the same, and Maitland is expected to do so at its next meeting, according to a report in GrowthSpotter.
And while local officials say they’re taking a stand against tax giveaways, housing advocates say the moves may push up rents at apartments targeted at low- and moderate-income Floridians.
In addition to encouraging the construction of new affordable housing by loosening zoning requirements, the Live Local law has provided tax incentives for new and recently completed apartment communities to help their owners keep rents attainable. So any project would be eligible for a 75% savings on its property tax bill if it’s less than five years old, has at least 70 units and offers rents considered affordable for tenants earning up to 120% of the area median income, or AMI, (around $90,000 for a two-person household)
A total of 21 apartment complexes in the region claimed the tax exemption this year and will save hundreds of thousands of dollars on their 2024 tax bills. The deadline to apply was March 1. The credit does not apply to school or water management district taxes, but it can reduce the owners’ tax burden by a significant amount, while simultaneously cutting into tax revenues for the city or county that is home to the development.
Earlier this year, in response to complaints from local governments, the Florida Legislature provided an opt-out provision in the updated Live Local Act that allows taxing districts to deny the exemption if they meet certain conditions. For starters, the county would have to be located in a region where there is already a surplus of affordable rental housing for people earning up to 120% of the AMI. Second, the governing body would have to approve the opt-out provision by a two-thirds majority vote, and the opt-out must be voted on every year as long as the city or county qualifies.
The latest report from the Shimberg Center for Housing Studies, which tracks housing affordability across the state, found that the greater Orlando market (Lake, Orange, Osceola and Seminoles counties), had a severe shortage of affordable housing for residents earning less than 80% of the AMI. But the four-county region has a slight surplus of 799 units considered affordable for residents earning between 80-120% of the AMI. Polk County also has a small surplus, 248 units, in the same income bracket, the report concluded.
That means any city or county in region could opt out of the tax exemption. The same is true in major market areas such as Tampa, Jacksonville, Sarasota and Brevard County.
Pasco County has already opted out, and Hillsborough County is scheduled to vote next week on the matter.
Bobby Anderson is managing director of Alliance Residential, which developed its Prose branded communities specifically to address the shortage of rental homes for the “missing middle” income earners. The company has qualified for the 75% tax exemption for several communities across the state, including two in the Orlando market.
Anderson said Winter Park’s decision to opt out of the program will have a chilling effect on future development. “I think the message is kind of obvious. What they’re saying, especially in a place like Winter Park, is they don’t want that type of housing in their community,” Anderson said. “And so the issue is with higher interest rates and higher cap rates, which leads to lower values for apartments, is deals don’t pencil right now. So although there’s been a lot of apartments built, and still some being finished right now, there’s very few new deals getting started.”
Any property currently receiving the exemption for 2024 would be grandfathered in, regardless of whether the taxing district opts out. None of the 11 qualifying apartment complexes in Orange County are actually located in Winter Park. Six are in Orlando, two are in Maitland and the rest are in unincorporated Orange County, according to the property appraiser’s office.
Winter Park Planning Director Jeffrey Briggs told the City Commission he was alerted to the opt-out provision by the City of Maitland, which saw a significant drop in its tax base as a result of the exemptions claimed by 400 North and Tiffany at Maitland West. Winter Park would be faced with similar challenges if it doesn’t opt out of the program because two of the city’s five largest taxpayers are apartment complexes.
“As an example, we have two apartment complexes in Ravaudage, and the amount of property taxes that comes just to the city — not all the other taxing authorities, just to the city — is about $325,000 per year from each of those,” Briggs said. He pointed out that existing apartment communities and any future developments would have the ability to ask for the exemption when they come on the tax roll, and that would have “a very significant budget impact” to the city.
Orlando Spokeswoman Ashley Papagni said the City Council has not had any discussions with planning staff since the law was updated regarding the potential to opt out. Orange County spokesman Dustin Wyatt said the county also has not evaluated issues related to the opt-out provision.
Osceola County had seven applications filed for 2024 and approved five. Property Appraiser Katrina Scarborough told GrowthSpotter those five properties combined will be able to reduce their taxable value by nearly $80 million. They include three market-rate apartment complexes, one defined as attainable workforce housing (Prose Stevens Point in St. Cloud) and The Teale, a motel conversion on U.S. 192.
For example, the 14Fifty apartments just outside of NeoCity charges rents starting a $1,610 for a one-bedroom unit and still was able to claim a Live Local exemption, lowering its taxable value from $58.6 million to $38.9 million.
Seminole County has three apartment communities approved for the exemption this year: Integra Crossing, Vue on Lake Monroe and Watervue Apartments. Katie Grasser, COO for the property appraiser, said she is not aware of any discussion of an opt-out ordinance yet in the county.
Only two recently completed apartment complexes in Lake County qualified for the credit this year, according to Property Appraiser Carey Baker. Those were Orchard at Cagan Crossings, a 55+ community in the Four Corners area, and Eudora Reserve, the first apartments built in Mount Dora in over a decade. Combined, they will be able to exempt about $14.2 million of their $36.1 million taxable value and reduce their tax bills by 39%.
Still, Baker said Lake commissioners did the right thing by eliminating the tax exemption for market rate housing that was built before Live Local was even approved.
“What I see with the Live Local is that essentially someone could come in, an apartment developer — which is great — but they can receive a significant property tax discount or exemption for merely providing the same apartments at the same cost to the same people they were going to anyway,” Baker said.
If the county had not opted out, more landlords would have taken advantage of the exemption next year — and most would have qualified because Lake County’s rents tend to be lower than those in Orange County. “Anything you subsidize, you’re always gonna get more of,” Baker said. “If we subsidize the cost of cars by 30-40%, they’re gonna sell more cars. But government has to be very careful when we provide these types of incentives that we don’t skew the marketplace.”
But Anderson said even if cities and counties don’t opt out of the program, just having the ability to opt out creates enough uncertainty that it’s affecting developers’ ability to get construction financing from risk-averse lenders.
“It’s really somewhat of a crapshoot as to whether or not your project is going to qualify four years from now when you finally get leased up,” he said.
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