Pinnacle Partner Talks Affordable Housing Trends

(Save the date: RealShare Apartments comes to the Westin Bonaventure, Los Angeles, October 24.)

MIAMI—When you want to know what’s happening on the ground in the affordable housing realm, you ask someone on the ground. Pinnacle Housing Group is on the ground.

Pinnacle is the nation’s seventh largest developer of affordable housing communities, with 6,000 housing units developed in Florida and the Southeast U.S. Pinnacle takes a different approach to affordable housing development by building amenity-rich properties and including public art elements.

Now, Pinnacle is knee deep in an affordable housing trend in Florida that has development shifting toward urban submarkets rather than the suburbs where land is cheaper. GlobeSt.com caught up with Mitchell Friedman, a partner with Pinnacle Housing Group, to discuss this and other trends in affordable housing development.
 
GlobeSt.com: Pinnacle has been developing for more than 15 years. How has the affordable housing sector evolved to meet changes in market demand and economic conditions?

Friedman: The overriding change we have seen in the affordable housing space in Florida has been a gradual shift in focus to urban development over the past 15 to 20 years. Prior to 1993, there were few affordable high-rises in urban South Florida, with most of the region’s units situated in two and three story buildings located in the suburbs.

Today, we can develop a 13- or 14-story apartment building on a single acre and achieve the same level of density that we might deliver on a larger piece of land in the suburbs. Urban development provides residents access to job opportunities, mass transit, and commercial businesses that serve their everyday needs. Pinnacle Housing Group has developed or redeveloped 10 urban communities in Miami-Dade during the past decade alone.

GlobeSt.com: What is the current state of Florida’s affordable housing landscape and how are different parts of the state faring when it comes to the development of new projects?

Friedman: Overall, the state of affordable housing in Florida is quite good. We have built thousands of new units over the past decade and statewide demand remains high. New cost efficiencies are resulting in a higher quality of unit, in terms of construction quality, interior finishes, and sustainable design features. Some parts of the state, such as Southwest Florida and Jacksonville, have become saturated with too much affordable product, the result of the economic downtown that saw many new units built in a short period of time.

GlobeSt.com: What is the financing picture like in the affordable housing sector? Are you faced with the same challenges as market rate developers?

Friedman: Financing for affordable housing has predictably been impacted by economic volatility, albeit in a much different fashion than in the mainstream market. Until five or six years ago, Florida collected surtax dollars that were allocated to affordable housing projects each year.

With the recession, the state redirected some of those dollars to the general fund in an effort to help balance the budget, so the number of available dollars statewide fell from about $50 to $60 million each year to about $15 million annually. On the federal level, a major tax credit bill is set to expire on Dec. 31, 2013. Without an extension, the number and quality of units built in Florida will decline, so the industry is watching Congress closely.

GlobeSt.com: South Florida is seeing new affordable product developed in urban markets. Is this a response to the urban construction boom underway in places like Ft. Lauderdale and Miami?

Friedman: The affordable housing sector’s emphasis on urban development in South Florida certainly pre-dates the recent building boom. As the region’s population migrated to the suburbs over the past 50 years, it became more and more difficult to find large parcels of land, so we have taken to developing communities in previously overlooked markets, such as Wynwood, Little Haiti, and Little Havana.

There are a number of examples of projects where Pinnacle Housing Group has taken one acre of land or less and made the economics work where a market rate developer could not. We have also found immense value in going into an urban area and reusing or mitigating environmentally damaged land and designated brownfields, as we have done at Los Suenos and the Corinthian.

GlobeSt.com: One of Pinnacle’s traditions is incorporating public art into its affordable housing communities. Where did this concept originate and why does the firm make these investments?

Friedman: The public art concept originated with one of our partners, Louis Wolfson III, whose family has made significant contributions to South Florida’s cultural base by supporting local artists and arts groups. Incorporating art into our developments has since become one of our trademarks and a beloved feature in the communities where we build.

Our partners have spent more than $2 million in private funds to date to outfit our properties with original art, affording our tenants and members of the surrounding neighborhoods an opportunity to live amongst paintings, mosaics, murals and sculptures. Our artworks also inspire and serve as a source of pride for our residents and the surrounding neighborhoods.

GlobeSt.com: What are the latest trends in affordable housing development and finance and where do you see Florida stacking up over the coming years by comparison with other U.S. markets?

Friedman: Affordable communities are becoming more responsive to environmental sustainability, in terms of green design and construction practices, efficient use of resources such as energy and water, and the incorporation of eco-friendly products and materials. We are also seeing developments that integrate affordable and market rate housing side-by-side in cities like Boston, New York, Chicago and Washington DC. With land in Florida growing more sparse and the demand here as high as in any other state, we can expect to see new mixed-income developments take shape in the near term.