Miami Dade County's Proposed Affordability Controls For the Infill Housing Initiative

In 2006 the Miami-Dade County Commission has adopted a new Infill Housing Ordinance.  Click here to view a copy of the legislation.

The Ordinance covers County owned lots that are to be deeded to developers for the construction of affordable houses. It will also cover privately owned lots whose owners apply for the clearance of County liens.

The Ordinance is apparently being rushed through in reaction to a Miami Herald article about flaws in the administration of the current infill program.  Some believe that major or minor revisions are needed to almost every paragraph. The legislation was written without consulting lenders or experienced developers. Critics have suggested that the Ordinance not be rushed through without getting additional input. County officials should sit down in round table discussions with experienced developers and lenders to get their input.

In particular, the affordability mechanism seems poorly thought out and could cause problems unanticipated by the drafters (it is to be imposed by means of a Restrictive Covenant placed in the chain of title for each property).  Consider the following:

• Resale prices will be controlled for 30 or more years by an unnamed County bureaucracy. The prices that owners will be allowed to resell at will, presumably, be set at amounts well below the prevailing fair market values.

• Owners wishing to resell will be limited to an extremely small universe of potential "qualified" buyers (only those low and moderate income persons who have been certified and approved in writing by the unnamed County bureaucracy).

• Potential buyers wishing to become a "qualified" must first apply to the unnamed County bureaucracy.  There is no time deadline imposed upon the County for the approval or disapproval of such applications.

• Owners wishing to re-sell must first apply to the County for permission. The application must include a sworn affidavit, the proposed sales contract, and information on the proposed purchaser.  The County's approval or disapproval must be given in a "reasonable time" (30 days? 6 months?).  This assumes, of course, that the Owner (or broker) can figure out from the language of the Restrictive Covenant who in the County to submit the application to (OCED? GSA? MDHA? MDHFA? the County Manager?).

• The County's title restrictions are expressly stated to have priority over any mortgage. This will make it difficult or impossible for a prospective homeowner to get financing for the purchase.

• There will be nothing in the chain of title to indicate whether a particular resale had been approved by the County or not (leading to title issues for future owners).

In summary, the affordability mechanism may not prove to be workable in the long run. It has several serious drawbacks. Primarily, it will impose a significant ongoing administrative responsibility on the County. Owners, including second and third owners, will constantly need to know the price at which they can sell their property and the income limits of potential buyers. Hence, the County must be constantly monitoring so that it can respond to such inquiries. Maintaining a highly efficient, responsive, and user friendly County bureaucracy will be absolutely critical if disaster is to be avoided.  There is also be a continuing educational requirement as second and third owners will be largely unaware of the purpose of the original affordability program. Additionally most real estate agents will not handle transactions involving these houses due to the restrictions on the sales price and the potential buyers. Lenders will not want to participate for the same reasons and because their mortgages will be subordinate to the restrictions. Finally, the artificially low resale prices will have a depressing affect on market rate resale prices for other houses in the targeted distressed neighborhoods and accelerating the downward spiral of social and economic conditions.  

There are alternate solution that are perhaps more desirable. Click here to read an article on the advantages and disadvantages of the various alternatives for preserving affordabilty.