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VII. Housing Market Study

Profile of the Housing Inventory in the City of Miami

Housing Market Study Background

The following Housing Market Section of the City of Miami's HUD Consolidated Plan is intended to describe the physical or "supply" side of the City's housing environment. Together with the previous "General Housing Needs Assessment" and the subsequent "Special Housing Needs Assessment" sections of the plan, a clearer understanding of the City's housing issues and conditions should emerge that will help guide the subsequent Strategic Plan.

The objectives of a housing market study within a consolidated plan are to:

  • Analyze Miami-Dade County’s existing housing supply or inventory, including development trends in single and multi-family housing, housing prices, and residential vacancies and absorption rates.
  • Assess the City of Miami's inventory of housing, affordability, and housing conditions.
  • Discuss the "barriers to affordable housing" and specifically those public and private polices that might raise the cost of housing or discourage its development and maintenance.
  • Establish a list of "critical findings" to serve as the underpinnings for the Strategic Plan. The findings are based on the combination of key issues identified in the Housing Needs Assessment and the Housing Market Study.

Miami-Dade Housing Market

Overview

The City of Miami's current housing market has been strongly influenced by a combination of real estate supply conditions occurring within the larger Miami-Dade market and recent demand factors that have contributed to a significant increase in housing development activity within and adjacent to Miami's Central Business District (CBD).

The single greatest factor affecting the City's housing market is the continued growth in Miami Dade's population. Based on figures from Miami Dade County's Department of Planning and Zoning, the County 'is projected to experience a population growth increase of 736,466 or 32 percent by the Year 2025. This projected population increase is just under the County's historical population increase since 1970, a period in which the County grew by nearly 1.1 million people. The expectation of a sustained population increase is based on the assumption that Miami Dade County will continue to experience a large immigration inflow and statistical evidence that the natural increase (the excess of births over deaths), still contributes more than 40 percent of the population growth.

The population growth of Miami Dade County has a significant impact on housing demand and supply both within the larger County area and the City of Miami. While the City of Miami has lagged behind the County in population growth, the City did experience a growth of nearly 4,000 people flanked by 1990-2000 after previous decades of population decline. Most significant, is the fact that the largest population gains (nearly 15,000 people) occurred in the 35-54 age range, a large "working age" group. This population growth can be viewed as part of a larger demographic trend that has already begun to influence and alter the City of Miami's housing demand and supply. The following housing market analysis defines this demographic shift.

Housing Trends and Existing Supply

Between 1975 and 2001, there have been 160,236 single-family and 184,276 multi-family building permits issued in Miami-Dade County. During this period, Miami-Dade County averaged 12,600 building permits per year. As shown in Table 16 below, both single-family and multi-family building permit activity have significantly increased in Miami-Dade County since 1997.

Unlike the early-1990s (economic recession) and mid-1990s (pent-up demand), building permit activity in the past seven years has been steady. However, recent building permit activity reflects increases in both single and multi-family construction. New single-family homes authorized during the third quarter of 2003 totaled 2,292 units, up 38.5percent percent over the third quarter of 2002 (See Table 17 below). Single-family housing construction in 2003-2004 is forecast to be the highest since 1995, with most of the activity occurring in the southern unincorporated areas of Miami-Dade.

A total of 2,262 multi-family housing units were permitted during the third quarter of 2003, up a significant 62.9percent from the third quarter of 2002. Multi-family housing starts are expected to remain steady through 2004. Unlike the geographic concentration of new single-family housing in South Miami-Dade, new multi-family housing starts are primarily located in the City of Miami. A total of 1,553 multi-family units were permitted in the City during the third quarter of 2003 (see Table 18 below).

Multi-Family Occupancy and Vacancies

Miami-Dade County’s multi-family apartment occupancy rates remain high in all sub-markets with a 95.7 percent overall occupancy rate reported for the third quarter of 2003. The multi-family (apartment rentals) vacancy rate for Miami-Dade County increased slightly from 4.3 percent in November 2002 to 4.7percent in November 2003, which represented 2,389 vacant apartment units. The highest vacancy rates were found in Northeast Miami (8.5percent) and Central Beach/North Beach (8.0percent). The lowest vacancy rates occurred in Sunset (0.6percent), Hialeah (1.7percent), East Kendall (2.1percent) and in the North Gables, South Gables/South Miami area (2.2percent).

Absorption of New Rentals

Calculating absorption rates requires an understanding of local housing demand and includes such factors as historical trends in the local market and economic and demographic changes e.g. newly formed households, households moving into the market and household moving within the market. Total absorption is also based on the absorption performance of a local housing market looking at such factors as vacancies, rents and incentive programs. During the second quarter of 2003, a total of 779 new rental apartment units were absorbed in Miami-Dade County. This represents a 39.1percent percent increase from the second quarter in 2002. A total of 1,746 new apartments were absorbed through June, 2003 up 45.7percent from the same period in 2002.

For the six month period ending in June 2003 an average of 291 new rental units were absorbed each month. A total of 1,278 new units were available at the end of June 2003, which represented 4.4 months of supply at the pace of absorption during that period. During the six month period an average of 279 units were being completed each month while 257 units were started each month. Through October 2003, there were a total of 4,143 apartment units under construction in Miami-Dade. However, rental apartment building activity remains below the estimated demand level for 6,747 units per year according to Reinhold P. Wolff Economic Research, Inc.

The following tables depict the rental construction activity in Miami-Dade through October 2003. As previously noted, new multi-family housing starts are primarily located within the City of Miami. This is true for both new rental developments that are "under construction and lease-up" (Table 19) and rental developments that are "planned" (Table 20). In the category of new rental developments under construction and lease-up, 4,683 of Miami-Dade's 7,998 total units or 58.9percent are located in the City of Miami. Likewise, in the category of rental developments that are planned, 2,384 of Miami-Dade's 4,785 total units or 49.8percent are located in the City of Miami.



City of Miami's Housing Market

Inventory

According to the 2000 U.S. Census, there are a total of 148,388 housing units within the City of Miami, with an increase of 3,838 housing units since 1990. Approximately 35 percent of the City's housing stock is owner-occupied and 65 percent renter-occupied. The owner occupancy rate is nearly 24 percent less than Miami-Dade County. The City's overall residential vacancy rate declined from 9.9 to 9.6 percent between 1990-2000.

The City of Miami's total housing inventory is nearly split between single-family units (1unit detached and attached) and multi-family units (5 units and greater). Together, single-family detached (45,523 units) and 20+ multi-family structures (39,636 units) comprise 57.3percent of the City's total housing inventory.

Within the HUD Consolidated Plan, the City of Miami has created Neighborhood Development Zones (NDZs) in eight lower income neighborhoods to help stimulate urban revitalization and provide affordable homeownership opportunities for the City's workforce. As shown in Table 21 below, the eight NDZs generally reflect the same distribution of structure types as the City. Single-family and 20+ multi-family structures comprise the majority of the NDZs' housing inventory. The main difference between the NDZs and the City is that a larger percentage of single-family "attached" structures/units are found in most of the neighborhoods and particularly in the Little Havana and Edison/ Little River/Little Haiti NDZs.

While the City experienced an overall increase in housing units between 1990-2000, there were notable decreases in certain structure types. Of particular note was the loss of multi family units in structures containing 5-9 units and 10-19 units. During this period, the City lost 581 units (4 percent decrease) in 5-9 unit structures and 2,028 units (14 percent decrease) in its 10-19 unit structures. Overall, the City experienced a 5 percent increase in multi-family units, due primarily to market rate new construction in Downtown locations. The City's overall renter-occupied units decreased by 1,152 units between 1980-1990 and grew by only 206 units between 1990-2000.

Homebuyer Market

Single-family home prices in the City of Miami have increased significantly in recent years, due in part to a saturation of the housing markets in the western suburbs and Miami Beach and lifestyle changes brought about by the revitalization of the City’s Design and Performing Arts Districts, Brickell Village and Coconut Grove. Another contributing factor has been the recent influx of higher income immigrants from South America who favor the urban setting of Miami. According to the National Association of Realtors, the current median sale price for a single-family home in the Miami Metropolitan Area is $236,900.

The escalating price of single-family homes in the greater Miami area is also impacting sale prices in the City’s Neighborhood Development Zones (NDZs). While median sale prices remain below that of the Miami MSA, the high-end of the sale price range depicted in Table 22 below indicates some current single-family sales in the NDZs approaching or exceeding the median sale price for the MSA.

In calculating the effect of rising sale prices on "housing affordability", the median household income of the residents of the NDZs is applied to an "affordability index", which is computed as housing costs not exceeding the standard of 30 percent of monthly gross income. In Table 23 below this, calculation is determined using the median sale price of a single-family home applied against the median household income for each NDZ. Favorable financing terms were applied (Fixed 30 year mortgage @ 6 percent interest with a 5 percent down payment).

The housing affordability calculation using the index and financing terms described above shows a substantial "affordability gap" for each of the NDZs. The affordability gap is largest in NDZs, e.g. Wynwood and Little Havana, where the disparity between home sale prices and median household incomes are the greatest.

Of note, are the price ranges shown in Table 38 for "condominium" sales in the NDZs. Though few sales transactions were reported, the median sale prices in several of the NDZs, including Little Havana and Overtown were near or within the affordable price range for residing households.

Rental Market

According to the 2000 U.S. Census, gross rents in the City of Miami have increased by 32 percent since 1990. The escalation in rent prices can be attributed to the overall increase in housing values in the City, as reflected in current sale prices and restricted supply of housing to a .9 percent decline in the City's vacancy rate between 1990-2000. This is exacerbated by a relatively tight 5.6 percent vacancy rate in Miami-Dade as a whole.

As previously indicated, the City of Miami is currently experiencing a surge in multi-family housing starts and new developments in the pipeline. However, 76 percent of the 4,683 multi-family rental units under construction/lease-up and 73 percent of the rental units planned are market rate developments with rents ranging from $934 to $3,320 per month. Tax Credit rental developments begin as low as $504 per month, but comprise only 13 percent of the new rentals in the City of Miami. It should also be noted that Tax Credit multi-family rentals have typically smaller square footage than market rate units. The largest Tax Credit rental unit is 1,170 square feet compared to 2,375 for market rate units.

Rent prices in the City's NDZs remain lower than the City as a whole, but contract rents still exceed 30 percent of household income in all NDZs other than Coconut Grove (See Table 24 below). The highest percentages are found in Overtown, Wynwood, Little Havana and Edison/Little River. It should be noted that the range of the median contract rent in the NDZs is from $375 to $444. In comparison, the fair market rent for the Miami PMSA is $652 for one bedroom units and $813 for a two bedroom unit.

Age and Condition of the Housing Stock

Age of Housing

The majority (62 percent) of the City of Miami's housing stock was built prior to 1970. Approximately 44 percent of the City's housing stock was built prior to 1960, as compared to only 27 percent for Miami-Dade County (see Table 25 below). Only about 8 percent of the City's housing stock has been built since 1990 compared to 15 percent in the County.

An analysis of the City of Miami's Neighborhood Development Zones indicates a much older housing stock than the City as a whole and a smaller percentage of housing built since 1990. Model City (73 percent), Edison Little River/Little Haiti (72 percent) and Little Havana (64 percent) have significantly higher percentages of the housing stock built prior to 1970 with only 6 to 7 percent of the housing within these NDZs built since 1990.

Housing Conditions

According to the 2000 U.S. Census, 2,593 units or 1.9 percent of the City of Miami's housing stock lack complete plumbing facilities. This represents a 24 percent increase since 1990. The condition of the City's housing stock correlates to overall age with the highest concentrations of "unsafe structures" complaints based on code compliance existing in older, less redeveloped neighborhoods including Little Haiti, Model City and Little Havana (See Table 26 below).

The concentration of "illegal units" complaints based on building code compliance are generally found in neighborhoods where newer immigrants are concentrated e.g. West Little Havana, Coral Way, Flagami (See Table 27 below). In these neighborhoods both economic conditions and cultural factors contribute to property owners creating building additions to accommodate extended families or groups of like immigrants.

Areas of Concentrations of Low Income and Racial Minorities

Areas of Low Income Concentration

According to the 2000 U.S. Census, the City of Miami's Median Household Income is currently $23, 483. This is substantially less than both Miami-Dade County ($35,959) and the Miami PMSA ($39,749). Within the City, there are areas of concentration of low income that have been traditionally targeted for HUD program assistance including designation as Neighborhood Development Zones (NDZs). The table below indicates these low-income concentrations by NDZ and income category.

The above table indicates that the "less than $10,000" household income category comprises the largest (15,241) amount of households within the City's NDZs. Among the NDZs, Little Havana (6,230) and Edison/Little River/Little Haiti (2,984) have the largest concentrations based on total numbers. However, Overtown (41 percent), Model City (39 percent), Wynwood (39 percent) and Allapattah (33 percent) have the highest percentages of households in the lowest income category.

Areas of Racial Concentration

According to the 2000 U.S. Census, the City of Miami's Hipic population is 65.8 percent (238,351 persons) of the total population, an increase of 3.3 percent since 1990. Miami-Dade's total Hipic population is 1,291,737 or 57 percent of the County's total population. The City of Miami's Black/African-American population is 22.3 percent (80,858) of the total population, a 5.1 percent decrease since 1990. Miami-Dade's Black/ African-American population is 457,214, or 20.3 percent of the County's total population.

Within the City of Miami there are significant concentrations of racial minorities that exceed both the City and County overall percentages. As is the case of the low-income concentrations shown above, the highest concentrations of racial minorities also exist within the City's NDZs (See Table below).

The highest concentrations of Hipics are found in Little Havana (93 percent), Allapattah (85 percent) and Wynwood (72 percent). The highest concentrations of Black/ African-Americans are found in Model City (96 percent), Coconut Grove (88 percent), Overtown (74 percent), and Edison/Little River/Little Haiti (68 percent).

Barriers to Affordable Housing

Land Use and Zoning

City land use policies play a significant role in determining the amount and availability of affordable housing within a community. City land use policy guides the location of housing types and densities. Zoning is the planning tool for implementing housing development and regulating its construction. Through zoning incentives, private and non-profit developers can help a City address the housing needs of its low- and moderate-income population. Moreover zoning incentives that increase the density of housing development and provide for a mix uses including transit, are important tools for expanding the local supply of both affordable homeownership and renter housing.

Currently, the City of Miami uses "special districts" in locations throughout the City to provide for greater densities, uses and design standards. Similar districts need to be considered for NDZs as part of larger neighborhood revitalization plans.

Public Infrastructure

Public infrastructure investment can be an important catalyst for housing development activity. Public infrastructure investment has been used successfully in South Florida when targeted to community redevelopment areas. Public infrastructure improvements have also been effectively used in conjunction with model block purchase/rehabilitation programs, helping to insure the investment of both private lenders and first time homebuyers.

It is clearly evident that most streets within the City's NDZs lack adequate public infrastructure. Not only does this detract from the physical aesthetics of the streets and surrounding neighborhoods, it also transmits a message that these neighborhoods are low priority.

Private Lending

According to the 1991 Economic Development Implementation Plan (EDIP) for Miami Dade, the local banking market has gone through dramatic shifts in the past ten years. Large banks, while attempting to fulfill Community Reinvestment Act (CRA) commitments, still have no stake in Miami-Dade over another market area. Capital market assessments once required by the CRA of regulated financial institutions must be undertaken and differentiate between community needs and market demand. While community needs have been well documented, the demand for capital and financial products and services has not. Another important piece of the capital-market assessment is verification that existing financial institutions are unable or unwilling to fill the identified gaps. From the perspective of the homebuyer, a review of Home Mortgage Disclosure Act (HMDA) data in the County's minority areas will unveil that many of the area's top lenders are private mortgage lenders who are considered "sub-prime lenders". The EDIP report cites "these lenders have often been accused of high fees and interest rates as well as onerous terms that lead to increased foreclosures in these areas."(FIU Metropolitan Center, 2001)

A recent survey and analysis of private lending patterns in Miami and Miami-Dade revealed certain institutional barriers to affordable housing. Analysis of home purchase and refinance loans in Miami-Dade County market shows "several patterns of disparate service and under-service to minority markets." Hipics and especially African Americans show significant racial disparities related to higher failure rates for conventional loan applications, unusually high levels of FHA lending and clearly higher levels of sub-prime lending when compared to whites or predominantly white areas (Calvin Bradford & Associates, 2003)

Housing Market Study Findings

The following is an extraction of the key findings from the Housing Market Study. The findings consider the prior "Needs Assessment Section" and those housing issues deemed most relevant for the subsequent formulation of the Strategic Plan.

Current Level of Multi-family Rental Construction Activity

    Finding 1:

    Miami-Dade County and particularly the City of Miami is experiencing a surge in multi-family rental construction activity.

    The Market Study indicates that Miami-Dade County and particularly the City of Miami is experiencing a surge in multifamily rental construction activity. The study found there are currently 7,998 rental units under construction in Miami-Dade County and another 4,795 planned. Third Quarter 2003 construction activities were up 62.9 percent from the previous year. Most of the multi-family rental activity is occurring in the City of Miami representing 58.9 percent of units under construction/lease-up and 49.8 percent of all units planned.

    Finding 2:

    Occupancy rates are high in all submarkets.

    Despite an up swing in the level of multi-family rental construction activity, Miami-Dade's occupancy rates remain high in all sub-markets with an overall Third Quarter 2003 occupancy rate of 95.7 percent. The current inventory represents 4.4 months of supply at the rate of absorption of new units over the previous six months. Based on the estimated annual demand for about 6,747 new apartments, the inventory could total 3,374 units without being excessive.

    Finding 3:

    Vacancy rates have declined.

    The overall vacancy rates for the City of Miami and Miami-Dade have declined between 1990-2000. The City's declined from 9.9 to 9.6 percent, while the County experienced a significant drop from 10.2 to 8.9 percent.

Affordability of the Multi-family Rental Market

    Finding 4:

    The majority of the multi-family rental activity is market rate or upscale.

    The Market Study found that the vast majority of new multifamily rental activity is market priced and above (upscale). Market rate and upscale rental units comprise 76 percent of all units under construction/lease-up and 73percent of all units currently planned.

    Finding 5:

    Tax credit multi-family rental comprises only 8 percent of units under construction/lease up within the City of Miami.

    Tax Credit multi-family rental activity comprises 24percent of multifamily rental units under construction/lease-up and 27percent of units currently planned. Of these totals, only 8percent of the units under construction/lease-up are within the City of Miami and 13percent of those units are planned.

    Finding 6:

    The City of Miami’s stock of affordable multi-family rental units are declining and not being replaced with new construction.

    The Market Study also determined that the City of Miami experienced a loss in multi-family structure types between 1990-2000. The City lost 14percent of its units in 10-19 unit structures (2,028 total units) and 4percent of its units in 5-9 unit structures (581 units). These structure types traditionally support affordable rental housing in older urban neighborhoods.

Homebuyer Affordability Within Neighborhood Development Zones (NDZs)

    Finding 7:

    Significant single-family affordability gaps exists in the NDZs

    The Market Study determined that significant single-family home purchase "affordability gaps" exist within the City of Miami NDZs. The large affordability gaps are caused by two critical variables: 1) low median household incomes within the NDZs, and 2) escalating single-family home prices within the NDZs.

    The affordability gaps are highest within NDZs where median single-family home prices are the highest including Wynwood ($65,202 gap), Little Havana ($64,676 gap) and Coconut Grove ($57,233 gap).

Potential Condominium Market within NDZs

    Finding 8:

    Potential Condominiums Market exists within the NDZs

    The Market Study determined that there is a potential "affordable" condominium market emerging within several of the NDZs. Condo sales activity in Little Havana and Overtown, in particular, show starting and median sale prices within or near the affordability requirements of households in these neighborhoods.

Affordability of Existing Rental Housing

    Finding 9:

    Existing contract rents within the NDZs are above the 30 percent threshold for neighborhood residents and will likely increase.

    The Market Study determined that existing contract rents within NDZs are above the 30 percent threshold for neighborhood residents. Lack of rental affordability is greatest in Overtown (38 percent) and Wynwood (36 percent).

    The lack of rent affordability within NDZs is largely the result of low median household incomes as contract rents are substantially below the City's median contract rent.

    The lack of rental affordability is likely to increase as contract rents begin to catch up with market rents. Also, the dwindling supply of multi-family structures e.g. 5-9, 10-19 unit structures will tighten the rental market and impact rent prices.

Combination of Unsafe Structures and Age of the Housing Stock within NDZs

    Finding 10:

    Most of the housing stock is over 30 years old. Deferred maintenance and costs associated with code violations will increase the overall purchase price of homes in the NDZs.

    The Market Study showed a correlation between neighborhoods having the highest complaints of "unsafe structures" and those neighborhoods having the highest percentages of older housing, e.g. Little Haiti, Model City and East Little Havana.

    As these neighborhoods have been designated as NDZs, rehabilitation costs associated with code violations and deferred maintenance will significantly affect the overall purchase price of homes in these areas.

Concentrations of Low-Income Populations within NDZs

    Finding 11:

    Households that earn $10,000 or less make up the largest income categories in the NDZs.

    The Market Study concluded that the "less than $10,000" household income category comprises the largest (15,241) amount of households within the City's NDZs. Among the NDZs, Little Havana (6,230) and Edison/Little River/Little Haiti (2,984) have the largest concentrations based on total numbers. However, Overtown (41 percent), Model City (39 percent), Wynwood (39 percent) and Allapattah (33 percent) have the highest percentages of households in the lowest income category.

    The existence of large concentrations of low-income households within the City's NDZs can be attributed to several factors including low wages, lack of education and worker skills and chronic unemployment. This creates a major impediment for these intended housing markets (NDZs).

Barriers to Affordable Housing

    Finding 12:

    Existing land use and public infrastructure policies have limited private sector investment in the NDZs.

    The Market Study identified several barriers to affordable housing in the City including land use and public infrastructure policies and decisions that have limited private investment opportunity in the NDZs. For example, land use and zoning can serve as barriers to affordable housing by functioning as "disincentives" to both private and non-profit developer sponsors. Conversely, land use and zoning can serve as "incentives" to developers by providing opportunities for creating mixed-use, higher density projects that, in turn, can stimulate mixed-income housing in designated neighborhoods.

    Public infrastructure investment is critical to affordable housing development because it creates a physical stabilization effect that encourages private investment by homebuyers, while reassuring private lenders who may have been reluctant to invest in these areas. Streetscape improvements e.g. sidewalks, curbing, landscaping, are particularly important as they noticeably improve the physical image of a neighborhood.

    Finding 13:

    There are significant patterns of disparate service and underservice in private lending to minorities.

    The market study also provided analysis of home purchase and refinance loans in the Miami-Dade County market that showed patterns of disparate service and underservice to minority markets. Hipics and especially African Americans showed significant racial disparities related to higher failure rates for conventional loan applications, unusually high levels of FHA lending and clearly higher levels of subprime lending when compared to whites or predominantly white areas.