Source: South Florida Business Journal | Author: Brian Bandell | Date Published: June 14, 2019
Investors looking for a rehab or flip in South Florida have found fertile ground in low-income neighborhoods.
Recent data from Florida Realtors shows median sale prices for single-family homes in low-income areas have surged double-digits in 2018 – to the mid-$200,000s. Thirteen of the Top 25 ZIP codes for percentage growth in median home sale values last year were in low-income neighborhoods with large minority populations.
“People’s buying power isn’t as strong as it used to be with interest rate hikes,” Keyes Co. Realtor Ron Alishah said. “Take west Coral Springs, where the median sale price is $350,000. Other areas, like Lauderhill, have a lower price point, which is driving people with lower [loan] pre-approval amounts to those areas.”
The pricing jump in areas like Miami’s Liberty City and Little Haiti, and Fort Lauderdale’s Progresso Village generate healthy returns for investors. Alishah said the new buyers often have higher incomes than the existing population, so they generate more consumer spending in these areas. But experts fear residents and small businesses could be forced out as the communities become increasingly unaffordable.
Nearly half of South Florida’s workforce is in the tourism, hospitality, retail, and food industries, which pay a median annual wage of $26,532. So, low-income, minority neighborhoods typically serve as affordable havens for service workers to live.
Economic development experts also say that the lack of affordable housing for workers is often a chief stumbling block to luring companies to the region.
“Wage structures dictate that housing be available across the entire spectrum, especially on the lower end,” said Michael A. Finney, president and CEO of the Miami-Dade Beacon Council. “It certainly represents a challenge for individuals in lower-income jobs.”
Finney said the redevelopment of neighborhoods in economic distress is generally a good thing because properties are rehabilitated and the community becomes more attractive for business investment.
Home renovations and higher prices also impact renters. According to a review of multiple listing service (MLS) data by Ana Bozovic of Analytics Miami, rent for single-family homes in neighborhoods such as Fort Lauderdale’s Roosevelt Gardens, and Miami’s Allapattah, Wynwood and West Little River jumped over 60% since 2010.
“That is an indication of investors chasing yield and bidding up these properties,” Bozovic said. “The returns on the properties are fantastic compared to just about anywhere else in the area.”
Investor hot spots
Liberty City is a strong neighborhood for home investment because it has solid housing stock, willing sellers and attainable prices, said Fabiola Fleuranvil, CEO of Blueprint Creative Group.
Fleuranvil is a co-investor in the Miami Millennial Investment Firm, a group of young black professionals buying and rehabbing houses, while teaching about the benefits of homeownership and available grants.
“The Liberty Square area gets a bad rap, but there are pockets that are good areas and nice places to live,” she said. “A lot of foreign investors are acquiring property in Liberty City.”
Several years ago, her group bought houses priced below $100,000 in Liberty City, renovated them, and sold them for the high $100,000s, often while linking buyers with financial assistance programs, she said.
Vincent Viscomi, VP and Miami-Dade County area lending manager for Bank of America, said the advantage for homebuyers in lower-income neighborhoods is that many of those deals qualify for financial aid.
Once borrowers are pre-approved for specific loan amounts, they flock to these neighborhoods because there are many homes in their price range, he added. It also helps that areas such as Allapattah and Opa-locka are on higher ground, so flood and windstorm insurance rates are usually less costly, Viscomi said.
Now that home values in Liberty City are increasing – surpassing $200,000 in some cases – it’s more challenging to justify the cost of renovations and still sell for a nice gain, Fleuranvil said. Little Haiti has seen major value increases, but it varies by home, she said.
“On the same street in Little Haiti, for every $80,000 house there’s a $500,000 house on the market,” she said. “The existing houses are being rehabbed.”
Renovations have a big impact on an area’s median sale price, said William Hardin, director of the Jerome Bain Real Estate Institute at Florida International University. The least-expensive homes, especially those in foreclosure, are the easiest for investors to acquire and rehabilitate. When they are resold, they’re often among the neighborhood’s most expensive homes because they’ve been modernized, which brings the median sale price up dramatically, he said.
Claudienne Hibbert, a broker with Keyes in Miami Gardens, said middle-class families are moving to the area because it’s near Florida’s Turnpike and there is more retail and restaurant development with national brands. Educated homebuyers see the progress and feel comfortable living there, she said.
In Palm Beach County, lower-income neighborhoods in Riviera Beach and Lake Park posted some of the highest median sale price increases – over 12% in 2018.
Keyes broker Chip Armstrong said the county’s median home price of about $350,000 is out of reach for many buyers, so they find houses in Riviera Beach and Lake Park in the $200,000s, and usually end up with larger homes a short drive from the beach. The area has a reputation for crime, but that is improving, he added.
Lake Park recently rezoned much of its downtown to allow mixed-use buildings and more density, and attracted several breweries, Armstrong said.
“Lake Park has done a lot to bring younger millennial folks there to take over housing product,” he said.
Many of the neighborhoods with soaring home values have major commercial developments planned. While it’s not always clear whether the projects helped trigger housing price hikes, both phenomena are transforming the areas.
Wynwood has over 500 apartments and three office buildings under construction. The Magic City Innovation District could bring homes, offices, retail and entertainment to Little Haiti. Miami Beach developer Robert S. Wennett secured approval for a Bjarke Ingels-designed mixed-use project in Allapattah. A major Amazon.com distribution center opened in Opa-locka. Downtown Lake Worth has two apartment buildings in the pipeline.
When people hear about a proposal like Magic City, that drives home prices up because the neighborhood could be enhanced, Alishah said.
Fleuranvil has witnessed changes in the type of businesses in Little Haiti, with more catering to new residents.
“Little Haiti has been an immigrant community where Haitians came in and worked their way up,” she said. “But, it could be a hub for the next wave of immigrants. These are not the same type of people, economically or socially.”
Gentrification and displacement
The pace of housing-price increases, especially in lower-income neighborhoods, is not sustainable, said Ned Murray, associate director of the Metropolitan Center at Florida International University. Most residents in these neighborhoods are renters, so they are vulnerable to displacement, he said.
“It will not just impact housing affordability; it will impact the economy,” Murray said. “We won’t maintain workers or attract workers. South Florida won’t become livable for the average worker and the average family.”
As members of the middle-class move in and values rise, many renters in historically black neighborhoods will be displaced, Hibbert said. There aren’t many places left in South Florida with low rents, she added.
Gentrification of older neighborhoods has positive and negative aspects, said Nancy L. Robin, CEO and executive director of Habitat for Humanity of Broward County. Neighborhoods in Wilton Manors and Oakland Park have become more attractive as people renovate and flip homes. On Fort Lauderdale’s Sistrunk Boulevard, many formerly vacant lots now have upscale homes under construction, she added.
The rising cost of land forces Habitat to be more creative when acquiring property to develop affordable and workforce housing, Robin said. It’s working with cities to donate land and companies to subsidize acquisition costs.
“Affordability has becoming a crisis throughout South Florida, and it’s happening at a much faster rate than any of us had imagined,” Murray said. “If we don’t do something about it soon, we might lose the opportunity to develop and preserve affordable housing in many of these neighborhoods and communities.”