One of the key considerations for developers in Palm Beach County is how changes instituted under Florida’s Live Local Act (LLA) will affect the potential rental income of new projects. Under the LLA, projects that incorporate affordable housing units into mixed-use or multifamily developments may qualify for various incentives, including height bonuses, density adjustments, and tax exemptions. However, these developments also need to meet specific requirements, such as renting a portion of the units at below-market rates.

For developers and landlords, understanding the potential rental income under the Act is crucial for making planning and investment decisions. Here’s an overview of the rental income possibilities under the LLA.

Housing Requirements Under the LLA

The Live Local Act as it applies to housing projects in Palm Beach County mandates that at least 40 percent of the residential units in qualifying multi-family developments must be affordable for households earning up to 120 percent of the local area median income (AMI). This ensures that a significant portion of the units are accessible to lower- and middle-income families.

The revised act, (Senate Bill 328), clarifies that only the affordable units in a qualifying development must be rental units. The development property on the whole may include a mix of for-sale and rental products.

What to Know When Setting Rent Rates on an LLA Project

AMI is a key metric developers must tune into for LLA projects. In Palm Beach County, AMI is determined annually and varies depending on household size. To remain compliant with LLA regulations, rent for the affordable units in your development project must be capped at a percentage of a household’s income. This is typically around 30 percent of the household’s gross income.

That means rent for 40 percent of your units must fall within this threshold. The remaining 60 percent of the units in the mixed-use development, however, can be rented at competitive market rates for the area.

Calculating Potential Rental Income

To estimate potential rental income on a new multi-family development project that complies with the LLA in Palm Beach County, developers should:

• Determine AMI – First, understand AMI for the specific area where your development is planned.
• Set affordable rents – Next, calculate rents for the affordable units in your development, which are based on the percentage of AMI. For example, if the AMI for a family of four is $80,000, the income limit for those earning 120 percent of the AMI is $96,000. The affordable rent calculation would be 30% x $96,000 / 12 months = $2,400 per month.
• Assess market rates – Analyze local market rents and establish competitive rent rates for your unrestricted units.

• Calculate total rental income – Lastly, calculate the total projected monthly income by adding the combined income from your affordable units and your market-rate units.

In addition, you should also factor in incentives like the ad valorem tax exemptions and loan programs offered through the Florida Housing Finance Corporation when assessing profitability.

Contact Us at Seacoast Consulting Group with Questions

As you assess rental income potential and project feasibility under the Live Local Act, get in touch with our team at Seacoast Consulting Group. We keep close watch over changing regulations so we can advise clients on how these legislative updates will impact building projects in the tri-county area. To learn more or ask your questions about commercial construction in South Florida, give our office a call today at 786-433-8740.