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Florida’s New Live Local Act

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9 min read

From an Affordable Housing Perspective

Developers across the country are discussing Florida’s new law, the Live Local Act (the Act). Many developers are discussing the Act’s zoning preemption provisions and its Missing Middle property tax exemption, which provide incentives for renting to individuals or families with incomes at or below 120 percent of the median annual adjusted gross income (AMI) for households within the metropolitan statistical area, or within the county in which such person or family resides. 

At first glance, everyone can see the great potential the Act has as it relates to developing workforce housing in Florida. All these discussions surrounding the Act’s workforce housing provisions may have some affordable housing developers feeling left out. Although, the Act opens a realm of possibilities for market-rate developers to enter the workforce housing world; the Act adds provisions that directly assist affordable housing developers that may have been overlooked by many. This article focuses on those provisions that directly benefit affordable housing developers in Florida.

The Act – Overview
The Act went into effect July 1st, unless otherwise specified herein, and can be effectively broken down into three parts. The first part are statutes that preempt certain aspects of local government land use and zoning regulations (the Zoning Preemption Provisions); second, those statutes relating to the three new property tax exemptions (the Property Tax Exemptions); and, lastly, those statutes relating to funding, tax refunds and corporate tax credits (the Funding/Refund Provisions). 

Zoning Preemption Provisions
The Zoning Preemption Provisions amended, in part, Florida Statutes Sections 125.01055 (applicable to counties) and 166.04151 (applicable to municipalities). These statutes already provided local governments with tools for increasing the supply of affordable housing within their jurisdictional boundaries, but as a result of the Act, they now take certain decisions away from local governments by requiring them to administratively authorize multifamily residential as an allowable use in any area zoned for commercial, industrial or mixed-use if at least 40 percent of the proposed project’s residential units are affordable for a period of at least 30 years. The project may be strictly multifamily residential, or it may be a mixed-use project that includes multifamily residential, in which case at least 65 percent of the total square footage of the project’s improvements is used for residential purposes. Under the Act, the term “affordable” means that the monthly rents, including taxes, insurance and utilities, do not exceed 30 percent of the median adjusted gross annual income for people or families whose income is at or below 120 percent AMI.

Due to the Zoning Preemption Provisions, local governments in Florida may not require any comprehensive plan amendments, rezoning, conditional use approvals or any other special approvals for a multifamily residential project on lands zoned for industrial, commercial or mixed-use provided: (i) the project meets the affordability requirements; (ii) the project’s density does not exceed the highest density allowed on any parcel where multifamily residential use is already permitted in the county or municipality (as applicable); and (iii) the building height does not exceed the highest allowable building height for residential or commercial structures within one mile of the property proposed for development (and also within the county or municipality, as applicable). The density and height allowances are statutory minimums and, while local governments may not require less, they may authorize projects that exceed these minimums. Moreover, as indicated, the project must be administratively approved if it satisfies all other applicable land development regulations. If any other applicable land development regulations cannot be satisfied, then further action by the county or a municipality may be required to obtain the necessary relief.

The Property Tax Exemptions
The Act added three new property tax exemptions that a property owner may apply for upon meeting certain requirements, or when such exemption is adopted by a local government starting in 2024. Of the three, the most discussed exemption is the Missing Middle property tax exemption, which was added as subsection (3) to Florida Statute 196.1978 (the Missing Middle Exemption). However, the Missing Middle Exemption currently excludes from eligibility, units that are subject to a recorded agreement with Florida Housing pursuant to Florida Statute Chapter 420; and, therefore, effectively excludes many affordable housing developers from taking advantage of this property tax exemption. The other two property tax exemptions are the “Nonprofit Exemption” and the “Affordable Housing Exemption.”

A.  The Nonprofit Exemption
The Nonprofit Exemption – added by the Act via an amendment to subsection (1) to Florida Statute 196.1978 – first applies to the 2024 tax roll and sunsets on Dec. 31, 2059. It provides a property tax exemption for land owned entirely by a not-for-profit entity if the following requirements are met:

  • The not-for-profit entity is a corporation qualified as charitable under §501(c)(3) of the Internal Revenue Code and is in compliance with Rev. Proc. 96-32, 1996-1 C.B. 717;
  • The land is leased from the not-for-profit entity for a minimum of 99 years; and
  • The land will be predominately used for providing housing to natural persons or families whose income is at or below 120 percent of AMI.

To meet the “predominantly used for” requirement, the square footage of the improvements on the land used to provide housing to persons meeting the requirements under this exemption must be greater than 50 percent of the total square footage of improvements on the land.

B.  The Affordable Housing Exemption
The Affordable Housing property exemption was created under the Act by adding new Section 196.1979 to the Florida Statutes (the Exemption). For an affordable housing developer to take advantage of this Exemption, it must first be adopted by the respective county or municipality where the development is located (or to be located).  

The Exemption applies on a unit-by-unit basis and only to taxes levied by the unit of government granting the exemption. The Exemption ultimately provides a discount of up to 75 percent of the assessed value if less than 100 percent of the units are used to provide housing to natural persons or families whose annual household income is no greater than 60 percent AMI; or 100 percent of the assessed value if 100 percent of the units are used to provide housing to natural persons or families whose annual household income is no greater than 60 percent AMI.  

Generally, a property owner will be eligible to receive the Exemption if portions of the property in a multifamily project meet the following criteria:  

  • Provide affordable housing to natural persons and families whose annual household income does not exceed 60 percent AMI (the Income Test);
  • Are within a multifamily project containing 50 or more units of which at least 20 percent will be used to provide housing to natural persons or families meeting the Income Test (the Unit Test); 
  • Are rented for an amount that does not exceed the lesser of (a) the amount as specified by the most recent multifamily rental programs income and rent limit chart posted by Florida Housing Finance Corporation and derived from the Multifamily Tax Subsidy Projects Income Limits published annually by the U.S. Department of Housing and Urban Development; or (b) 90 percent of the fair market value rent as determined by a rental market study;
  • May not have been cited for three code violations in the preceding 24 months; have outstanding code violations; and have unpaid fines or charges relating to the cited code violations before the submission of the application; and
  • The property owner must apply on a form to be prescribed by the Department of Revenue by March 1 for the exemption, accompanied by a certification to be created by the applicable local government’s designated local entity, to the property appraiser.

The Funding/Refund Provisions
As it relates to affordable housing developers, the most significant law added by the Act is The Building Materials Sales Tax Refund law added under subsection (5)(v) of Section 212.08 Florida Statutes (the Sales Tax Refund).  

The Sales Tax Refund provides a project owner a refund for previously paid sales taxes paid on building materials used to construct new units that are (i) within a development subject to a recorded agreement with Florida Housing pursuant to chapter 420, to provide affordable housing to natural persons or families meeting the extremely-low-income (i.e., 30 percent AMI), very-low-income (i.e., 50 percent AMI) and low-income limits (i.e., 80 percent AMI); and (ii) are restricted under a land use restriction agreement.  

The term building materials is defined under the Act as any tangible personal property that becomes a component part of newly constructed units that meet the requirements in (i) and (ii) above (Eligible Unit). The term includes appliances but not plants, landscaping, fencing and hardscaping. The term “newly constructed” means improvements to real property that did not previously exist or the construction of a new improvement where an old one was removed. The definition under the Act specifically carves out renovation, restoration, rehabilitation, modification, alteration or expansion of a building already located on a parcel on which the eligible residential unit is built. 

The Sales Tax Refund applies to sales of building materials that occur on or after July 1st and takes the form of a post-construction refund to the project owner. The refund may not exceed the lesser of $5,000 or 97.5 percent of the Florida sales or use tax paid on the cost of the building materials per unit. A refund will not be granted unless it exceeds $500. 

To receive the refund, the project owner must file an application with the Department of Revenue. Such application must be submitted by the project owner either (a) within six months after the Eligible Unit is deemed substantially completed by the local building code inspector; or (b) by November 1st after the improved property is first subject to assessment. 

Going Forward
Although the buzz may refer to the provisions of the Act relating to workforce housing, the Act does provide incentives to affordable housing developers in the state of Florida. The new statutory provisions allow developers the opportunity to (i) develop projects on land that is currently zoned as commercial, industrial or mixed-use without the need for comprehensive plan amendments or rezonings; (ii) receive additional property tax exemptions previously unavailable; and (iii) receive a sales tax refund on certain building materials used to construct affordable housing materials. 

Each day we hear more and more from developers across the nation expressing their interest in the Act and/or actively seeking to develop projects in accordance with it. We hope that this Act is the first of many more laws to come in Florida that promote much-needed affordable and workforce developments.   

Hollie Croft is a partner in the Affordable Housing & Tax Credits practice of Nelson Mullins. Based in Orlando, she can be reached at hollie.croft@nelsonmullins.com.
David F. Leon is Co-Chair of the Firm’s Affordable Housing and Tax Credit Practice Group. Leon holds an AV Preeminent® rating with the Martindale Hubbell publication, a rating denoting the highest accolade an attorney can receive for his “legal ability” and “adherence to professional standards of conduct, ethics, reliability and diligence.” In addition to affordable housing matters, Leon handles corporate law, municipal financing, EB-5 transactions, VA housing programs, state and local taxation, USDA loans, HUD financing, new market tax credit and historic tax credit transactions. Leon is also deeply involved in micro-finance and capital raise transactions, and works to create programs for clients who are seeking crowd source, Reg. A Plus, or other types of funding utilizing programs similar to the Florida Intrastate Crowdfunding Exemption. Leon is a Certified Public Accountant. Before joining Broad and Cassel, Leon was a Senior Tax Associate with Coopers and Lybrand’s multi-state tax department in Orlando. Leon and his team close several hundred million dollars in tax credit and tax exempt financial transactions annually. He is a member of the USA Today Money Panel. Leon is a member of the Florida Bar. He is active in the community and is a staunch supporter of Sound of Grace and the Providence Theological Seminary. Leon has also served as an adjunct professor at Florida A&M University College of Law. He is married and has two daughters.
Nick Heckman is a senior associate in the Affordable Housing & Tax Credits practice of Nelson Mullins. Based in Orlando, he can be reached at nick.heckman@nelsonmullins.com.