Empty ‘spaghetti’ apartments and unfinished houses
This week, two bits of news bear mention and comment.
The first is that in Lee County, the apartment vacancy rate has spiked to 20.3 percent, with the highest rental vacancy rate for any major metropolitan area. Charlotte County is just below that, at 19.5 percent. Five years ago, vacancy rates were under five percent.
The second is a rare drop in same-store sales at Publix. Same-store sales were down 0.5 percent. This is an infrequent occurrence, especially in a time of extreme grocery inflation when “sales” go up because of pricing.
Both items signal a shift in the local economy.
How worrisome is unclear, but it is not a good sign.
The vacancy rate is to be expected. All one has to do is drive anywhere in Florida (or the U.S.) and you will see umpteen stick-framed four-story apartment complexes, with a “luxury” brand name and open outdoor corridors. Many of these were built with federal programs. They are not technically public housing, but the financing rules are so complex, and intertwined with state and local freebies and schemes and rules, that they are not organic to the market.
They used to just be called apartments, but today, developers and planning commissions prefer a focus-grouped code word, namely “multifamily housing,” which is a bureaucratic rebranding. The wording is designed to push high-density projects through resistant local zoning boards by evoking wholesome images of families, even though these buildings are designed primarily for singles, roommates and the retired.
Within the trades, they have a much more honest name: “spaghetti apartments.” The industry slang comes from the construction phase, where a chaotic, hyper-dense maze of thousands of 2×4 lumber studs resembles vertical noodles. To squeeze maximum profit out of the footprint, designers frequently use open exterior corridors to exploit loopholes in fire codes.
Over their lifetimes, these green-lumber structures can settle and shrink by inches as they dry while the rigid, unyielding plumbing lines stay entirely in place. This is all planned for. Some are almost a decade old.
We observed this pipeline at a Lee County meeting last year. At one meeting, it was packed with slick, young, well-dressed lawyers and investors, lined up at the trough for approvals, as the county parceled out millions in bonds and decided on winners and losers. The projects must not only go through local counties, but there are also tax subsidies and regular certifications, adding yet another cost layer to bureaucracy.
Developers are using a number of schemes for the projects, including the federal Low-Income Housing Tax Credit program with billions in high-leverage HUD/FHA Section 221(d)(4) mortgage guarantees and tax-exempt Multifamily Mortgage Revenue Bonds. There are also federal HUD HOME Investment Partnerships. This is direct federal risk mitigation and a clear subsidy. What is supercharging the Olive Garden pasta-bowl pipeline is Florida’s Live Local Act, which sweeps away some local guidance and scrutiny.
Let us say clearly that in one way, it is very good news to see deals for the average person and young person, who has not gotten a break for that most important item, a place to live. But the bad news is that this subsidy is affecting other markets. And the programs are so complex that it takes lawyers to sort out all the rules of financing. The buildings also have complex local reporting requirements each year to justify their costs. One Atlanta-based law firm, Nelson Mullins, has developed a full side business helping push these projects through. Their website shows a complex web of rules and arcane percentages based on income and federal law. This is not your grandfather’s little apartment rental-income project.
This is having an effect locally.
Take a drive through South Gulf Cove, for instance. There are dozens of unfinished house shells on streets, some with not even a garage door. Other projects are being slow-walked by builders, or are merely slabs with rebar sticking up.
For the person in Boca Grande, busy building a house for the few months that they are here, they can miss this local story. Many will choose to ignore it and hunker down.
But we are all of one ecosystem, and an American society.
A good exercise for all of us would be to take an evening drive around your own hometown this week, and see what you can see in the place where you are in the summer, places like Michigan, Maine, New Hampshire or North Carolina. What do you observe? What does your local built landscape look like? What is the health of the downtown near you? Or more importantly, what is the health and landscape of the town you grew up in?
In 2022, Lee Commissioners voted 5-0 to turn down the Eden Oak apartment project, located west of Shell Point Boulevard, because of its location in mangroves. And this year, Charlotte voted 3-2 to turn down the Hutton apartment project in Cape Haze. Both came up against strong environmental concerns, including their building in a coastal zone. The Sanibel-Captiva Conservation Foundation, or SCCF, was opposed to Eden Oak. And the Friends of Cape Haze and other groups rallied against the project in Cape Haze. Sadly, for the Cape Haze development, Bill Truex and Ken Doherty voted for it, in spite of clear evidence of its unsuitability in a coastal zone.
There can be sanity, when the issues are framed clearly. What can you, our readers, do to research and frame the issues, and encourage better decisions on development?
Garland Pollard is editor of the Beacon. Email editor@bocabeacon.com
