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Business Observer Thursday, Nov. 11, 2021 3 weeks ago

Balancing act: How can high-dollar condos and affordable housing co-exist?

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The frenzied pace of glorious luxury condos going up in downtown St. Pete comes with a not-as-pretty side effect.
by: Louis Llovio Commercial Real Estate Editor

As the number of luxury apartment towers continue to sprout like weeds in downtown St. Petersburg, a growing chorus of local residents see themselves being priced out of the neighborhood.

A small but especially vocal group made its presence known in late October during a ceremonial groundbreaking for 400 Central — what’s said to be the largest luxury tower being built on Florida's Gulf Coast. As politicians, city officials and members of the city’s real estate and business community gathered to hear speeches in the shadows of construction cranes dotting the skyline, some protesters shouted them down, accusing leaders of running them out of town.

While it’s unlikely any minds were changed by the protest, it was a good example of how some residents are feeling as the number of high-priced condo projects continue to be built in downtown St. Pete and housing prices go up.

But is it true that people are being priced out of their homes?

No question downtown St. Petersburg prices are rising — as they are across the region and state.

According to real estate data company Clever Real Estate, Tampa Bay, for example, has an average home price of $277,811, a median household income of $72,700 and a house-price-to-income ratio of 3.8.

Clever says the average ratio experts recommend is 2.6. 

From 2019 to 2021, the average house-price-to-income ratio in the area rose by 14.9%, making homes here, on average, 5.4 times higher than a typical homebuyer’s gross income. This, Clever says, makes Tampa Bay the 21st least affordable area for housing in the country or state. That's pretty much in the middle, as Clever's study looked at the top 50 metro areas as defined by the U.S. Census.

In Orlando, the average home price was $293,443, the median family income was $70,800 and the price-to-income ratio at 4.1. In Miami, the average home price was $342,684, the median family income was $61,000 and the price-to-income ratio at 5.6.

The squeeze  

Rising prices can be seen across Tampa Bay, but the concentration in downtown St. Petersburg has affected an area changing for several years now, with restaurants, shops and condominiums coming on the market at a frenzied pace.

“Obviously housing affordability is a problem across the nation and in the state of Florida, but I think we have a robust program to try and provide units out there at different incomes for people to take advantage of,” Robert Gerdes, neighborhood affairs administrator for the city of St. Petersburg.

For many locals, rising costs that came with the growth has been suffocating. At the 400 Central event, protesters chanted “Your luxury is our displacement.” That’s understandable sentiment from someone who, rightly or wrongly, feels squeezed out.

Robert Gerdes, neighborhood affairs administrator for the city of St. Petersburg, says the city is aware of the situation and trying to address it.

He says the city is in year two of a 10-year plan to rein in housing costs and increase homeownership. This plan includes helping low income families and individuals become homeowners by providing 150 lots to build on and down payment assistance. The city is also working on helping existing homeowners who may be struggling with repair assistance, rehab assistance and helping address code violations in an effort to make sure homes remain habitable. This, the city says, will allow about 3,200 struggling homeowners to stay in their homes.

The plan, according to city officials, is funded through state, federal and local funding, including fees paid by developers.

And Gerdes says City Council is working on a dedicated zoning district that will allow the construction of multifamily units where they normally wouldn’t be allowed.

One of the lynchpins of the plan is the construction of 2,400 apartment units. These will be affordable and workforce housing, where rent is set based on a person’s income, though there will be market rate apartments as well. The city has currently partnered to fund 650 units, which are under construction. The $60 million project is city funded but, according to the detail on the city’s website, “since most of these funds are sourced by taxes already paid to each level of government, everyone is contributing to this important solution.” 

The idea behind the push, says Gerdes, is to increase the housing supply in order to keep costs down.

“Obviously housing affordability is a problem across the nation and in Florida, but I think we have a robust program to try and provide units out there at different incomes for people to take advantage of,” Gerdes says.

Rise up

The protesters at the groundbreaking for 400 Central, however, don’t seem to agree that the city is doing enough.

Using a bullhorn to disrupt the presentation, they repeatedly charged St. Petersburg Mayor Rick Kriseman for lying to them and for betraying working people.

Kriseman, a two-term Democrat leaving office in January due to term limits who has been sympathetic in the past to similar causes from similar groups, did not respond, telling the audience the city “likes change.”

“Not simply for the sake of change," says Kriseman, who also spent six years on the city council, "but we like change that makes sense and that helps move us forward.”

(John Catsimatidis, a colorful New York billionaire who counts among his holdings the New York City supermarket chain Gristedes and, through New York-based real estate firm Red Apple Group, is the lead developer of 400 Central, did respond to the audience. From the stage, Catsimatidis shouted for them to chant louder and approached them afterward and told them to “Yell louder. You have the right to speak.” The praise only went so far. “God bless you,” he said from the stage. “If you worked harder, you could live here. Go get a job.”)

And while a tiny number of protesters can't be the gauge with which a subject as complicated as affordable housing can be measured by, they are likely right that luxury developments may make it harder for working people living in downtown St. Petersburg to maintain the status quo. That’s because economics principles dictate that the development of about a half dozen high-end luxury towers is undoubtedly going to make it more expensive to live in the area.

As more people with higher income move in, retailers, restaurants and other businesses to serve them will soon follow, says Francesca Ortegren, a data scientist for Clever. It stands to reason, she says, that if the people living in the area can afford high-dollar condo, the businesses coming will likely cater to that demographic.

Not only that, but as sale prices increase other property prices will increase, too — as will property taxes on owners. That, she says, will take a toll on small local businesses in the area as well as residents.

The tide could turn, Ortegren says, if property owners are incentivized not to raise rents.

But the question facing those low and middle income residents living in the shadows of new towers and among construction sites, is even if rents stay low and if existing rent control policies remain in place and if the city helps with buying a house, what difference does it make if the new supermarket drawn by the condo residents opening down the street sells Gruyère when they can barely afford Velveeta?

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