The issue of historic districts in Miami has become a highly polarized issue in recent years. While preservationists are determined to keep at least certain parts of Miami the way they are for years to come, some developers and property owners feel differently. Developers stand to increase their return on investment when they tear down old buildings and build more modern developments that command a higher and better use. Property owners of historic buildings are often faced with near impossible building regulations, astronomical fees and cost burdens to keep up with historic designations…. all while being stuck with a property that often can be repurposed or redeveloped to a higher and better use.
Historic Districts Cited by Preservationists as Smart Financial Investments
Preservationists argue that keeping historic designations and districts is not just good for protecting Miami’s past, but it also makes for smart financial investments. According to recent economic impact reports published by the county, there are long-term financial gains, primarily achieved by slowing gentrification and maintaining natural affordable housing.
The county report, titled “Enhancing Paradise,” is a 53-page analysis of 28 local historic districts. The study takes into account property values, growth management, tax generation, job markets, diversity, stability, transportation, natural resources, environments, community health, safety and resiliency.
A second report, conducted from June to August 2017 by PlaceEconomics principal Donovan Rypkema, examined locally designated historic districts in Miami-Dade and in Coral Gables, Homestead, Miami, Miami Beach and South Miami. Titled “Incentives, Tools and Strategies Assessment,” this report attempts to explain the benefits of preservation incentives and provides an outline of nine recommendations to carry out the plan.
Historic districts examined include Little Havana, Morningside, MiMo Biscayne Boulevard and Buena Vista East in Miami; Española Way and Flamingo Park in Miami Beach; Historic Downtown Homestead and Cauley Square in Homestead; Cambridge Lawns in South Miami; and Macfarlane Homestead in Coral Gables.
Historic districts are a relatively small percentage of Miami: less than 2% of the county is designated as historic; 18% of Miami Beach, 11% of Coral Gables, 2% of Miami, 1% of Homestead and 1% of South Miami currently carries the designation.
Miami Beach Historic Districts Costly for Property Owners Who’s Hands Are Tied by Regulation
The relatively high percentage of historic properties in Miami Beach is particularly interesting given the recent slew of city regulations that has severe limitations on property rights. As we have reported in-depth, the City of Miami Beach currently has legislation on the books that prohibit renting short term, which is considered less than six months and one day. Together with the non-profit Goldwater Institute, we worked to file a lawsuit against the city to relax these laws, which we feel goes against the state constitution and unfairly strips property owners of their rights. The current fine for renting short-term is $20,000 on the first offense, and has even been discussed to be punishable by jail time.
For a large majority of owners in these historic districts, and Miami Beach as a whole, they are not able to cover their fixed expenses through market rents collected in long-term leases. Rising property taxes, flood mitigation, and other property related operating expenses often fall short of annual rental income. Now enter additional historic designations to the equation: these regulations make it even more expensive to do renovations, modernize or redevelop, which also keep rents low, making for a vicious cycle of increased burden for property owners. The irony of the situation is that the city wants property owners to pay through taxes and historic preservation, but then they tie their hands not allowing them to maximize their income. The result is often properties left in disrepair and owners waiting for something to give to make it feasible for them to properly maintain their buildings.
Who Should Bear the Expense?
We agree that historic preservation is important. And even more so, we are staunch believers that Miami is in need of more affordable housing, as we have previously reported. But to do this, something needs to give. Preservationists cite that the districts provide affordable housing through “a range of housing sizes with older, smaller and centrally located homes,” and the assessed value per acre of property in the areas is 3.8 times that of the rest of the county, the “Enhancing Paradise” report states. Between 2002 and 2016, single-family houses in local historic districts increased in value 7.3% each year, compared with just 3.5% for houses in non-historic districts.
Just this week, City of Miami Commissioner Ken Russell successfully lobbied Miami’s leaders to tentatively adopt the first-ever mandatory affordable-housing ordinance in city history. The commission agreed to force developers building in the “T6-24B” zoning area — parts of the urban core near the Adrienne Arscht Center, club district, and the border with Overtown — to create apartments affordable to residents making between 60 to 140 percent of the city’s median income. In exchange, developers will receive zoning benefits including permits to build slightly larger buildings than typically is allowed. The measure is aimed at helping the city’s working class, as well as low-income individuals, but it will need to pass a second commission reading before formally becoming law.
There is no magic bullet to solve the issue of affordable housing, historic preservation and allowing developers and property owners to make enough revenue to justify new projects and renovations of existing buildings. The ordinance proposed by Mr. Russell does lean towards one of the better solutions – to require new developments to include a portion of the buildings to include affordable housing in exchange for incentives. But until something is done to relax the laws allowing owners to make higher and best use of their properties, including taxed and regulated short-term-rentals, we will continue to have issues. As sea-levels rise, property taxes rise and insurance rates spike, there is little time left for Miami to put plans in place to secure our economically feasible future.