How does the Florida Apartment Safety Act affect housing?

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In the early morning hours of June 24the seventh2021, a 12-story building with 136 apartments in Surfside, Florida, partially collapsed without warning. The Champlain South tower collapsed within minutes with 101 residents inside. Only three survived. The disaster gripped the nation, and even international experts came to Florida to help with recovery efforts. The questions began: what happened and what can be done to prevent such a disaster in the future? Last May, the Florida Legislature passed and Governor Ron DeSantis signed into law Senate Bill 4, the Building Safety Act to address collapse issues. However, well-intentioned local homeowners associations and building managers are already beginning to grapple with the new law’s far-reaching implications.

The law addresses two problems. First, an uneven revalidation process that existed at the time of the collapse. Recertification is a comprehensive review of the building structure after the issuance of a permit and certificate of occupancy by building inspectors. According to the Seminole County Chamber, “At the time of the Surfside collapse, only two of Florida’s 67 counties, Miami-Dade and Broward, had apartment recertification programs. At the time of the collapse, the Champlain South Towers condominium complex was 40 years old and was actively going through the 40-year recertification process required by Miami-Dade.

The legislature decided 40 years was too long and changed the requirement to 30 years, but also required “milestone inspections.” A state Senate analysis of the bill identifies new requirements

Condominium and cooperative association buildings that are three stories or more in height until the building reaches the age of 30 years and thereafter every 10 years or every 25 years are inspected for structural integrity by an architect or engineer. age and every 10 years thereafter if the building is located within 3 miles of the shoreline.

The law determines the new inspection regime and the requirements if defects are found.

Any building that was issued a certificate of occupancy before July 1, 1992 will undergo a “phase one” inspection before the end of 2024. If there are serious problems, condominium associations are making appropriate corrections. How many condos are affected?

That’s about 1.5 million condos managed by 28,000 associations across Florida, according to Greg Main-Baillie, managing director of Florida Development Services Group at Colliers. Main-Baillie expressed serious concern about the new law, while also supporting the measure. Many buildings have serious problems, and the government intervened immediately after the Champlain Towers disaster. But many people who manage and work with HOAs, including Main-Baillie, are concerned about what could happen.

Main-Baillie says HOA boards simply don’t have the skills or capacity to manage large capital projects. He wants to see the government require professional oversight to prevent fraud and abuse, as well as to ensure completion of projects and increase safety. Otherwise, he says, existing problems in the buildings could get worse or money wasted. And when it comes to money, who pays for all the extra updates to recertify condos in Florida?

In an email, Main-Baillie provided an example of how the new law would affect the average building and condo owner.

Construction supply and labor shortages only increase the dollar amount, which is in the six figures for some special assessments. For example, the Murano at Portofino, a 37-story, 189-unit tower in Miami Beach, faces a special assessment of $30 million, or an average of $160,000 per owner. [One owner] He recently posted on Facebook that his first appraisal payment was $52,525. With more than 2 million people calling condos home, the implications are far-reaching.

Kevin Kuchel and Martin Schwartz at the law firm Bilzin Samberg wrote a well-researched post titled: Senate Bill 4-D and the South Champlain Towers disaster: A problem in response to a problem And it spells out problems with the proposed law, problems that could create a real housing crisis for thousands of people unable to pay or finance huge assessments to make up for backlogs.

“If left essentially as it is now, it could displace thousands of people from their homes and force the end of condominiums across the state. This is due to simple economics. Owners of older housing units on limited or fixed incomes are unable to afford the increased assessments resulting from the new mandates. Financing options may be limited or non-existent. Any loss of affordable housing stock appears to exacerbate the existing shortage of affordable housing in Florida.

The real problem here is nothing new. In the west coast, the problem is earthquakes. There are many old unreinforced masonry buildings that will likely collapse in a significant seismic event. The government likes to issue fiat to fix these problems, and like the Florida legislature, cities like Seattle simply want the problem fixed without identifying who pays and how. I wrote about this problem in early 2021. The answer to this problem is to create incentives, including low-interest financing for repairs.

Main-Baillie agreed with me that many buildings are cost-effective through deferred maintenance. When repairs are deferred, the money saved means lower rents on rental properties and, for apartment dwellers, lower monthly assessments. Florida has the option of waiving contributions to savings accounts, and due to the peculiar nature of condo HOA governance, many condo boards want to keep assessments low for themselves and other residents, so repairs don’t get done.

With rental properties, this can mean that repairs become impossible for the current owner who eventually sells, leaving tenants behind to deal with the new owner. This often means that those tenants are forced to move due to major renovations to the buildings as well as large rent increases to pay for them.

In Florida, the legislature must mandate this with property owners: Delay maintenance or face the consequences. But this stick approach must come with a carrot. Experts in Florida are warning of another kind of crash, a financial meltdown.

When people can’t pay or take out loans to pay the big values, they abandon their homes, forcing wealthy buyers to raise properties for resale. It doesn’t help with affordability. Supporting low-interest loans to make repairs exposes the government to financial risks, but with interest rates on the mortgage market rising sharply, it makes sense for the government to invest in housing that is not only safe, but also affordable.