Florida’s Live Local Act: Implications for Developers, Lenders, and Investors

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Today’s real estate landscape in Florida has been reshaped by the Live Local Act (Senate Bill 102 of 2023) – a sweeping affordable housing law that preempts local zoning to encourage multifamily development.

Background and Objectives of the Live Local Act

Florida’s Live Local Act was signed into law in 2023 amid a statewide housing affordability crisis. With broad bipartisan support, the Act aims to spur the production of affordable and workforce housing by removing local regulatory barriers and providing financial incentives. It reflects a legislative intent to override restrictive zoning and accelerate development on underutilized commercial sites. In essence, the Act seeks to “upzone” qualifying projects by right, in exchange for including affordable units, thereby addressing the shortage of attainable housing while still attracting private capital.

Key objectives and context include:

• Legislative Context: The Act was introduced as SB 102 in 2023 and passed overwhelmingly as Chapter 2023-17, Laws of Florida. It was part of a broader housing initiative appropriating over $700 million to affordable housing programs. Subsequent amendments in 2024 and 2025 (SB 328 and SB 1730) refined definitions and expanded provisions, reflecting lawmakers’ commitment to making the Act effective.

• Policy Goal: The primary goal is to incentivize mixed-income development by granting state-level preemptions over local zoning. This allows developers to build higher-density, taller projects than local codes would ordinarily permit, provided a portion of units are set aside as affordable. The Act is essentially a pro-development, pro-affordable housing measure balancing free-market principles (encouraging private development) with social aims (increasing affordable supply).

• Housing Affordability Crisis: Florida’s rapid population growth and rising rents set the stage for the Act. By cutting red tape and offering tax breaks, the Act aims to improve project feasibility for housing that serves moderate and low-income households. It addresses the criticism that local zoning (often influenced by NIMBY opposition) has stifled multifamily construction in many communities.

In summary, the Live Local Act represents a paradigm shift in Florida’s housing policy – using state preemption to override local zoning for the sake of affordability. This has far-reaching implications across the real estate industry, as detailed below.

Key Land Use Provisions: Zoning Preemption, Density, Height, and FAR

At the heart of the Live Local Act are statewide land use provisions that supersede local regulations for qualifying developments. These provisions significantly expand what and where developers can build:

• By-Right Multifamily in Commercial Zones: The Act requires local governments to allow multifamily residential or mixed-use projects on any site zoned commercial, industrial, or mixed-use, without requiring a rezoning or comprehensive plan amendment. In other words, if a parcel is legally zoned for any kind of commercial or industrial use, a developer can now build housing on it by right (as long as affordability conditions are met). This preemption opens up vast swaths of non-residential land for potential apartment projects, including shopping centers, office parks, and light industrial areas that were previously off-limits for housing.

• Density Preemption: Local governments may not enforce density limits on qualifying projects below the highest density currently allowed in their jurisdiction. Practically, this means a developer can use the maximum dwelling units per acre found anywhere in the city or county as the allowable density for the project. For example, if the highest residential density in a city is 60 units/acre in a downtown zone, a qualifying Live Local Act project can utilize that same density on a commercially zoned site elsewhere. This effectively upzones the site to a much higher unit count than the underlying zoning would normally permit. Some municipalities have extremely high theoretical densities (City of Miami’s guidance notes up to 1,000 units/acre as the upper bound under the Act).

• Height Allowances: The Act also preempts local height restrictions. A qualifying development can build up to the tallest height currently allowed for a commercial or residential building within a 1-mile radius, or at least 3 stories, whichever is greater. This one-mile comparator rule means if a tall building exists (or is allowed) nearby, the new project can match that height. For instance, if there’s a 12-story building within a mile, the project can go 12 stories by right, even if the site’s zoning is low-rise. SB 328 (2024) clarified that “highest currently allowed height” refers to heights permitted by right (excluding special variances or bonuses). It also introduced a safeguard for single-family neighborhoods: if a project is immediately adjacent on two sides to a single-family zone with at least 25 homes, its height may be limited to 150% of the height of the nearest homes or 3 stories, whichever is greater. This was a response to concerns about high-rises looming over residential suburbs.

• Floor Area Ratio (FAR) and Intensity: While the original 2023 Act did not explicitly mention FAR, the 2024 amendments added a 150% FAR bonus preemption. Local governments cannot restrict a qualifying project’s floor area ratio below 150% of the highest currently allowed FAR in the jurisdiction. In effect, if the most intense zoning district in a city allows, say, a 4.0 FAR, a Live Local project could achieve a 6.0 FAR on a qualifying site. This can significantly increase the buildable square footage (and thus unit count or amenities) on the site. Many Florida cities use FAR to regulate bulk; the Act ensures affordable projects can maximize building size beyond normal limits. (In the City of Miami’s implementation, this translated to an allowed Floor Lot Ratio of up to 36 in certain high-density zones, reflecting 150% of an already high baseline FAR.)

• Use and Zoning Categories: Qualifying developments are treated as conforming uses in these non-residential zones. The Act overrides any prohibitions on residential use in commercial or industrial zoning. Notably, if a county or city has very limited commercial/industrial land (less than 20% of its area), it is not forced to allow purely residential projects on those parcels – it can require a mixed-use component. This exception prevents small communities from losing all their scarce commercial land to housing. Additionally, sites designated as recreational or as “commercial working waterfront” (e.g., marinas and port facilities) in industrial zones are excluded from the Act. Otherwise, even many planned unit developments (PUDs) or special districts can qualify if they permit commercial or industrial uses.

• Parking and Other Local Requirements: The original Act encouraged local governments to reduce parking requirements for affordable housing near transit, but did not mandate it. Recent tweaks have made this a requirement: for example, 2025’s update requires at least a 15% parking reduction for projects within 1/4 mile of transit stops or 1/2 mile of major transit hubs. In some cases, parking minimums are eliminated entirely for projects in designated Transit Oriented Development areas. Aside from parking, the Act stipulates that all other state and local regulations still apply unless specifically preempted. This means building code, environmental regulations, stormwater, concurrency, and other typical development standards (setbacks, open space, etc.) remain in force. Design review is a gray area – some cities have tried to impose design criteria, but the 2025 amendment explicitly forbids local governments from layering on extra discretionary reviews for qualifying projects. Approvals must be administrative only, barring design boards or city commissions from dragging out the process.

In sum, the Live Local Act dramatically expands by-right development capacity for multifamily housing. Zoning, density, and height restrictions are effectively preempted for projects that meet the Act’s affordability criteria. For developers, this is a game-changer: it means previously unviable sites can now support large-scale projects without the uncertainty of rezoning. The trade-off is that the project must include a substantial affordable housing component, as detailed next.

Affordability Requirements and Compliance Conditions

To take advantage of the Act’s zoning overrides, a development must meet strict affordability thresholds. The law is essentially a grand bargain: greater development rights in exchange for providing affordable units.

Affordability threshold: At least 40% of the residential units must be “affordable” – meaning restricted to certain income levels – and maintained as such for a minimum of 30 years. This 40% set-aside is substantial, effectively creating a mixed-income project with a large workforce/affordable segment. The affordability period of 30 years is enforced typically through a recorded covenant or land use restriction agreement, ensuring that even if the property is sold, the affordability requirement runs with the land for three decades.

Definition of “affordable”: Florida statutes define “affordable” in this context as housing for incomes up to 120% of Area Median Income (AMI). In other words, units can be rented to households making at or below 120% AMI and still count toward the requirement. Rent (including utilities) must not exceed 30% of the target income level. Example: If the local AMI is $70,000 for a family, 120% AMI is $84,000; an affordable unit for that income could charge roughly $2,100 per month in rent (30% of monthly income). This threshold encompasses traditional “low-income” tiers (80% AMI or below) as well as “workforce housing” tiers (above 80% up to 120% AMI). Developers therefore have flexibility to offer units at different affordability levels within that spectrum. Many are likely to target the higher end (e.g. 100-120% AMI) to minimize the gap from market rents, unless deeper affordability is offset by other subsidies.

Rental requirement: Originally, SB 102 applied to rental housing only – the text referred to “residential rental” developments. This meant condominiums or for-sale units were not contemplated. However, in 2024 the legislature removed the word “rental” to allow mixed-income projects that include for-sale housing (condominiums) alongside workforce rentals. Despite this tweak, the vast majority of Live Local Act projects are expected to be rental apartments, since long-term affordability covenants are more straightforward to implement in rentals. If a condo project were to use the Act, it would likely need a mechanism to ensure 40% of units remain affordable (perhaps via resale price restrictions and an oversight entity). For our discussion, we focus on rental developments as the primary use-case.

Mixed-use projects: The Act also specifies that if a development is mixed-use (includes non-residential components like retail or office), then at least 65% of the total square footage must be residential. This prevents abuse of the law by, say, building a mostly commercial project with a handful of token apartments. The core intent is to produce housing, so the project must be predominantly residential in use.

Compliance and monitoring: Developers will be required to record an affordability covenant on the property to enforce the 30-year affordability term. Typically, this is done via a restrictive covenant or deed restriction that enumerates the percentage of units and the income limits (e.g., “40% of units rented to households ≤120% AMI”). Often, an agency or the local housing department will monitor compliance annually, verifying tenant incomes and rents. Non-compliance could result in penalties or loss of incentives. The 2025 amendments added provisions to “cure” affordability violations – for example, if a unit is mistakenly rented above the income cap, the owner might have a window to re-qualify a unit or pay a fine, rather than immediately losing their zoning benefits. Importantly, the law ensures that projects remain legal conforming uses even after the 30-year period expires. This was a key concern for lenders: without such assurance, a building that was only allowed to be tall or dense due to the Act might become an illegal non-conforming structure once the affordability requirement lapsed. The Act now explicitly provides that upon expiration of the affordability term, the building doesn’t revert to a forbidden use – it stays as a conforming use in perpetuity (though presumably without the affordability covenant, units could then convert to market rate).

Other limitations: A notable restriction is that local rent control is preempted statewide. The Act prohibits local governments from enacting rent control ordinances, with the intention that incentivizing new supply (with affordability conditions) is preferable to rent caps. Also, projects cannot be located in certain sensitive areas: for instance, sites too close to airport runways (within defined flight path zones) are disqualified for the zoning benefits, reflecting safety and noise concerns.

In summary, to leverage the Act’s powerful zoning preemptions, a developer must commit to a 40% affordable, long-term regulated project. The affordability definition (≤120% AMI) captures a broad workforce segment, making it easier for projects to pencil out than if the requirement were for very low incomes. Nonetheless, meeting this threshold significantly impacts the project’s economics – which the Act aims to offset through incentives and cost savings discussed next.

Tax Incentives and Regulatory Streamlining for Qualifying Projects

In addition to the zoning and density bonuses, the Live Local Act provides financial incentives and streamlining measures to improve project feasibility for those who include affordable housing. These include substantial property tax exemptions and other economic benefits:

• “Missing Middle” Property Tax Exemption: The Act introduces a statewide ad valorem tax exemption for new multifamily developments that incorporate affordable units, often referred to as the “missing middle” exemption. For qualifying properties, each affordable unit can receive a 75% or 100% property tax exemption on its assessed value, depending on the income level served. Specifically, if a development has at least 71 units rented to households earning >80% up to 120% of AMI, those units are eligible for a 75% tax exemption. If instead the units serve households at 80% AMI or below, they qualify for a 100% tax exemption (full tax relief). This can result in significant operating cost savings. For example, consider a 200-unit project with 80 affordable units: if those 80 units are for ≤80% AMI, the property appraiser would essentially not count their value for taxation, potentially cutting the annual property tax bill by roughly 40%. Even units serving moderate-income (100% AMI etc.) get three-quarters of their value exempted from taxes. This incentive first applies to the 2024 tax roll and remains available through 2059, giving a multi-decade window for new projects to benefit.

  • Important details: To claim the exemption, developers must obtain a certification from the Florida Housing Finance Corporation (FHFC) confirming the unit count and rent levels, and then apply to the county property appraiser. The exemption is unit-specific – if a qualifying unit is vacant on the assessment date but was occupied by an eligible tenant during the year, it can still get the exemption as long as reasonable efforts to re-lease it are shown. Units already receiving another affordable housing tax benefit (like those in a 100% affordable project under a local ordinance or FHFC agreement) cannot double-dip. Overall, this tax break is a major boon: it improves the project’s net operating income by reducing expenses, partly compensating for the lower rent collected on affordable units.

• Sales Tax Refund on Building Materials: Another often-overlooked incentive is a refund of sales tax on construction materials for affordable housing projects. Under the Act, developers of projects that have a state affordability agreement (typically those using state housing programs or Low-Income Housing Tax Credits) can apply for a refund of Florida sales tax paid on materials used to construct affordable units. The refund is up to $5,000 per unit (or 97.5% of the tax paid, whichever is less). While this incentive is aimed at more traditional affordable projects (e.g., 100% affordable developments with FHFC involvement), a Live Local Act project that partners with FHFC programs could potentially leverage it. For a qualifying project, this reduces construction cost effectively by ~6-7% on materials for those units, lowering the required equity or debt.

• Expedited and Administrative Approvals: The Act mandates a streamlined approval process. Qualifying projects must be approved administratively, without further action by elected bodies. This means no planning board or city commission hearings are required if the project meets the criteria – removing a major source of delay and uncertainty. Local governments are directed to process these developments similar to how they would handle any by-right site plan or building permit application. Many cities have created internal review procedures and posted guidelines on their websites to facilitate this. The 2025 amendment further emphasized that cities/counties cannot impose additional conditions or lengthy reviews beyond standard compliance checks. For developers, this translates to faster timelines and lower soft costs (less politics, fewer legal fees, no contentious public hearings). Entitlement risk is significantly reduced – an important consideration for construction lenders (as discussed later).

• Local Development Bonuses: The Act does not preclude developers from also seeking any local density or height bonuses for affordable housing that a city already offers. If a locality has an incentive zoning program (such as extra height for including affordable units), a Live Local project can still obtain those on top of the state preemption. The law even says such bonuses “must be approved administratively without further action” for qualifying projects. In practice, this means a developer could potentially stack the state’s allowance with local bonuses (if any) for even more density or height, as long as the project remains consistent with the comprehensive plan. However, some local programs might be redundant now that the state guarantees the highest available entitlements by right.

• Funding Programs: While not the focus of this article, it’s worth noting the Act also injected funding into housing programs (like the “Hometown Heroes” down payment assistance) and encourages public-private partnerships. These don’t directly change developer entitlements or project economics, but indicate the broader commitment of resources. A developer could, for instance, combine a Live Local Act project with gap financing from state or local housing trust funds for deeper affordability.

In combination, the tax and process incentives above aim to offset the financial “hit” of providing 40% of units at below-market rents. By lowering operating costs (tax exemptions), reducing entitlement timelines (administrative approval), and potentially lowering construction costs (tax refunds), the Act improves the development feasibility for mixed-income projects. Yet, the viability still heavily depends on site economics and market conditions, as explored next.

Implications for Site Selection, Entitlement Strategy, and Feasibility

From a developer’s perspective, the Live Local Act changes the calculus on what sites are attractive and how to approach the entitlement process:

• Broader Site Selection Criteria: Developers can now consider sites that were previously infeasible for residential development. Underutilized commercial corridors, shopping centers, big box retail sites, office parks, and even light industrial parcels can become multifamily communities under the Act. This vastly expands the inventory of potential development sites. Land that was zoned commercial often trades cheaper (per buildable unit) than land already zoned multifamily, due to the old entitlement uncertainty. Now, with by-right conversion to residential allowed, those price discounts may shrink, but early movers can still find bargains. Site selection will focus on areas with strong demand where local zoning was the only barrier. For example, a developer might target a strip mall on a busy arterial that’s surrounded by residential demand – previously, convincing the city to rezone it for apartments would be arduous; now it can be done by right if affordability is included. Infill opportunities in prime locations (e.g., aging commercial strips in urban cores or near job centers) suddenly open up. Developers will still avoid parcels with environmental issues or inadequate infrastructure, but zoning will be less of a filter in site acquisition.

• Entitlement Strategy Shift: Historically, obtaining higher density or a use change required a rezoning or land use amendment – a political process with uncertain outcome and long timelines. Under the Act, the entitlement strategy shifts to a compliance exercise: the developer’s task is to design the project to meet the Act’s criteria (40% affordable, within the height/density limits allowed, etc.) and demonstrate consistency with any remaining local regulations. Essentially, the negotiation with the city is largely off the table; instead, it’s about checking the boxes for administrative approval. This can cut entitlement time from a year or more (for rezonings) down to a few months or even weeks for site plan approval. It also reduces NIMBY risk: neighbors will have limited ability to formally object since the project is a statutory right. Developers should still engage in community outreach to manage local relationships, but the leverage has shifted. We may see fewer “conditions” or exactions imposed by local governments, since their discretionary power is curtailed. However, developers must be diligent in documentation – providing the required covenant on affordability, proving the site meets the zoning category criteria, and perhaps furnishing a market study for the tax exemption. Municipal staff may require detailed proof that 40% of units meet income limits, etc., before green-lighting permits.

• Feasibility Analysis: The inclusion of a large affordable component means developers must carefully underwrite projects to ensure financial feasibility. The increased density and height allowances are key compensating factors – more units can generate more total revenue even if some units have restricted rents. In feasibility terms, the Act essentially offers a density bonus in exchange for affordable units (much like inclusionary zoning, but with state guarantee). Developers will perform yield-on-cost analyses to see if the higher unit count (and possibly reduced land cost per unit) makes up for the lower rent on 40% of units. Often, being able to build 2x the units on the same land more than offsets a, say, 20% reduction in average rent per unit, resulting in a similar or even improved project yield. Each site’s math will differ: in high land value areas with strict old zoning, the upzoning benefit is enormous; in areas that already allowed high density, the benefit is smaller. Site feasibility will also consider the property tax savings – in some pro formas, the tax exemption can improve NOI by hundreds of thousands of dollars annually, which directly boosts project value.

• Infrastructure and Utilities: One practical consideration is whether sites zoned commercial/industrial have the infrastructure capacity for high-density residential. Sewer, water, and road capacity will need evaluation. The Act doesn’t waive concurrency or utility standards, so developers must ensure the site can handle, say, 200 new apartments (or be prepared to pay for upgrades). This is part of feasibility: a site might be entitled to 200 units by law, but if it requires a new sewer main extension, that adds to cost and timeline (though still likely easier than a full rezoning fight).

• Local Government Reactions: Entitlement strategy must also account for how proactive or resistant a particular city is. Some municipalities have embraced the Act, creating clear guidelines and fast-tracking reviews. Others may be dragging their feet or narrowly interpreting the law. For instance, early on there was ambiguity about what counts as “industrial” or “commercial” zoning – the 2025 update clarifies those definitions to prevent overly strict interpretations. Nonetheless, developers might face subtle pushback like strict site plan scrutiny or additional requirements under the guise of “local regulations” (e.g., aesthetic standards, landscape requirements). Having land use attorneys ready to enforce the letter of the law (even via legal action, which the Act allows with expedited hearings for non-compliant cities) is part of the strategy now. In short, while entitlements are easier on paper, developers should be prepared to assert their rights if a locality is non-cooperative.

Overall, the Live Local Act improves feasibility for many projects by cutting entitlement costs and timelines and by increasing allowable density. However, not every site will pencil out. Developers will carefully select locations where the market rents (for the unrestricted units) and the volume of units enabled by upzoning produce a viable project after delivering the affordable set-aside. In many cases, the sweet spot will be “workforce housing” projects that mix market-rate and moderate-income units in growing employment centers – essentially the target the Act had in mind.

Impact on Financial Modeling: Rental Income Mix, Yield on Cost, and IRR

The presence of affordable units and various incentives under the Act necessitates adjustments to traditional underwriting and financial modeling. Key impacts include:

• Rental Revenue Mix: With 40% of units restricted to affordable levels (up to 120% AMI), the blended average rent of the project will be lower than a 100% market-rate project in the same location. For example, suppose market rent for a 1-bedroom is $2,000, and an affordable 1-bedroom at 100% AMI is $1,600 – the blended rent across units might be ~$1,800. This affects gross potential income and thus all downstream metrics. Underwriting must incorporate the specified rent caps. Depending on the local AMI and market rents, the discount may be modest or significant. In many Florida markets, 120% AMI rents are actually close to prevailing “Class B” rents, meaning the hit is not huge. However, if targeting 80% AMI to get the full tax exemption, those rents could be substantially below luxury market levels. The unit mix also matters: the Act doesn’t dictate which units must be affordable, so developers might choose to designate more of the smaller units or less desirable views as the affordable ones, preserving higher rents on premium units. This strategy can help maximize revenue while still meeting the 40% count.

• Operating Expense Impacts: On the positive side, the property tax exemption will reduce the operating expenses in the pro forma. Typically, property taxes are one of the largest line-item expenses for apartments. With a portion of the building’s value exempt, the effective tax rate per unit goes down. For underwriting, this means higher net operating income (NOI) than otherwise expected for a given gross income. Lenders and investors will carefully factor in the exemption – ensuring the project qualifies and remains in compliance so the tax benefit isn’t lost. They may, however, run sensitivity analyses on what happens after 2059 when the exemption law sunsets, especially for long-hold projects (though 2059 is beyond most investor horizons). Additionally, reduced parking requirements (in transit areas) can lower development costs and future maintenance costs, subtly improving the expense side of the model.

• Yield on Cost and Return on Investment: Yield on cost (stabilized NOI divided by total development cost) is a critical metric for developers. The Act’s influence on yield is mixed: lower rents on 40% of units push yield down, but higher density (more units) and tax savings push it up. Consider a scenario: without the Act, a site could have 100 units at market rent, yield on cost maybe 6%. With the Act, maybe you can build 150 units, of which 60 are affordable at slightly lower rents. The total NOI might end up higher due to 50 extra units, even if each of those 60 has lower rent. Plus, those 60 units might pay little to no property tax, further boosting NOI. The net effect could be a yield on cost that is equal or even superior to the smaller 100-unit market-rate project. Financial modeling becomes more complex, as one must balance the value of extra density and incentives against revenue loss from cheaper units. Sophisticated developers will run iterative models to find the optimal mix (for instance, providing just the minimum 40% affordable at the highest allowable income levels to maximize effective rent, unless a deeper set-aside yields outsized tax benefits or other subsidies).

• Internal Rate of Return (IRR): For investors and developers looking at IRR (a time-sensitive return measure), a few points are noteworthy. First, the speed of entitlement and permitting under the Act can accelerate project completion, thus potentially improving IRR by getting to stabilized occupancy faster. Time saved in pre-development is valuable. Second, the reduced risk of entitlement (almost a sure-thing approval if rules followed) might lower the required risk premium. Some developers might accept a slightly lower IRR because the project’s path is more certain, as compared to a risky rezoning deal. On the other hand, the presence of affordable units can introduce operational complexity (income certification of tenants, compliance reporting) which might slightly increase operating costs or risk, nudging required returns up. By and large, IRRs will depend on market rent growth and exit values, which we discuss in investor considerations. But from a pure development perspective, many projects will still target typical IRRs in the teens, factoring in the Act’s benefits to ensure those returns are reachable even with the affordable component.

• Capital Stack Considerations: The Act doesn’t directly provide gap financing (aside from tax savings), so projects still need to pencil out with private capital. However, with the regulatory risk mitigated, construction lenders may be willing to underwrite a bit more aggressively on loan-to-cost or offer better terms. Also, some projects might combine the Act with traditional affordable housing financing on the 40% portion (e.g., seek housing credits or HOME funds for those units), effectively blending two financing models. Doing so could boost returns but also complicates the deal. Underwriting must ensure the project can meet any additional requirements from such funding (like deeper income targeting if credits are used).

In essence, financial modeling under the Live Local Act becomes an exercise in balancing trade-offs. The reduced revenue from affordable units is balanced by higher unit count and cost savings. The overall impact on yield and IRR can be neutral or even positive, but it requires careful structuring. Many developers will likely find that the Act enables projects that otherwise would have been impossible – meaning even if the returns are slightly lower than a pure market-rate deal, those pure deals couldn’t happen on the same site anyway. The Act is expanding the universe of profitable projects into what was formerly marginal land.

Strategic Opportunities for Developers

The Live Local Act unlocks several strategic avenues for developers to pursue. By creatively leveraging the law, developers can tap into new markets and partnerships:

• Adaptive Reuse of Commercial Properties: Florida cities are dotted with aging strip malls, shopping centers, and office buildings that struggle in the current retail/office market. Developers can pursue adaptive reuse or redevelopment of these properties into mixed-use housing. For example, a half-vacant shopping plaza could be partially demolished or built upon to create a multifamily project. Prior to the Act, even if market demand existed for housing, zoning would likely forbid residential use. Now, as long as 40% of units are affordable, that Broward County strip mall or suburban office park can become an apartment complex by right. Adaptive reuse can reduce construction costs (if some structures are repurposed) and also aligns with sustainability and infill development goals. We expect to see innovative designs that integrate housing with remaining commercial functions (a true mixed-use revitalization).

• Upzoning and Urban Infill: The Act’s effective upzoning means developers can achieve higher densities on infill parcels, making projects financially viable in areas they weren’t before. Small infill lots in urban corridors, previously limited to low-rise or few units, can now host mid-rise or high-rise buildings if a taller comparator exists nearby. This is a huge opportunity in cities like Miami, Orlando, Tampa, and Jacksonville where certain neighborhoods have pockets of low-intensity zoning amid higher development. Developers can assemble parcels knowing that the ceiling for units and height is much higher than local maps indicate, provided they meet affordability criteria. This could spur a wave of mid-market apartment buildings, seamlessly integrated into commercial corridors. It also allows developers to more aggressively bid on underutilized parcels, since the potential buildable area is larger than before.

• Transit-Oriented Development (TOD): With parking requirements being relaxed or eliminated for qualifying projects near transit, developers can more easily pursue TOD projects. Sites near train stations or major bus routes that were previously held back by high parking mandates can now support denser, less car-dependent housing. This not only reduces construction costs (parking garages are expensive), but it also enables design of projects that cater to urban renters who prioritize location over car ownership. Combined with the state’s push for affordable housing, TOD projects under the Act can serve commuters and essential workers with quality housing at accessible rents.

• Faith-Based and Non-Profit Land Partnerships: An intriguing opportunity is partnering with religious institutions and non-profits that own land. Churches and faith-based organizations in Florida often have underutilized land (like oversized parking lots or empty acreage). Historically, zoning might not allow multifamily on those sites, or the institutions lacked development know-how. The Live Local Act, especially with the 2025 “Yes In God’s Backyard” addition, empowers religious institutions to use their land for affordable housing regardless of local zoning. This means a church in a single-family zone, for example, can potentially build housing on its property if at least 10% of the units are affordable. For developers, this is a chance to partner with mission-driven landowners: the church provides land (often at low or no cost, or via ground lease), and the developer brings expertise and capital to build a mixed-income project. The Act’s preemption ensures the project can get approved without a rezoning battle. Such partnerships can be win-win: the church furthers its mission by aiding the housing crisis, and the developer gains access to well-located land and possibly community support. We anticipate more deals where developers team up with faith-based organizations, leveraging this new freedom to build on institutional land.

• Public-Private and “Missing Middle” Strategies: Developers might also collaborate with local governments or public agencies now that the state framework is in place. For instance, a city might identify a commercial area ripe for housing and work with a developer under the Act to achieve both market-rate and affordable units. The term “missing middle” often refers to housing types and income levels that fall through the cracks (too expensive for subsidies, not expensive enough for luxury). The Act is tailor-made for missing-middle development – e.g., workforce housing for teachers, nurses, civil servants. Developers who specialize in this segment can now scale up projects across Florida, focusing on moderate-income renters who were previously underserved. There’s also synergy with employer-sponsored housing: the 2025 update explicitly allows preferences for certain employees (like hospital workers or first responders) in affordable units, which could encourage hospitals or large employers to partner on housing for their workforce.

In capitalizing on these opportunities, developers should remain mindful of community relations and design quality. Even though projects bypass some local hurdles, they should be thoughtfully designed to fit their context (especially when adjacent to neighborhoods). Those who seize the new opportunities responsibly could establish themselves as leaders in Florida’s evolving housing market, delivering projects that are profitable, politically palatable, and socially beneficial.

Considerations for Lenders: Entitlement Risk, Covenants, and Income Mix

Construction lenders and permanent mortgage lenders financing Live Local Act projects will view them through a distinctive lens:

• Reduced Entitlement and Timing Risk: From a lender’s perspective, one of the biggest positives of the Act is the mitigation of entitlement risk. Loans on development projects always face the risk that zoning or approvals fall through, delaying or killing a project. With the Act guaranteeing a path to approval (if criteria are met), lenders can be more confident that a project will actually commence on schedule. There’s no need to wait for a rezoning vote or worry about NIMBY lawsuits overturning a planning decision, since the approval is by-right. This can translate into lenders being willing to lend earlier or at higher leverage. For example, a lender might fund land acquisition and predevelopment for a Live Local project more readily than for a speculative rezoning deal. The certainty of the entitlement also reduces the risk premium, potentially leading to slightly lower interest rates or better terms than a comparable project with heavy political risk. Moreover, faster approvals mean construction can start sooner, shortening the loan carry period and interest expense – a benefit to both borrower and lender.

• Affordability Covenant and Compliance Risk: Lenders will closely examine the affordability covenant that is recorded on the property. They need to ensure that the covenant’s requirements (40% affordable @ ≤120% AMI for 30 years, etc.) are clearly defined and that there are remedies if the covenant is breached. A key question is: what happens if the developer/owner fails to comply with affordability requirements? The worst-case scenario could be losing the zoning entitlement or tax exemption, which could impair the project’s viability and value. Fortunately, the law provides some comfort here – as noted, projects remain conforming uses even after the affordability period and SB 328 created a process to cure violations. Lenders will likely require borrowers to regularly certify compliance and perhaps set aside reserves or agree to third-party monitoring. Another concern is transfer/foreclosure: if the lender forecloses or the property is sold, the covenant stays with the land. Some affordable housing covenants include clauses that extinguish or ease upon foreclosure (to encourage lending), but it’s unclear if Live Local covenants have such provisions. Lenders might insist on clarity that they can step in and operate the property without triggering a default in the covenant. Overall, while the covenant adds a layer of complexity, the legislative intent is to make these projects financeable. The explicit conforming use guarantee after 30 years was added specifically to address lender concerns about long-term zoning conformity.

• Underwriting Income Mix: Lenders will underwrite the project’s income stream with a conservative eye on the affordable units. They’ll likely use the restricted rents in their cash flow projections (not market rents), and they’ll consider potential slower rent growth on those units if tied to AMI adjustments. The debt service coverage ratio (DSCR) will be evaluated on the blended NOI, so the lower income from affordable units must still comfortably cover the loan. However, the property tax savings can significantly improve the DSCR by reducing expenses, something lenders will factor in as well. They may require evidence or a letter from the FHFC confirming the tax exemption qualification to give full credit for it. If part of the units are at 120% AMI (which is closer to market), lenders might underwrite those with only a small haircut to market rent, recognizing they’re not deeply subsidized and likely to stay occupied. For units at 80% AMI or below, lenders might be more conservative on rent growth and collection assumptions (though demand for those units is generally very robust, mitigating vacancy risk).

• Appraisal and Valuation for Loan: The presence of affordable units and the 30-year covenant will influence the appraisal. Appraisers will likely use an income approach that reflects restricted rents and the tax exemption. The capitalization rate might be slightly higher (indicating a lower value) for a restricted-income property compared to a full market-rate property, because of the perceived risk or lower flexibility. Lenders will thus lend on a somewhat lower appraised value than they would if the same building were unrestricted. That said, because 60% of units (in the minimum scenario) are market-rate, the blended cap rate impact may be minor – the asset is still primarily a market-driven property. Lenders will also consider exit scenarios; for instance, if they have to foreclose and sell the building, the buyer pool might be more limited (buyers specialized in affordable/workforce housing). This could affect the loan-to-value (LTV) they are comfortable with. Some lenders may engage their internal affordable housing groups or consult experts in LIHTC financing, as the compliance aspect resembles that of housing credit deals (though the Live Local projects won’t typically have the same depth of subsidies).

• Experience of Developer: It’s worth noting that lenders will favor experienced developers who understand both market-rate and affordable compliance operations. Managing a mixed-income property isn’t exceedingly difficult, but it does require processes for income verification and reporting. Lenders might require the developer to hire a qualified property management firm with affordable housing experience for the lease-up and ongoing management of the affordable units. This gives confidence that the project will remain in compliance and thus retain its tax benefits and zoning status.

In conclusion, lenders generally view Live Local Act projects favorably due to reduced entitlement risk and the state’s backing, but they will rigorously diligence the affordability requirements. They’ll stress-test the deal to ensure it can withstand compliance hiccups or changes in market conditions. With proper structuring, financing is readily available – indeed, construction loans have already been closed for some of the first wave of Live Local projects, reflecting lender comfort with the new paradigm.

Considerations for Investors: Exit Strategy, Valuation, and Long-Term Regulations

For equity investors and eventual asset buyers, the Live Local Act raises specific strategic considerations:

• Exit Strategy and Hold Period: An investor in a multifamily development typically looks at a hold period (say 5-10 years for a fund, or longer for core holders) and an eventual exit via sale or refinance. With a 30-year affordability covenant, an early exit requires finding a buyer willing to assume the remaining term of restrictions. This can affect who the likely buyers are and the pricing. Many institutional investors specializing in multifamily might shy away from regulated assets unless they have a mandate for impact investing or workforce housing. However, there is a growing pool of capital (REITs, private equity, family offices) interested in stable, income-producing assets with a social component. If the property is performing well – high occupancy, steady cash flow thanks to the blended tenant base and perhaps less turnover (affordable tenants tend to stay longer) – it can be an attractive core investment. Exit cap rates may be a bit higher to reflect the income restrictions, but the difference could be offset by the lower operating expenses (tax exemption) which boost NOI. Investors should plan for potentially longer marketing times when selling, as the buyer universe is narrower. Alternatively, some developers may choose to hold the asset for the full 30 years, especially if they are long-term affordable housing operators. After 30 years, the restrictions lift (unless extended by choice), and the property could theoretically be converted to full market rents – a possible value-add play for a future investor, though by then the building is older.

• Valuation Under Affordability Covenants: When valuing a Live Local Act asset, investors will use an income capitalization approach that accounts for restricted rents on the affordable portion. Typically, the appraised value or market value will be lower than an identical building with all market rents. However, one must also account for the capitalized value of the tax savings. For instance, if the tax exemption saves $200,000 per year in operating expenses, that could add on the order of $3 to $4 million in value (at a ~5-6% cap rate) compared to a fully taxed scenario. So there is a trade-off: lower gross income but also lower expenses. The net operating income is the key. If a Live Local project’s NOI is, say, 85% of what a same-size market-rate project’s NOI would be, and if investors require maybe a slightly higher cap rate (by 25-50 basis points) for the regulatory aspect, the valuation might end up perhaps 80-90% of an equivalent market-rate asset’s value. This will vary by deal. Some factors that could further affect value: the proportion of units at 80% AMI vs 120% AMI (deeper affordability may reduce NOI more, but also could qualify for 100% tax exemption which improves NOI – a balance), and the location and class of the asset (in a very high-rent submarket, the opportunity cost of affordable units is greater in absolute dollars).

• Income Mix and Marketability: Mixed-income properties can have marketing considerations. On one hand, having a range of rent levels can broaden the pool of potential renters, ensuring the building maintains occupancy (the affordable units will have strong demand, and the market-rate units appeal to those who can pay for location/amenities). On the other hand, some worry that higher-income renters might be hesitant if a large portion of the building is reserved for lower rents. In practice, for workforce housing (up to 120% AMI), this stigma is minimal – these are often middle-class workers, not a very disparate tenant base. Many Class A apartment communities already have residents on a wide income spectrum. If some units are at 60-80% AMI, there could be more noticeable differences (perhaps in ability to pay for extras, etc.), but management can mitigate any social friction through design (uniform quality for all units) and policies. Investors should ensure the property’s amenities and unit finishes are comparable for all tenants to avoid a “second-class” section, which can negatively affect community reputation. Overall, a well-executed mixed-income community can actually enhance stability – during economic downturns, the affordable units maintain demand, supporting occupancy when luxury units might struggle.

• Regulatory Overlay and Compliance Costs: Owning a Live Local Act property means operating under a regulatory agreement for 30 years. Investors must consider the administrative burden: annual income re-certifications of affordable-unit tenants, reporting to FHFC or local agencies, and maintaining qualification for tax exemptions. These tasks incur some cost (hiring compliance staff or third-party consultants) and require diligence. Non-compliance can risk fines or losing tax benefits. However, compared to heavily subsidized affordable housing (like LIHTC projects with multiple layers of audits), the Live Local requirements are relatively straightforward (one set of income limits, perhaps simpler reporting). Still, an investor needs to have (or hire) the expertise to handle it. Many larger investors are setting up or expanding internal teams for ESG and affordable housing compliance, anticipating more of these mixed-income assets in their portfolios.

• Policy Stability and Changes: Investors should also weigh the political/regulatory stability of this framework. The Live Local Act is new and has already seen amendments in 2024 and 2025 to refine it. Generally, the trend is the state strengthening the pro-housing stance, not rolling it back. The risk of repeal seems low in the near term given bipartisan support and the acknowledged housing shortage. However, local governments may attempt end-runs (for instance, stricter building codes or fees for these projects) – investors need to stay informed on any such local dynamics. Also, the property tax exemption is slated to sunset in 2059, which is far off but theoretically could be altered by future legislatures. A long-term holder would consider the impact if, say, after 10 years the state decided to reduce the benefits (again, unlikely without grandfathering given Florida’s generally contract-friendly law, but worth noting). For now, the regulatory environment is favorable to these projects, and investors can underwrite with reasonable confidence that the major benefits will remain in place.

In summary, investors approaching Live Local Act assets will adjust their strategies to account for the mixed-income nature and long-term restrictions. Many will find the risk-adjusted returns attractive: often slightly lower unlevered yields than luxury multifamily, but steadier and with lower legislative risk (since the state is explicitly supporting these projects). Those with an ESG or impact mandate may especially prize these investments as they combine stable cash flow with a social good. Ultimately, as a new asset subclass emerges (“Live Local” mixed-income developments), the market will determine pricing and liquidity. Early entrants may get favorable deals before the broader investor community fully prices in the reduced risk profile of such assets.

Risks and Limitations of the Live Local Act Approach

While the Live Local Act offers substantial benefits, it is not without risks and limitations. All stakeholders – developers, lenders, investors, and communities – should be cognizant of the following:

• Scope of Eligible Sites: Not every parcel can be transformed under the Act. Exclusions and carve-outs exist. Properties in single-family only zones (e.g., purely residential suburban neighborhoods) are off-limits unless rezoned through normal processes – the Act doesn’t allow a developer to drop an apartment building in the middle of an R-1 zone. Also, areas designated as “recreational” or “commercial working waterfront” in comprehensive plans and certain industrial zones are excluded. This means ports, marinas, or maybe heavy industrial districts won’t see Live Local projects. Furthermore, the Act’s requirement that the site be zoned commercial, industrial, or mixed-use still needs interpretation in edge cases – what about community facility zones, or educational campus zones? The 2025 amendments help by broadening definitions (treating any parcel allowing for-profit business activity as “commercial” for Act purposes). Still, developers might find some properties that seem ideal but fall just outside the letter of the law. Due diligence on zoning definitions is critical. And in counties with very little non-residential land, remember that if <20% of land is commercial/industrial, pure residential projects need not be approved by the local government; they can insist on mixed-use with some non-residential space.

• Local Implementation Uncertainties: Despite state preemption, implementation is happening at the local level, and ambiguity can cause delays. Early experiences have shown some confusion in cities interpreting height comparisons, “currently allowed” densities, etc. For instance, determining the tallest allowed height within 1 mile can be straightforward in a downtown with obvious high-rises, but in sprawling areas it might be debatable. Municipal staff also must verify the 40% affordability – some may require developers to already have an agreement with a monitoring agency or a draft covenant at the time of application. There is also potential for local politics to play out in subtler ways: while officials cannot deny a compliant project, they might scrutinize plan details more intensively (e.g., insisting on extensive traffic studies or infrastructure analysis) which can slow things. The Act permits developers to sue local governments for non-compliance and even provides for expedited handling of such suits, but litigation is a cost and time suck that everyone prefers to avoid. Until a body of case law and clear precedent is established, there is a risk of inconsistent application from one jurisdiction to another. Engaging land use attorneys and consultants who are tracking state guidance (e.g., FHFC workshops, legal advisories) is recommended to navigate these uncertainties.

• Market Absorption and Tenant Mix: Building a large number of mixed-income projects raises the question of market absorption. If multiple developers in a city all launch Live Local Act projects, will there be sufficient demand for the affordable and market-rate units? In high-growth metros, demand is likely robust across the board – Florida’s population influx and lack of housing supply suggest units will be absorbed. However, in smaller markets or slower-growth areas, a sudden surge in development could saturate certain price segments. Particularly, the affordable units at ~120% AMI are essentially “workforce” units; if too many come online at once in one submarket, there might be competitive pressure (though arguably, these renters were previously not served, so pent-up demand exists). Additionally, developers need to ensure the unit mix and amenity package aligns with a mixed-income demographic. Misjudging the target market is a risk – e.g., if a project’s luxury amenities make it very costly to operate but 40% of tenants can’t pay premium fees, the economics could suffer. Market studies and careful product positioning are essential to mitigate absorption risk.

• Economic and Interest Rate Environment: The Act doesn’t shield projects from macroeconomic risks like high interest rates, construction cost inflation, or economic downturns. A risk is that developers, lured by the new entitlements, might push projects that are thinly margined. If interest rates rise or construction costs spike, some projects could become unfeasible, leading to potential mid-stream financing issues or even defaults. Lenders and equity partners will likely impose discipline, but the current environment (in 2024-2025) of higher financing costs is a headwind. The Act helps on the margin by improving NOI (tax breaks) and reducing time, but a pro forma that barely works could tip into the red if cap rates expand or rents soften. Market cycles still apply – if there’s a recession and market-rate rents stagnate or fall, projects with 40% affordable units might have less flexibility to raise overall income, squeezing returns.

• Long-Term Regulatory Risk: While the state is strongly supportive now, investors consider the long game. One risk is what happens after 30 years – though that is far off, if an investor’s horizon is shorter, they mainly worry about holding period. However, if one is holding to year 30 and beyond, they would consider will the state possibly extend affordability requirements or impose new rules later? Also, if a project struggles and an owner wanted to convert some affordable units to market to boost revenue, they legally cannot until the period ends (unless some penalty or payback to the state, which is not provided for – essentially you’re locked in). In contrast, a conventional project has flexibility to adjust unit mix or reposition entirely. That flexibility is sacrificed with an affordability covenant. Another aspect of regulatory risk: while unlikely, if future state leadership were to deem the Act too aggressive (perhaps due to backlash from local governments or communities) they might roll back some provisions or add new ones (the 2024/2025 changes were mostly developer-friendly clarifications, but one never knows if in future, e.g., a requirement for higher affordability percentage could be imposed to use the benefits). However, given Florida’s political climate favoring property rights and development, drastic unfavorable changes seem low probability in the near term.

• Community Pushback and NIMBYism: Although the law curtails formal NIMBY power, informal community pushback remains a risk. Neighborhood groups may use public relations, press, or political pressure to slow a project indirectly. For example, they might lobby for stricter building codes or try to get a site declared historic if an old structure is present, etc. The 2025 amendments did address historic preservation issues by allowing some design requirements if a site has a historic structure. But as a risk, developers might face social friction or negative publicity (“they’re building a huge apartment next to our homes”). How much this affects a project’s success can vary – it might deter some renters if a project is painted in bad light, or it might simply be noise. Community outreach and demonstrating benefits (like highlighting that 40% of units are for local workforce, which many neighbors might support in concept) can mitigate this. It’s a new dynamic when state law overrides local sentiment; managing community relations is still advisable to ensure smooth operations post-opening.

In weighing these risks, it’s clear that the Live Local Act is not a silver bullet but a powerful tool that must be used judiciously. Developers should conduct thorough due diligence – not just on the site and pro forma, but on the local reception and any hidden pitfalls (like infrastructure capacity or obscure local rules). Lenders and investors should underwrite conservatively, building in cushions for interest rates or cost overruns. The opportunity is great, but so is the responsibility to execute projects that truly benefit both the developers and the communities. As the first wave of Live Local Act projects come online, all parties will learn more about the real-world challenges and refine their approaches accordingly.

Conclusion

The Live Local Act marks a significant shift in Florida’s real estate development landscape. For developers, it unlocks new sites and allows larger projects, but also demands a commitment to affordability and careful financial planning. For lenders, it reduces zoning risk and creates more predictable deals, albeit with covenants to monitor. For investors, it offers stable, mixed-income assets with unique valuation considerations and a long-term regulatory framework.

In many ways, the Act is a bold experiment in addressing housing needs through deregulation and incentives rather than mandates alone. Early indications show strong interest from developers in leveraging the law, and numerous projects have entered planning stages across the state. As these projects materialize, they will provide valuable case studies on design, leasing, and investment performance of mixed-income communities at scale.

From zoning preemption that enables high-density infill, to tax breaks that improve returns, the Live Local Act provides a toolkit for aligning private sector capabilities with public policy goals. Real estate professionals who navigate its nuances successfully can find strategic opportunities – whether it’s redeveloping a dead mall into a vibrant apartment community or forging partnerships with churches to build housing on faith-based land. The key is a neutral, analytical approach: understanding the law’s provisions in depth, modeling the economics carefully, and executing projects that meet both profitability and affordability metrics.

Florida’s approach is being watched nationally, as other states consider similar measures to override local barriers to housing. For those active in Florida’s market, the Live Local Act is now a central part of the development playbook. By addressing an expert audience in this article, we aimed to provide a comprehensive examination of its implications. The ultimate takeaway is that the Live Local Act, with all its benefits and challenges, is reshaping how deals are sourced, underwritten, and realized – creating a new paradigm where zoning and finance intersect to produce the next generation of Florida’s housing.

October 29, 2025, by a collective authors of MMCG Invest, LLC, multi family feasibility study consultants.

Sources:

• Florida Senate Bill 102 (Live Local Act) – Summary of Zoning Preemptions and Requirements

• Bilzin Sumberg New Miami Blog – Live Local Act Clarifications (2024)

• Florida Housing Coalition – Overview of Live Local Act Land Use Provisions

• Holland & Knight Alert – Missing Middle Property Tax Exemption Details

• Nelson Mullins Affordable Housing News – Sales Tax Refund for Affordable Units

• Holland & Knight Alert – 2025 Updates: YIGBY (Faith-Based Housing) and Other Changes

• Broward County Climate Task Force – Live Local Act Presentation (local government perspective on SB 102 implementation)