Insurance and Operations Costs Crushing Affordable Seniors Housing

The rising costs and labor shortages have put tremendous pressure on construction at a time when the demand for affordable and workforce housing is at an all-time high in Miami-Dade County. 

Raul Rodriguez, head of Miami-based CREI Holdings, is currently building an affordable multi-housing project, Li’l Abner 2, a 244-unit low-income multifamily complex in Sweetwater for the elderly and low-income families. 

“As we are nearing completion of Li’l Abner 2, construction costs have skyrocketed,” Rodriquez tells GlobeSt.com.

Recently, Miami-Dade Chairman Jose ‘Pepe’ Diaz gave Li’l Abner II a much-needed $2 million grant to help cover the increased cost of construction. 

“Without this grant, we would be scrambling to pay for the repriced construction materials, supplies and labor costs, which are nearly 40 percent higher than they were over a year ago when we priced the construction job,” Rodriguez said.

“Without public-private partnership, where the private sector and the public sector work together, building affordable multi-housing projects is just not possible in this economic environment.

Addressing the Problem is ‘Imperative’

Hilda M. Fernandez, CEO of Miami-based Camillus House, one of the largest non-profit organizations caring for the homeless in South Florida, tells GlobeSt.com, “According to the most recent studies, in the US, millions of older adults suffer from a lack of affordable housing, while the poorest seniors and most vulnerable to homelessness are losing access to housing in record numbers.

“At Camillus, on average, nearly 25 percent of the individuals we serve across our housing programs are age 62 and over – and it seems as if the numbers are only growing. It’s imperative that we address this growing problem with solutions that include both preserving and expanding the supply of affordable, rental housing where seniors can live.”

CREI completed the 87-unit Li’l Abner I in 2013 and it has been 100 percent occupied every year since.  Li’l Abner 2 will be completed later this year.

Insurance Rates ‘Skyrocketing’

The repricing is happening to developers across the board but it is affecting those building affordable and workforce housing the most, Rodriguez said.

Affordable housing operators are limited in how much they can charge for rent – 60 percent of the local median income or AMI. Considering the cost of construction, as well as the operating expenses, without public subsidies, “no one in the region can afford to build affordable housing anymore,” Rodriguez said.

Case in point, the insurance policy for Li’l Abner in 2021 was close to $30,000. This year, it is $56,000; next year, it will be $127,000. 

“When you have increases of that magnitude, at the end of the day, the numbers just don’t make sense unless the government provides subsidies,” Rodriguez said.

“If the insurance issue continues this way it would be nearly impossible to build anything affordable, not because of construction costs alone but because of the cost of the operating expenses. Unfortunately, increasing density of the buildings is not a solution because the more affordable units we build per acre, the more we pay in insurance, utility costs, property taxes and other operating expenses.

Demand for Seniors Housing Rising

GlobeSt.com reported that for the fourth straight month, occupancy growth in seniors housing of any type rose.

The data came from the NIC MAP Vision report, which added that more than three-fourths (78%) of the units vacated during the pandemic have been re-occupied.

Overall, based on the 31 markets in the report, seniors housing occupancy increased 0.9 percentage points from 80.5% in Q1 2022 to 81.4% in Q2 2022.

It was the fourth consecutive quarter of occupancy growth; occupancy is up 3.4 percentage points this quarter from a pandemic low of 78% in Q2 2021.