[This is part of an ongoing monthly cross-country series profiling America's Progressive Developers. Here are the pieces on Charlottesville, New Orleans, San Antonio, San Diego, San Francisco and Detroit.]
Miami, FL -- In July of 2017, I announced the beginning of a Forbes series called America’s Progressive Developers, documenting the different forward-thinking builders I met while traveling cross-country. The initial two that I'm profiling—Carlos Fausto Miranda and Andrew Frey—are fitting first choices. They are young Miami developers who have limited portfolios, but expansive visions for how their city could look. Perhaps more importantly, they are some of Miami's leading advocates for reversing the regulations that inhibit these visions -- and the fruits of their advocacy are starting to show.
Fausto, who was born and raised in Miami to a Cuban refugee father and Italian mother, is owner of the realty and development firm Fausto Commercial Realty. The commercial, residential, and industrial properties he sells or leases are scattered, but his portfolio is focused primarily in Little Havana and Allapattah, two west-side immigrant neighborhoods.
Frey, a transplant from Massachusetts, first moved to Miami and worked for larger firms that built in the suburbs. In 2015, he started his own company, Tecela Real Estate Innovation, to focus on urban development. The company is developing two lots on the eastern edge of Little Havana that each contain eight small units.
Fausto and Frey got involved in real estate because they are dyed-in-the-wool urbanists who want to see better density and design principles in Miami. They also want it to become more affordable, something that doesn't have to be a contradiction, but often is in today's urban America. As Fausto explained over breakfast in Little Havana, the city teems with new immigrants arriving from around the world, but lacks adequate housing for them, causing Miami to grow expensive, with citywide median home prices increasing from $171,000 to $301,000 since 2011. According to a recent Forbes analysis, it has a 2.2% vacancy rate, making it the nation's worst city for renters. In human terms, this means that such immigrants, who nowadays mostly come not just from Cuba, but Nicaragua, Honduras, The D.R., Colombia, and the rest of Latin America, must cram together in small multi-room apartments.
As both developers discovered early into their careers, though, the government worsens this problem.
Parking regulations here, only recently amended, once required that all buildings have 1.5 spaces per unit. This consumed space for potential housing, and made urban formats like micro-units uneconomical. Miami also still has anti-density regulations that limit the number of units that can go within given buildings. This stops today's developers from emulating the built forms that first made so many of Miami's historic neighborhoods special.
Take Little Havana, the historically Cuban neighborhood that is famous for its culture and street life. As Fausto explained, the building types that define the area are now technically illegal.
"The most architecturally prized buildings in the neighborhood are the 1920's-built center-hallway buildings, built in a Spanish Revival, Mediterranean, or Mission style. Those tend to have 18 units, which roughly [equate] to 120-150 units per acre. Well, if you have an empty lot next to that building, more than likely it’s zoned T-4, which would only permit you to build 35 units per acre. You do the math, and, even assuming there’s no parking requirement, you’re building 4 units on that lot. So take that into consideration—the most prized buildings we have in the neighborhood…that contribute to the urban fabric of our city, and yet we cannot build those buildings today."
This center-hallway building in Little Havana, built in 1933, would now be illegal.
More crucially, it is worsening the affordability problem.
“Miami as a city is building an endless supply of palaces in the sky,” said Fausto, a trend that he enjoys, considering that he lives in one such building in the Brickell neighborhood. “But we’re not building in our medium to lower-income neighborhoods, and in particular we have an excess of small lots which are not being touched…And the reason they’re not being considered is because of the regulations that exist.”
He used his business as an example, noting that the vacant lots around Miami with "Fausto Commercial Realty" banners are the result of an uncertain and constrictive regulatory climate. But there are an alarming number of vacant lots everywhere in Miami--and they certainly aren't all his. Fausto said that during conversations, he's heard other developers cite Miami's regulations as the reason they sit on, rather than improve, their underutilized properties.
Frey, who I later spoke with by phone, concurred, saying that existing regulations mean "Miami is experiencing a severe crisis of affordability that's driven mostly by artificial scarcity," preventing very specific development types. In many areas, building to code would mean constructing 3- or 4-unit buildings, and leaving the rest of the lot for parking, an option that provides minimal returns and isn't typically pursued. The second option is to build skyscrapers, since that's the only other way to conform to parking requirements while also adding many units. Building skyscrapers is illegal in most areas, though, and even where it's not, small developers can't get the financing for it. So many developers in Fausto and Frey's position keep their lots unimproved.
As I reported last year for Forbes, Miami is slowly loosening its parking minimums in certain areas. This began in 2010, when the form-based Miami 21 zoning code ended parking minimums downtown, helping sustain a high-rise development boom. In 2015, the city extended these waivers to other parts of the city with existing density and transit access. Frey drafted that amendment and took it to the city commissioners -- where it actually got passed.For these reasons, both Fausto and Frey have become prominent spokesmen for regulatory reform in Miami. At public meetings and in local media, they've called for relaxing these parking requirements and density limits. It seems to be working.
In response to the new measures, both builders, and others in Miami, have begun adding housing that mirrors a bygone era.
Neither of Frey's two 8-unit projects -- one of which is nearly complete, and the other being developed -- has any parking, and they are both urban-style row-homes. They are going up on empty lots and are within walking distance of downtown, made possible only because of the deregulation that Frey himself fought for. Fausto wrote in an email that he has responded to the changes by also rolling out a new line of micro-units in eastern Little Havana. They will be called "Dwell", and are "for a specific and underserved demographic, Millenials, aged from 25-35 years old, earning $35,000-$75,000." Perhaps most encouraging, says Frey, some existing family landowners in Little Havana are now trying to build on their lots -- providing income for them, and more neighborhood housing.
That said, Miami still badly needs regulatory reform. Recent waivers aside, much of the city is still zoned for minimum parking requirements and low densities. These regulations are dated compared with what the city has become: a global destination with good Walk Scores in some areas, and an increasingly urban feel. High-rise developments now dominate large swaths of the coastline going up to Ft. Lauderdale, and Miami's interior neighborhoods and first suburbs demand the metro area's highest per-square-foot prices.
Little Havana is not at the top of the price scale, but that's probably a good thing. It means that with less regulation, the neighborhood would not give way to skyscrapers, anyway, but enjoy more of the medium-scale, incremental development that has always defined it. That, in fact, is exactly what Fausto and Frey are trying to build -- thereby returning to Miami's roots.
“If we can overcome those regulatory hurdles tomorrow," said Fausto, "then the day after, we will start building a better Little Havana.”
[This article was originally published by Forbes.]