Miami Taxpayers Help Billionaire Jorge Perez Get Rich Off Affordable Housing
Miami-Dade Commissioner Bruno Barreiro (left) and radio talk show host Martha Flores cut the ribbon to open the Piñeiro building in Little Havana.
Courtesy of City of Miami
UPDATED: Read the second part of this series on how Commissioner Bruno Barreiro requested the no-bid deal by Jorge Pérez's company, Related Urban Development Group, be approved without evaluating competing proposals or hearing public input.
This past March 3, local officials gathered to celebrate the opening of a 34-unit affordable-housing apartment complex in the leafy, middle-class Miami neighborhood of Shenandoah. County Commissioner Bruno Barreiro and Cuban radio personality Martha Flores snipped the red ribbon.
"A lot of families are going to be happy here," Miami Mayor Tomás Regalado announced. "But one thing we have to remember is that there are many, many families on waiting lists [to lease apartments], and they are living in difficult conditions."
The three-story building, next to an elementary school at SW 12th Street and 20th Avenue, is dubbed "Edificio Piñeiro," honoring a Miami-Dade Republican Party official and mentor to Barreiro who passed away in 2004. Though it's almost 90 years old, the building gives the appearance of new construction. The apartments, for low-income seniors, average 500 square feet.
But missing from the festivities was another man with much to celebrate — Miami's condo-king developer and arts patron Jorge Pérez. A company within Pérez's real-estate conglomerate received millions in city and county loans and grants to reopen the building. Much of that funding was requested by Barreiro, the veteran commissioner whose hotly contested 2012 reelection campaign was backed by more than $18,000 in contributions from Pérez, his associates, and affiliate companies.
How much of Edificio Piñeiro's $7.6 million price tag will end up in Pérez's pocket is unclear. Renovation costs for the privately owned building are being paid with public funds. And some, perhaps all, of the government loans to kick-start the project may be forgiven, never to be repaid. On top of it all, Pérez's group is collecting a $1 million "developer's fee." Indeed, a close inspection of this and a similar deal — both negotiated by Pérez's people and local officials — sheds light on the lucrative underside of affordable housing in Miami-Dade.
Executives from Pérez's luxury developer, the Related Group, declined to comment about the project. A company spokesperson, Jorge Mendez, also refused to be interviewed or answer questions submitted in writing. Alberto Milo, vice president of Pérez's affordable-housing affiliate, Related Urban Development Group (RUDG), did speak at the grand opening, lamenting the dearth of housing options for fixed-income seniors: "These are people who have worked their whole lives, and they don't have a lot to show for it. There are not a lot of quality places for them to live."
Low-cost shelter is one of America's intractable challenges. Nationwide only 31 affordable-housing units are available for every 100 families that need them. The problem is growing. Rental rates are rising, and federal housing assistance has been cut in half over the past decade.
And Miami-Dade is among the hardest-hit regions. Census data shows that nearly two-thirds of renters here spend more than 30 percent of their income on housing — the highest in the nation among major cities. In 2014, U.S. Housing Secretary Shaun Donovan proclaimed the country was on the verge of "the worst rental affordability crisis that this country has ever known."
For decades, federal programs for affordable housing have encouraged partnerships between government and for-profit developers through low-interest government loans and federal tax credits, which are traded on an open market. The American Recovery and Reinvestment Act of 2009 sweetened the incentives. Low-income multifamily housing starts jumped 15 percent in 2014 and are expected to grow 9 percent this year.
South Florida remains one of the most competitive markets for affordable-housing construction. Locally based Pinnacle Housing Group and Atlantic Pacific Communities annually rank among the nation's largest developers in this field. Smaller players abound, such as Biscayne Housing Group, Peninsula Developers, and one of the industry's most respected — Carrfour Supportive Housing. The Miami-based not-for-profit has leveraged more than $200 million in subsidies since 1993 to construct close to 1,200 low-income housing units in facilities such as Homestead's Verde Gardens, Liberty City's Parkview Gardens, and Little Havana's Amistad, which opened last summer.
In addition to competing for federal incentives, Miami-Dade's affordable-housing developers also jockey for local funds, including nearly $200 million that county voters approved in 2004. The money is part of a much larger bond program — secured by future property tax revenues — to finance capital improvements from 2005 through 2020.
And though a chunk of this money has been used to build and maintain county-owned facilities, the bulk of it — $137.7 million — sat idle for years.
Former county commissioner Katy Sorenson, who gave up her seat in 2010, recalls the debate. "There was always a bit of tension between those commissioners who liked to have as much of their own discretionary money as possible and those who wanted more oversight to ensure that money wasn't just going to somebody's friend." A Solomonic compromise was reached in 2008, when the available cash was divvied up among the 13 county districts, creating a $10.6 million kitty for each commissioner.
"It was not a good system — wasn't then and isn't now," Sorenson says. "Most of the [bond program] funds have been very well spent, good investments. But the affordable housing funds... well, we need a better process."
In 2010, Barreiro, whose District 5 includes Little Havana, downtown Miami, and parts of Miami Beach, asked Pérez's people to propose a deal that could be done quickly and sensibly. Barreiro says he didn't request competing proposals because of "time constraints." Like other developers, Pérez had stumbled during the real-estate crisis a few years earlier and had turned his attention to lower-margin deals, such as affordable housing.
An opportunity, Pérez's people suggested, lay in the Toscana, a 49-unit apartment near SW First Street and Sixth Avenue that could be purchased from foreclosure. Barreiro liked the deal. So he asked for $6.2 million of his allotted kitty to be transferred to Pérez's RUDG. (Barreiro says he and Pérez had "causal and informal" conversations about the project; Milo was the commissioner's principal contact.) In early 2010, the county commission approved the request, with Sorenson the lone dissenter, citing a "lack of process."
But Pérez's group never purchased the building. Jose Galan, the Miami-Dade County administrator who oversees commissioners' affordable-housing bond money requests, doesn't know why the deal fell through. Internal documents offer no explanation.
Instead, the company acquired an older apartment building about two miles away, with just fewer than half the number of units. In 2013, after winning a tough reelection battle, Barreiro asked the commission to authorize Pérez's group to apply the $6.2 million awarded for the Toscana project (later reduced to $5.5 million) to renovate and maintain its new building. The commission approved the request without discussion.
It wasn't Pérez's only source of public funding for the project. The City of Miami also extended to RUDG two federally funded low-interest loans, totaling about $3.6 million, to finance renovation.
Despite all of these millions in public funds pledged, nobody could say — and nobody asked — if the deal would be good for taxpayers. Though outside underwriter First Housing Development Corporation of Florida weighed in on the viability of projects funded with county bonds in an August 2012 report — checking credentials of who gets the money, assessing the project costs and financing — the group didn't consider whether somebody else might do a better job at a better price.
Nor did the underwriter consider the legal contract that spells out what the recipients of bond money must do with it, and when.
Galan acknowledges that nobody in his department, or elsewhere in county government, vets commissioners' affordable-housing bond requests or questions their merits. "We are simply acting upon a request from a commissioner [for bond money]," Galan says, noting that no such request has ever been denied. And those requests, complains Sorenson, who chairs a citizen's advisory committee charged with overseeing the county bond program, are inexplicably exempt from her committee's review.
Barreiro defends the project and the process. He and his staff "looked at the numbers," and it promised a good deal for taxpayers. "We evaluated it personally," he said in a recent interview.
Next week: Details of Barreiro's hefty political support from Pérez.