Economic Commentary: An Update on Florida’s Housing Rental Market
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Florida aims to be the best state in the nation to live, work, and play, and its tremendous growth suggests such efforts have not been in vain. Florida welcomes about 808 new residents per day, and for the first time since 1957, the state has the fastest-growing population within the United States. While tough to manage at times, a growing population is good for the state, fueling Florida’s economy with new talents and dollars, but as the state continues to attract new residents, the state must ensure that the development of housing keeps pace.
Following the COVID-19 pandemic, Florida experienced a housing boom. As discussed in the October 2021 Florida TaxWatch commentary “Beyond the Pandemic: Long-term Changes and Challenges for Housing in Florida,” a collision of demographic trends, government policies, and basic supply and demand resulted in soaring house prices. By November 2022, the median price of single-family homes in Florida was nearly ten percent higher than the year before.
The high prices of houses make homeownership seem out of reach to would-be homebuyers, which can lead to these households choosing to be renters. This places an extra strain upon the rental market, causing price spikes. The increase of rental prices burdens the budgets of Floridians—whose budgets are already burdened by inflated prices on goods—and results in long-lasting implications for Florida’s workforce.
Nationwide, the prices of rent have drastically grown since the days before the COVID-19 pandemic. Florida incurred a 36 percent increase in rental prices from the first month of 2020 to the last month of 2022. Florida’s rental prices grew especially fast in 2021. At the start of the year, the median price of rent was $1,266. By the year’s end, renters were paying $1,635, a 29 percent increase.
The speed of growth slowed after 2021, and prices even experienced decreases during the last four months of 2022. Although slight declines in rental prices are common during the end of the year, the national rate of decline coupled with increased vacancy rates may be promising. Preliminary forecasts suggest that relaxing rental demand and increased supply should continue easing price growth in coming months; however, since the price is not expected to decline, renters will continue to grapple with the legacy of the 2021 price hike. Rent in metropolitan areas like Miami, Tampa, and Fort Myers has drastically increased since 2020. Metropolitan areas are popular for renters looking for job opportunities, and amid the rise of remote work, many of these cities have also become popular with employed persons looking for an enjoyable place to live. Households in Miami pay a median of $1,634 for a one bedroom apartment and a median of $2,079 for a two bedroom apartment, both of which cost about 36 percent more than the median prices of January 2020 (Table 1).
Rental prices have grown so much that they surpassed the prices predicted by historical trends. According to the Waller, Weeks and Johnson Rental Index, a rental market is considered “overvalued” when it exceeds projections. Of the 25 most overvalued rental markets nationwide, with costs ranging from 7.06 percent to 18.05 percent higher than predictions, Florida is home to nine: Cape Coral (ranked #1), Miami (#2), North Port (#3), Tampa (#7), Orlando (#12), Deltona (#14), Palm Bay (#16), Jacksonville (#18), and Lakeland (#21).
High rent is a risk to Florida’s workforce. While Florida’s highest earners may be able to afford committing greater funds to their housing needs, Floridians with a smaller net income may be required to compromise other needs, such as health care or insurance, to make ends meet. Some may choose to live farther from their workplace to seek affordable housing, committing to longer commute times and greater gas prices. Others may leave local communities, or even the
state altogether, taking their potential earnings and talents elsewhere. Losing residents to other states could limit the strength of Florida’s economy. Currently, the labor market is competitive, characterized by record high quit rates and changing workplace values (i.e., remote work). If Floridians leave their jobs and move to other states, it will further restrain an already tight talent pool.
Although other states are enduring high rental growth as well, there are enticing options that could draw away Floridians. Median rent in nearby Georgia ($1,390 per month) is about $300 less than Florida’s median rent ($1,698). In Texas—a state whose size, economy, and policies are similar to Florida—median rent is $400 less ($1,298). To attract and retain the talent Florida’s economy depends upon, Florida needs sufficient housing options.
Rent is often considered affordable when it costs 30 percent or less of a household’s income. If gross rent costs more than 30 percent of a household’s income, the household is considered cost burdened, and if the household pays more than 50 percent of their income for rent, it is considered severely cost burdened. Lower earning Floridians are especially susceptible to becoming cost burdened. Average median income (AMI) for Florida households is about $61,777.13 Most households earning the AMI or less are cost burdened, paying 40 percent or more of their household income on rent (Table 2).
Looking Ahead
“We need to recognize the changing needs as well as the varied demographics of a
diverse, mobile and to a certain extent remote workforce. We need affordable rental
property for all income levels and family sizes.” – Senate President Passidomo
The varied use of housing units is heavily intertwined with Florida’s success. Both as homes to the workforce and as passive sources of income, such as vacation homes or rentals, the state’s economy depends upon a reliable housing supply. With the prevalence of remote work, the state will also need enough housing units to welcome new residents who choose to bring their earnings from across the nation into Florida. Entering the 2023 Session, the Florida Legislature will tackle the challenge of determining how to best assist home and rental seekers, whether with support for making attainable housing affordable or accelerating and incentivizing construction to ensure the state can continue accommodating for the growing demand upon its housing units.