Florida rent growth eases, but it’s little solace for many wage earners

Price-sensitive renters seeking places to stay in South Florida can take solace in this: The pace of increases in those monthly payments is easing slightly.

But a lot of wage earners still aren’t able to find places that are affordable.

Eight of nine Florida cities surveyed by researchers at Florida Atlantic University, Florida Gulf Coast University and the University of Alabama “saw yearly rent increases at or below the national average, though renters across the state are still struggling with an affordability crisis.” according to the Waller, Weeks and Johnson Rental Index. released this week.

Nationally, rents went up 4.11%  year-over-year in June.

Here are percentage rent increases in the eight Florida metropolitan areas that fell below the U.S. average:

  • Deltona: 3.91%
  • North Port: 3.66%
  • Greater Miami: 3.38%
  • Tampa: 3.11%
  • Lakeland: 2.52%
  • Jacksonville: 2.43%
  • Orlando: 2.33%

Palm Bay matched the national average while Cape Coral, which is still recovering from last year’s strike by Hurricane Ian, registered a 7.73% increase. The Southwest Florida city of 200,000 suffered extensive flooding and damage to nearly all of the buildings in its southern section.

The 499-foot RD Las Olas building that will house rental units is shown under construction east of the 100 Las Olas building in Fort Lauderdale on Thursday, Feb. 2, 2023. 100 Las Olas is the tallest building in the city.

Amy Beth Bennett/South Florida Sun Sentinel

The 499-foot RD Las Olas building that will house rental units is shown under construction east of the 100 Las Olas building in Fort Lauderdale. Despite a spate of multi-family construction projects, analysts say they are not being built fast enough to meet the high demand in South Florida.

“This doesn’t mean that rents have become affordable as rents are still high in these areas. They just aren’t expanding as rapidly as before,” Ken H. Johnson, real estate economist at FAU’s College of Business, said in a statement.  “The state is easing out of a rental crisis and into an affordability crisis where renters are faced with increasing costs and incomes that aren’t rising to meet those costs.”

What’s the difference between rental and affordability crises?

A rental crisis “is nothing more than rents rising very very rapidly,” Johnson said in an interview. “Now rents aren’t rising as rapidly as they were.”

But an affordability crisis — where rents are consuming larger and larger chunks of people’s annual incomes — is a phenomenon “we’re going to be talking about for quite awhile,” Johnson said.

Rents aren’t going down any time soon, either.

Unrelenting lofty rents

In South Florida, the main drivers of upward rents are pretty familiar: A lack of supply, a continuing surge of new residents from out of state, and workers whose employers allow them to toil from home.

As if the migration-to-Florida story needed reinforcing, the consumer site SmartAsset found that the Sunshine State led the nation in the volume of “high-earning” residents moving from state to state in 2020 and 2021. More than 40,000 people who earned at least $200,000 annually arrived in the state from elsewhere during those years, according to a survey released this week.

Jaclyn DeJohn, managing editor of economic analysis at SmartAsset, suggested that high-earners willing to pay premiums for housing can apply upward pressure on prices.

“High-earners may be incentivized to move to an area for tax and cost-of-living savings,” she said in a statement. “If a flow of high-earners into an area is high, it may put particularly high demand onto a housing market, which may lead to a combination of lower inventory and higher prices. As more money is invested into a particular area, local businesses may adjust their goods, services and prices to better match the incoming market.”

Still, Johnson said he is encouraged by reports of 22,000 new rental units being constructed in South Florida by area developers to help cope with continuous inbound migration by young professionals and other out-of-state residents.

Fort Lauderdale in high demand

Fort Lauderdale, for example, remains one of the nation’s top 30  “sought-after” cities to live in the nation, according to the apartment search website RentCafe.

Available apartments have actually decreased by 63% over the past year, RentCafe said this week after conducting a nationwide survey of cities favored by renters.

“Fort Lauderdale maintains its status as the 7th most sought after city in the South by renters,” RentCafe said in a statement.

But newly built apartment projects are filling up fast at hefty prices.

Quantum at Flagler Village, a new project that includes two 15-story residential towers and a Marriott hotel, is all but fully leased,  said Joe Hercenberg, senior managing director of capital markets at Walker & Dunlop, a commercial real estate finance firm that helped secure a $150 million construction loan on the project. Quantum boasts a 24-hour fitness center, parking garage with a rooftop pool, and “smart keys” to open apartment doors..

Studios go for $2,000 a month, while one-bedroom units range from $2,500 to $3,500. Two-bedroom units can be rented for $3,500.

“I think rents are going to continue to go up,” Hercenberg said. “There’s so much demand. There’s still a ton of people moving from the Northeast to Florida, which is causing a lot of that demand.”

Johnson believes that eventually, the supply of apartments will improve and start meeting the demand that has overtaken the region.

“I’m still confident of what we’re going to do here,” Johnson said. “It always takes time to get enough units.”

“With rents, we’re going to see the rate of increase slowing,” he added. ”I don’t know that we’re going to see rents come down, although I do harbor hopes.”

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