The Economist - UK (2022-04-02)

6 Special report Florida The Economist April 2nd 2022

tor.com,a website.In 2021 housepricesin

Floridaroseby26%,accordingtoZillow,

whichtrackshousingdata.

Migrationisa bigcontributor.FromJu­

ly 2020 toJune2021,220,000moreAmeri­

cansarrivedinFloridathanleft,30%more

than the average over the previous six

years.Ithasbeenthetopdestinationfor

American movers since2014. Adding in

foreignimmigrants,Floridatookina net

260,000migrantsin2020­21,equivalentto

addinga citythesizeofOrlando.Sunandtaxadvantagesarenot

new,butcovid,thedecisiontokeepschoolsandbusinessesopen

andthespreadofremoteworkinghavecausedmanypeopletore­

thinktheirlocation.

“Work­from­homeisthebiggestthingtoaffectthegrowthof

Floridasinceair­conditioning,”saysWillyNunn,bossofHomes

byWestBay,Tampa’slargestprivatehousebuilder.Whereas15%of

buyersofhisfirm’shomesoncehailedfromotherstates,that

sharehastripledsincecovid,withmostcomingfromNewYork,

NewJersey,CaliforniaandPennsylvania.Theageofpeoplemov­

ingtoFloridaischanging.“Plannedcommunities”thatoncelured

mainlyretireesarenowattractingyoungerfamilies,saysLesley

DeutchofJohnBurnsRealEstateConsulting.AccordingtoBlake

Gable of Barron Collier, a developer, communitiesthat were

aroundtwo­thirdsretireeshaveshiftedtotwo­thirdsfamilies.

Bubblesandsqueak

Property  speculation  has  altered  the  state  before.  In  the  1920s

southern  Florida  hosted  “one  of  history’s  wildest  land  booms,

with speculation rivalling the Dutch tulip craze and immigration

exceeding  the  California  gold  rush,”  according  to  Mr  Grunwald.

Out­of­state buyers rushed to purchase land and houses. After the

infamous fraudster Charles Ponzi was released from a Massachu­

setts jail, he relocated to Jacksonville and began another “Ponzi”

scheme  with  a  Floridian  twist,  selling  sub­divided,  underwater

lots to unsuspecting investors. Then two successive hurricanes, in

1926  and  1928,  bankrupted  developers.  By  2006  Florida  was  once

again at the heart of a bubble as the subprime capital of America.

When the market collapsed, people moved and tourists cancelled

holidays, a double whammy for an economy so heavily reliant on

sales tax and property.

As  with  these  previous  bubbles,  the  current  one  will  change

Florida. One way is through its industry mix. As more companies,

including  financial  firms  and  technology  outfits,  move  in,  that

should diversify the economy. With an ageing population, health

care is the largest employer and is expected only to grow. Defence

is another big employer, with Florida hosting 21 military bases, the

largest number for any state after California. So is the space indus­

try, which transitioned after the end of nasa’s space shuttle in 2011

into private space firms that offer top­paying jobs. Yet Florida still

needs a greater diversity of industry and companies to reduce its

dependence on property with its dramatic booms and busts.

Another  way  Florida  could  change  is  in  its  value­proposition

and affordability. Underlying the state’s success has been the abil­

ity to attract cheap labour for tourism and development. Florida

lacks a diverse array of star firms that pay high wages. Publix, the

supermarket chain, is the largest employer. Next is Jabil, a manu­

facturing giant with a small public profile. The mean hourly wage

in Florida is just around 90% of the national average. 

Not only are house prices rising; so are insurance costs, due to

extreme weather, fraud and lawsuits. In 2021 the state accounted

for 8% of American property claims but 75% of lawsuits. Florida

has America’s highest home­insurance costs. Average premiums

in  2021  were  $3,600,  158%  above  national  levels.  In  the  past  two

years rates for homeowners have risen by 25%, against a national

average of 4%, according to the Insurance Information Institute, a

research group. “Property insurance is the Achilles heel of Flori­

da’s real­estate market,” says Jeff Brandes, a Republican state sena­

tor, terming it a “backdoor tax people pay to live in Florida”.

The  Sunshine  State  is  “converting  from  a  low­cost,  low­wage

state to a high­cost, low­wage state”, says Dan Gelber, mayor of Mi­

ami Beach. This has meant staff shortages. Some growth in central

Florida is driven by people moving out of expensive southern cit­

ies like Miami, says Amy Mercado, proper­

ty  appraiser  for  Orange  County  (which  in­

cludes Orlando) and a former legislator. 

A third way that Florida could change is

its seasonality. Traditionally its population

ballooned  in  winter,  as  “snowbirds”  from

the  north  flocked  in,  but  depopulated  in

the summer. This meant erratic year­round

receipts  for  businesses.  Now  “people  are

falling in love with Florida as a year­round

destination,  not  just  as  a  second  home  or

vacation  stop,”  says  Adam  Putnam,  a  for­

mer state agriculture secretary. He sees this

as a “big shift” and “game changer” which

will  be  “enormously  consequential  for

everything from schools to road infrastruc­

ture”. More people will require more public

spending  on  infrastructure  and  other  ser­

vices  but  also  contribute  greater  revenues

to city and local governments. 

Optimists  hope  that  more  people  will

still  move  to  Florida.  Yet  longtime  Florid­

ians think it is a matter of time before the

good  times  stop  rolling.  “In  this  state,

there’s  always  a  bust,”  says  Alex  Sink,  the

state’s formerchief financial officer. “Don’t

ask me whatthenext one will be, but there

Build back better? will be one.”n

Underlying the

state’s success

has been the

ability to attract

cheap labour