September 8, 2024
Florida is facing an escalating housing affordability crisis that is placing a severe strain on the budgets of Floridians, particularly middle and lower-income families. Recent polling by The James Madison Institute reveals that a staggering 75% of respondents believe housing and rent in their area are “unaffordable,” while only 23% find them affordable.
In July, the median price for single-family homes in Florida was $416,900. Furthermore, 54% of Floridians polled report that concerns over rent or mortgage payments significantly affect their daily lives. Certainly, this is not the Florida any of us envision and these figures simply underscore the urgent need to address the factors driving this crisis.
An examination of Florida’s housing market reveals a complex convergence of government policies and steady and robust population growth contributing to soaring housing costs. One major issue is the impact of land use regulations implemented by state and local governments, which have significantly affected housing prices across the state. Estimates suggest that land use regulations contribute between $14,800 and $22,800 to the cost of a newly constructed house. Unfortunately, this increase is regressive and thus particularly burdensome for smaller, more affordable homes, making it increasingly difficult for lower-income families to find suitable housing.
The rapid population growth in Florida accelerates this problem by increasing demand while supply struggles to keep pace. In many areas, home prices and rents have surged far faster than the cost of construction since the 1990s. This discrepancy highlights a critical gap between the actual costs of building and the market prices, squeezing household budgets even further.
Government policies play a significant role in this housing affordability crisis. Impact fees, permitting processes, and zoning regulations all contribute to higher cost. Impact fees, which are intended to cover the costs associated with new developments, often end up being a regressive burden. These fees can increase the cost of housing by a significant margin, disproportionately affecting those seeking smaller, more affordable homes.
To address some of these issues and improve housing availability and affordability, several reforms are needed:
1. Align Impact Fees with Service Costs: Impact fees should be linked to the actual costs of services and infrastructure required by new developments. This ensures that fees are more accurately reflective of the marginal costs, reducing their burden on housing development.
2. Enhance Transparency: The formulas used to calculate impact fees should be transparent and publicly accessible. This transparency will help bring clarity to the fee structures and allow stakeholders to better understand and challenge the calculations if necessary.
3. Assess Fees at Application: Impact fees should be assessed at the time of application rather than at the end of the development process. This change would reduce uncertainty and financial risk for developers, potentially lowering the overall costs of housing development.
4. Adjust Fees Based on Unit Size: To make impact fees less regressive, they should be linked to the actual size of the unit, not the number of bedrooms or unit type, e.g. single-family home. Smaller residential units should incur lower fees, aligning with the needs of lower-income buyers.
5. Public Input on Fee Schedules: Establishing impact fee schedules should involve public input to ensure that the fees reflect the community’s needs and priorities. This democratic approach can lead to more equitable and effective housing policies.
By addressing these issues, Florida can move toward a more equitable and sustainable housing market that better serves its diverse and growing population. The current system, burdened by outdated and counter-productive policies, paired with continued population growth, has created a crisis that disproportionately affects those who can least afford it.
Decision-makers should be mindful of how restrictive land-use regulations increase housing prices and exacerbate the issue. Policies that require developers to use more land than they otherwise would, such as minimum lot sizes, minimum parking requirements, or height limits that restrict density, all contribute to higher housing prices. Reforms to impact fees and other regulatory measures are essential steps toward ensuring that all Floridians have access to housing, and limiting government’s influence on this crisis should be a priority for Florida’s state and local leaders.
