House poor in Florida
Florida's sun-kissed reputation and picturesque landscapes make it a paradise for retirees, vacationers, and dreamers seeking everyday life. The beautiful beaches, vibrant cities, and favorable tax climate attract millions of residents – like you. You may see the Sunshine State as a vacation destination and a retirement community. Either way, the land of palm trees has plenty of money that flows into it!
But did you know Florida homeowners are shelling out too much of their hard-earned cash on housing costs? As housing costs increase, thousands of Floridians remain trapped in a cycle of financial strain. About 60% of Floridian homeowners are cost-burdened, spending over 30% of their income on housing expenses. They must face budget-busting insurance charges, mortgage prices, and property taxes. Unfortunately, these pressing issues contribute to Floridians' struggle to keep a roof over their heads.
Recently, shocking news came to light that has put many residents in a state of distress. According to the data released by U.S. Census Bureau, Florida ranks surprisingly high on the list for having the highest number of "house-poor" homeowners in the state. How high? Well, more than four cities in Florida are on the list of the top 10, and 6 cities are within the top 30.
Florida ranks at the top for the most house-poor homeowners.
Chamber of Commerce, a product research company for real estate agents, further analyzed the U.S. Census Bureau's monthly report of housing costs and household income. The report showed that over one-quarter of homeowners in the 170 most populated U.S. cities are "house poor." Here you must know that the people spending more than 30% of their income on housing costs are considered "house poor" - called the house poor phenomenon. According to Census Bureau, monthly housing costs consist of the following;
- · Payments for mortgages
- deeds of trust
- · Contracts to purchase
- · real estate taxes;
- · property and flood insurance
- · monthly condominium fees for condominiums
As per this definition, 27.4% of homeowners are cost-burdened, whereas 21% have a household income of less than $75,000. And when it comes to Florida, an average homeowner spends 44.3% on housing expenses.
"A factor that doesn't come up in these reports is Florida doesn't have a state income tax. Earnings are one thing, but the thing that matters to households is what is left to spend after taxes. When you look at straight-up earnings, Florida comes in below some of these other states that have high taxes. When you net it out, the picture is not as bad as looking at straight income might suggest." - Sean Snaith, the University of Central Florida's Institute for Economic Competitiveness director.
Cities overflowing with house-poor owners
As mentioned earlier, four cities in Florida have the highest number of "house-poor" homeowners. Let's take a closer look at these cities.
First on the top list of "house poor" is Hialeah, Florida. Approximately 59.3% (10,918 households) of homeowners are in the house-poor category. The median household income of $64,386 falls into a deficit when you pay the hefty monthly household costs of $1,632. In short, the yearly burden on the Hialeah homeowner is $19,584.
Next is Miami, Florida, where 44.6% (14,565 households) of homeowners are considered poor. Even though Miami ranked 4th on the top 10 list, people still have a substantial yearly burden of $27,696.
In Hollywood, Florida, 44.3% (10,180 households) of homeowners are in a house-poor predicament. Hollywood is in the 5th position, where people face a yearly burden of $24,468.
4. Port St. Lucie
"House poor" resident statistics showed homeowners of Port St. Lucie are spending 36.1% of their income on housing costs. The median household income of $84,195 may seem promising, but they face a burden of $19,140 yearly. In addition, Port St. Lucie comes on the 27th city with many people facing the challenges of house poverty.
Moreover, not a single city in Florida ranks as the most "budget-minded" homeowners ( who assign less than 20% of their income to housing expenses).
The land of Sunshine has a harsh reality- expensive housing. You may have noticed Florida's housing market has become a hotbed of unaffordability. Why? The answer lies in the exponentially growing population of the state. The March report stated net migration of 185,000 per year and 1000 per day, making it number one for domestic migration.
However, another factor that potentially causes the home cost to skyrocket is the influx of short-term rentals! As people are more attracted to tourist destinations, long-term housing options have gobbled up faster. And let's not forget the havoc wreaked by hurricanes, which results in sky-high insurance premiums for homeowners. Due to these contributing factors, home values have elevated by 36% in the last five years. However, average incomes increased only by 17%. Therefore, predicting how much housing cost-burden people face is relatively easy.
"The state's housing crisis boils down to the fact that housing prices exceed the local workers' incomes; it's a severe mismatch between what people earn in Florida and what housing costs in Florida."- Jaimie Ross, President and Chief Executive Officer of Florida Housing Coalition.
Recent data shows that Florida comfortably sits in the top ten states with the highest housing cost burden. That means many Florida residents face the harsh reality of spending too much on housing, such as low-income households, essential workers, and retirees living on fixed incomes. Talk about a heavy burden to bear. This housing crisis isn't just about numbers; it's about the people struggling hard to make ends meet.
You should also know that this pressure isn't limited to homeowners alone. Housing costs also lead to increased rents, which means both renters and homeowners are financially constrained.
"People have to recognize that housing is infrastructure. It's just as important as roads. We can't have a healthy economy, can't have a healthy population without an adequate supply of affordable housing."- Jaimie Ross, President and Chief Executive Officer of Florida Housing Coalition.
What to expect next?
In light of the house-poor crisis in Florida and the struggles faced by homeowners, there exists a glimmer of hope too. The Federal Reserve has consistently raised interest rates since March 2022 to fight against inflation. While the Fed doesn't directly control mortgage rates, its actions indirectly impact many home loans.
Fortunately, there is potential relief in sight. The Federal Reserve now indicates a pause in their rate increases after almost a year of consecutive elevation. This development carries promising implications, especially for new homeowners who may benefit from potentially more favorable mortgage rates. Many realtors believe any potential stabilization or even a slight rate decrease could make a significant difference for aspiring homeowners. This development aligns with the need for solutions and relief in Florida's housing crisis.
"That could signal some relief, at least for new homeowners," -Collin Czarnecki, a researcher at the Chamber of Commerce.
All in all, Florida's house-poor crisis is in all its not-so-sunny glory. A considerable number of Floridian homeowners are facing the highest housing cost burden. But let's not lose hope. By taking affordable housing initiatives, Florida can address its housing crisis and offer a brighter future for its residents. Moreover, implementing effective regulations and supporting those in need can help us alleviate the burden on Floridian cities. As a native Floridian, I hope the Sunshine State can reclaim its reputation and ensure housing affordability is a reality for all.
"Florida will continue to move up the ranks. We will continue to have economic growth higher than what we see nationally, and many other areas just won't have the population growth Florida does. They don't have the job growth Florida does. Over time this is going to transform the structure of Florida's economy and incomes along with it." -Sean Snaith, the University of Central Florida's Institute for Economic Competitiveness director.
This article is for informational purposes only. It should not be considered financial, real estate, or legal advice. The market fluctuates; therefore, not all information will remain the same. Consult a financial or real estate attorney before making significant real estate decisions.