Florida Renters Stand to Benefit as ‘COVID Refugees’ Return Home
Remote workers returning home could slow Florida’s devastating rent increases while simultaneously creating more affordability issues in New York, according to researchers at Florida Atlantic University and two other schools.
The Fort Myers and Miami metropolitan areas once again rank as the nation’s two most overvalued rental markets, with renters this June paying about 29 percent more than they did in June 2021, figures from the Waller Weeks and Johnson Rental Index show. In fact, the top eight of 109 overvalued markets all are in Florida and had year-over-year rent jumps exceeding 21 percent.
In normal conditions, rents traditionally increase only 3 to 5 percent a year.
But the research from FAU, The University of Alabama and Florida Gulf Coast University indicates that sharp rent increases in Fort Myers, Miami and the other six Florida markets are on pace to slow dramatically in the next year. At the same time, rents in the New York metro area are poised to rise about 21 percent by June 2023.
The main reason for this trend appears to be temporary Florida transplants returning home to New York, said Ken H. Johnson, Ph.D., an economist in FAU’s College of Business. Many workers fled New York because of COVID-related restrictions and worked remotely from Florida, but now firms are requiring their employees to come back to the office.
“Those COVID refugees placed a significant burden on the demand for rental units in Florida, and rents spiked to historic highs while New York became slightly more affordable,” Johnson said. “With those workers returning home, Florida should see a cooling in its rent hikes, and New York renters will again have to deal with much higher rates.”
The researchers use leasing data from Zillow’s Observed Rental Index to determine existing rents and statistically model historical trends from 2014. The analysis covers the entire rental stock of homes and apartments.
The lowest rent increase in June was in Jackson, Mississippi, where renters paid only 5.8 percent more than they did last year. Other markets with moderate increases included Wichita, Kansas; Des Moines, Iowa; and Youngstown, Ohio. The full rankings of the 109 metros can be found here.
“By and large, areas with the lowest rent increases are places with stagnant or declining populations,” said Shelton Weeks, Ph.D., of FGCU’s Lucas Institute for Real Estate Development & Finance. “In markets with growing populations, such as most of Florida, landlords can charge what they want because there’s always somebody willing to pay it.”
As rents rose in Florida, frustrated consumers and affordable housing advocates called for rent control, but Johnson and other economists said a price cap typically leads to unintended consequences.
“Falling rents should help quiet talk of rent control in Florida, but it’ll ratchet back up in New York as rents climb higher there,” said Bennie Waller, Ph.D., of UA’s Culverhouse College of Business. “In the long run, rent control is a bad idea because it leads to poorly maintained buildings, and it incentivizes developers to go build somewhere else without an artificial cap on their revenues.”