We Must Let Go of Legacy Thinking!
[As mentioned in the last column, this column was first published in the Sarasota Herald-Tribune. While it is about Sarasota and the Gulf Coast of Florida, the issues are national in scope. The climate crisis, generational issues and the legacy thinking and legacy economics are relevant in the country and the world. Sea Level Rise is and will be a huge issue for Florida. It will also be relevant to the Gulf Coast, the East Coast and much of the sub-continent of Asia. Elsewhere it will be issues around water, drought and fires. The generational demographics in America are largely the same as in Florida. This is the second about the issues. The next few will be about the trends, technologies and dynamics that can help to shape and redirect our collective futures.]
In my last column I suggested that we may be witnessing the end of “paradise” on the Gulf Coast – and Sarasota in particular – due to lack of foresight, planning and basic short-term greed. Evidently, this is a topic that is top of mind with residents. I received a greater number of supportive and lengthy emails from readers than any column in recent memory.
I wrote back to many of these readers promising to write columns in the future about trends and technologies ahead that could be brought to bear on saving “paradise” from becoming another overpriced, congested, problematic place to live. Better understanding the possibilities and dynamics ahead is essential if we want to keep the paradise many of you feel we are losing.
The current way that residential housing is viewed in our area will be a dead-end street. The top 10% of the population is being served at the cost of the remaining 90%. This may have been partially intentional to create a moneyed community that brings upscale tastes and desires. The problem with this was mentioned in the last column: creating a service- and tourist-oriented economy relies on housing for workers.
Help wanted signs are still everywhere, but who could fill those jobs if they can’t afford to live here?
Sea-level rise is coming, but when?
The two long-term trends that will affect housing on the Gulf Coast are the climate crisis and demographics. Both are national in scope but will be particularly acute for us living on the west coast of Florida
Florida has consistently been listed as the No. 1 state at risk from the effects of climate change, primarily due to due to sea-level rise (SLR). SLR will start to become a real issue in the region in the 2030s. A good visual of this impending reality is this video that I produced and directed along with Tim Rumage back in October 2016 that we called “Bird’s Eye View” Basically, there will be no Siesta Beach by 2040. It is a scientifically sound statement to say that there will be no beaches on the barrier islands by the 2040s. To be fair, the SLR shown in this video is at the high-end range of forecasts, but the direction is clear: a foot of sea-level rise is coming and only the timing is unknown. By mid-century, the region will largely be without beaches.
Beach replenishment has worked in the past, to restore beach lost due to erosion. That won’t work with SLR. “Beachfront property” will become “waterfront property.” Another way to think of it is that the priciest real estate will become the most discounted. Once the effects of SLR can be seen, there will be far more distressed inventory than buyers available.
Another huge housing local issue is a demographic one. In the last 15 years the market became largely influenced by the Baby Boomer generation relocating and retiring to luxurious housing.
The question I have always had about this trend is simple: who is going to buy these homes when the Boomers die?
The largest generation in our country’s history are the Boomers. They are the drivers of the local real estate economy. The smallest generation was GenX, born 1965-1980. Their numbers are so low that there will not be enough of them to buy all the Boomer housing. So the demand for second homes and retirement homes will trend down from the mid-2020s to 2040.
Millennials are now the largest generation in our country’s history. They are also the largest generation in the workforce. Born from 1981-1997, the oldest of the generation is in their early 40s, some 20-30 years away from retirement. This translates into the 2050s as the time when this generation will be retiring. Right at the time when the beaches will have gone.
What we know about the Millennial generation is that, at this stage, they are much less affluent than the Boomers were at their age. We have all experienced or read about this generation living at home well into their 20s. “Late to launch” is a phrase that has been used to describe this delayed entrance into independent lifestyle. So they are late in developing financial wealth.
On top of that is the reality of massive amounts of student loan debt this generation carries. More than a trillion dollars of it is currently on the books. While there are discussions to have the government forgive all federal college loans, this is not certain and does not cover all the debt.
Millennials are having fewer children and have shown to be more frugal – out of necessity – than the Boomers were at their age. These two dynamics suggest that when the Millennials retire, they will not be interested in 3,000-plus square-foot homes with luxury amenities, exactly what has and is being built on the Gulf Coast today.
Currently, the overarching residential real estate market story of our region is how expensive everything has become, from buying a huge luxury home to renting a one-bedroom apartment. People can’t afford to move here. There is no comparative price advantage, something Sarasota had in its favor until recently.
So, the next few years will see a lessening of relocation here due to the cost of living. The end of the Boomer generation will continue to move here for retirement, but only the affluent.
The 2030s will see the Boomers dying off but not being replaced by the GenX retirees as there will be so few of them comparatively. At this same time the clear and unmistakable effect of SLR will become reality. Beachfront property will begin its rapid decline in value. If, as forecasted, hurricanes become ever more powerful due to the climate crisis, there will be even less attraction to move to the region.
The 2040s real estate market here will be unprecedented in several ways. First, the effects of global warming and SLR will be real and profound. Second, the number of retirees will be at a historical low. Third, the Millennials will most likely have a much lower incidence of second home purchases than the Boomers or the Silent Generation before them.
So, what is going on in real estate development in the region now? High-end, expensive, large houses and condos in an effort to bring to market what the market has said it wants this past decade. Exactly the housing stock that is counter to all the trends discussed in this column.
Maybe, just maybe, there will be some effort in the next few years to create housing stock that will serve the 90% of the population that is now not being served. It is this type of housing that will become more attractive through time due to the climate and demographic trends discussed here. Or, we keep doing what we have been doing and hurtle down a one-way street to somewhere other than paradise.
In future columns I will write about certain trends in technology, housing, transportation and new ways of thinking in hopes that future thinking may take hold as we look ahead to truly disruptive times.