The New Post-Covid Real Estate and Economic Landscape in America
[First, an apology for tbe length of time between posts. I have been taking a break from all forms of writing the past two months. Back now.]
This column and the next column were initially published in the Sarasota Herald-Tribune where I write a column every two weeks in the Business Weekly section [yes I took a break there as well]. I live in Sarasota FL, on the Gulf Coast of Florida, so the particulars of these columns are about this city and region. However, while there are local and regional particulars, probably every state and many smaller cities have undergone a unique and , in some cases disruptive series of changes due to how people reacted to COVID.
The trends are about real estate, working from home, the national lack of affordable housing, the huge run-up in housing prices and rents and now, historic inflation. People reacted to COVID by fleeing the congested urban areas for less congestion -risk of disease- better climate and more space. Florida was one of the big recipients of this relocation. The county in which I live had the fifth highest number of out of state relocations in 2020-2021 in Florida, so these trends have had a huge effect.
When I moved from Chicago to Sarasota in 2016, I was struck by how much less the cost of living was in Sarasota. There was free parking everywhere and traffic congestion only around a narrow rush hour in the evening. Except for the price of gas, the cost of living is now at or higher than in Chicago. There is traffic outside of rush hour. And there are help wanted/now hiring signs in practically every retail and service establishments.
So this column, and the one that will follow are specific to the city and region in which I live, but there are now hundreds of communities in the country that are dealing with similar issues.
Finally, there is a loose, smiling reference about living in Sarasota, that I have heard for decades; that it is ‘living in paradise’ due to the wonderful weather. That is what is behind the paradise references .
‘Gulf Coast Alert: It’s Getting Hard ‘Living in Paradise”
Sarasota has undergone a transformation this century. Boomers flooding into the area for pre- and actual retirement. Beaches getting nationally and globally ranked. Cities being named in national top 10 lists. Downtown Sarasota has been transformed from what it was even 10 years ago into the beginning of a pedestrian lifestyle.
COVID-19 accelerated changes that were totally unexpected. Vast numbers of Americans left congested cities for more room and to be closer to the outdoors. Millions moved from colder to warmer states. The digital nomad trend benefited areas that had affordable real estate, good climate and amenities.
From Tampa down to Naples, all were near the top of the Florida and national lists for greatest influx of people relocating due to the pandemic. This resulted in a breathless rise in residential real estate values up and down the coast. It was recently reported that the average home sale in Sarasota County had reached $500,000, up substantially from 2020.
The rental market exploded as well, with rents up almost 50% in the area.
Layer on dynamics like historically high inflation resulting from the now-waning pandemic buying spree, supply-chain problems and the war in Ukraine and the problems begin to become very clear. It is increasingly expensive to live here.
One of the key problems is that Sarasota specifically, and the Gulf Coast generally, are becoming relatively expensive to live compared to both elsewhere and our recent past. I have spoken to senior executives on the Gulf Coast who all say that affordability has become the key issue when trying to recruit top talent from out of state. They tell me that when the chosen applicant shows interest in a job, the company brings them down to the area to close the deal, at which time the potential hire explains that they cannot afford to make the move unless the compensation package is increased significantly.
We are rapidly developing a dual market, where the rich are fine and everyone else is beginning to struggle. This is both a global and national phenomenon, but the statistics and trends suggest that on the Gulf Coast of Florida the situation is worse than most other U.S. locations.
My grandparents moved from Ontario to Sarasota around 1900. My father was born here in 1913 and he and his four siblings grew up here. My father was the only sibling who left, getting bachelor’s and master’s degrees from the University of Florida during the Depression. He then moved to Chicago where he had an illustrious academic career at the University of Chicago, largely being acknowledged as having created the field of adult education. So I am a third-generation resident of Sarasota, though most of my life I lived elsewhere.
I mention this because, as a child, my parents and I traveled down to Florida to “visit the family” in the 1950s and 1960s. Back then, much of what Sarasota was can still be seen on “north U.S. 41” as one drives from downtown to the airport. It was a quiet fishing and resort community with motels instead of convention hotels, with ranch homes instead of condo high-rises. In the 1990s, my parents had retired to Plymouth Harbor, in their 70s, and soon they were having major health problems. As an only child I was down here several times a year during that decade. At that time, the only residential high rises were on the harbor, facing Marina Jack, which was a moderate family restaurant at the time.
So, for me, the clear demarcation line was the beginning of the new century, 2000. I have spoken to many lifelong residents of the area who wistfully speak of how the beaches weren’t crowded, the traffic was minimal and the living was easy and inexpensive. Until this century.
There are many stories about really wonderful, places, mostly vacation destinations, where the affluent visited, fell in love and bought second homes to spend more than vacation time. This resulted in the explosion in real estate values, higher-priced restaurants and ever more costly services. This meant that the ski bums and beach bums who lived for the lifestyle and worked to serve the new visitors could no longer live in-market. The Colorado ski towns solved this by creating low-cost dorms and cheap dormitory-type housing miles down the road. Affordable housing is something that politicians and developers only gave lip service to. The NIMBY dynamic (Not In My Back Yard) was joined by NOMBL from developers (Not On My Bottom Line). One of the most erudite and knowledgeable people on affordable housing in our area is Jon Thaxton, a senior VP at the Gulf Coast Foundation. He recently gave a talk on affordable housing and there were two quotes worth noting:
“Affordable housing has graduated from a moral dilemma to an existential threat to our economy.”
And: “There is no quick fix. It took Sarasota 30 years to get in this hole and we’re not going to get out of it overnight.”
Ten years ago I found myself speaking of this as a possible future for our area. It is common now to go to a restaurant and see vacant seating areas and be told there would be a wait, simply because the restaurant does not have enough staff. Walk into most retail establishments and there are never enough people working.
Now this is a huge national trend, often referred to as the “great resignation.” As this column is being written, it was just reported that 5.9 million people left their jobs in April and at the same time there were 11 million job openings, a 2-1 ratio.
Folks, we live in a bifurcated economy; the affluent and those who are struggling. Sarasota – the Gulf Coast town I know best – is not a well-balanced market. It is a high-priced real-estate market, heavy on service industry jobs that don’t pay enough for workers to live here.This could have been foreseen, and avoided.
Yes, a lot of the developments mentioned in this column are trends, dynamics and macro forces that were not our doing and to which we must respond. But a lot of the problem can be laid at the feet of business owners, politicians and real estate developers and the zoning variances that were allowed. In addition, the development of the future by the area’s leaders was to create affluent retirement communities and high-end tourist hotels and restaurants, with visions of money and profit. I am sure some investigative reporter can uncover numerous cases where the authorities did not force the building of affordable housing that was required or at the least, clearly needed.
Rapidly escalating real estate valuations drove interest in the Gulf Coast. It has now become one of the main inhibitors to what used to be called “living in paradise.