The Role HOA’s Play in Florida’s Housing Affordability Challenges
Bottom Line: A quick search of Florida housing affordability nets greater than 116,000 news stories which have been written about the issue. It’s not a new issue and it’s not an issue that’s unique to Florida or South Florida specifically. It’s also not one with an easy fix. When it comes to housing affordability, or commonly the lack thereof in our state, the factor which matters most is supply vs demand. The bottom line is that Florida is and has been one of the top two destinations for relocations for over a decade – experiencing the fastest rise in population of any state since the 1980’s and last year when Florida was the fastest growing state on a rate basis. With that kind of sustained demand, it’s led to paying a premium to live here. No matter where here is. And speaking of here, there’s another immovable object for most which adds to Florida’s housing affordability challenges. Property insurance. It’s an oft discussed topic. It’s a topic which was addressed in two special state legislative sessions last year, most recently in December. And it is one in which if the litigation issue is truly fixed the average policy holder will see about $680 in annual relief. But there’s one which appears to be a huge factor and is seldom discussed. The role HOA’s play.
A new study by FAU economist Ken Johnson, shined a light on the role potentially onerous rules, regs and mandates play in driving up Florida’s housing costs. Quoting Johnson: While developers and local governments clearly need to build more units, that’s not the only solution to this problem. The crux of the focus is the extent of available inventory which isn’t used because it’s not allowed to be. Johnson’s research illustrates HOA rules preventing properties from being rented within their communities across the state. His economic analysis implies the net impact on rental costs of this action alone is nearly 11% higher rates when compared to the national average. Additionally, the study found the large number of landlords which choose to offer short-term rentals would often perform better by offering long-term rentals (by not having additional maintenance and windows of vacancies between tenants), while simultaneously aiding in reducing the burden of overall rental rates.
While the research focused specifically on the potential impact of perhaps overly restrict rules regarding rentals, the question is worth digging into a bit more generally. How much of Florida’s housing affordability issues are generally driven by onerous rules and spending by HOA’s? Acting as quasi governments within Florida, we all know the impact of high taxes and onerous government spending on affordability in high tax states. How much of that is taking place within our communities to unnecessarily drive-up costs through higher than necessary dues and special assessments? In my experience as a former HOA Vice-President, it’s considerable. As we’re seeking greater housing affordability, simply seeking more HOA accountability could be an important place to start.