FLORIDA HOUSING: Regulated out of reach

Editor’s note: On April 19, the Wall Street Journal published an article entitled: “Florida’s population boom fizzles as high costs drive away middle class.”

The article’s subtitle read: “Orlando and other Florida cities are either losing domestic migrants or gaining them more slowly, threatening the state’s economic model.”

The first four paragraphs of the article were as follows:

ORLANDO Florida’s migration patterns are changing dramatically. Residents in their prime working years are heading to other states, often citing affordability concerns. At the same time, the stream of. people arriving, from other states is shrinking.

“Meanwhile, an influx of wealthy people, from other states turbocharged during the pandemic has helped drive up home prices. Inflation in parts of Florida outpaced the national average over the past decade and home-insurance rates soared.

“These side-by-side trends could spell trouble for a state whose economy relies on continued population growth and real-estate development.

“‘The affordability picture has changed in Florida almost more than anywhere else in the country, yyp said Eric Finnigan, vice president of demographics research at John Burns Research & Consulting.”

In response, former Florida Sen. Jeff ‘Brandes, R-St. Petersburg, founder and president of The Florida Policy Project, wrote the following.

Florida’s growth story is starting to show cracks. For years, the state benefited from a simple equation: People and businesses moved in because the total cost of living, especially housing, was competitive.

That equation is now breaking down.

When costs outrun wages, the middle class leaves. Net migration slows. Growth becomes increasingly dependent on higher-income households. That is not a stable foundation for a state whose economy depends on a broad workforce.

The numbers help explain why. The median home price in Florida is now roughly $425,000, while mortgage rates have roughly doubled since 2022. Monthly payments have surged, effectively shutting many firsttime buyers out of the market.

At the center of the problem is housing. Florida has effectively lost entry-level housing and true starter homes. The bottom two rungs of the housing ladder, historically the on-ramp to homeownership, have been removed. Without them, upward mobility ctallc and affordability pressures cascade across the entire market.

For years, the workaround has been what the industry calls “drive until you qualify.” Households priced out of job centers move farther out until they find something affordable. That is not a solution. It is a symptom.

We can see this clearly in Florida today. Some of the strongest housing markets are in places like Ocala and Polk County, where relative affordability still exists. Affordable housing is noť happening where jobs are concentrated. It: is being pushed outward to wherever costs are lowest. Over time, that pattern becomes economically inefficient and unsustainable The implications extend beyond migration. Nationally, household formation is slowing, and the birthrate has fallen to roughly 1.6 children per woman well below the 2.1 needed to sustain the population.

Housing costs are a key driver. When younger households cannot afford to move out, they delay or forgo forming families. Florida’s loss of entry-level housing is not just an affordability issue. It is a demographic one, as well.

THE COST DRIVERS It is tempting to frame this as a demand problem nr to fnre nn investors. But the evidence points elsewhere. This is fundamentally a cost structure and supply issue that has been building for years.

The real constraint is the widespread practice of local governments yielding to NIMBY resistance by restricting housing growth well below what is needed to accommodate new residents. And in the absence of a coherent statewide housing policy, these local decisions carry few consequences for elected officials, even as the costs are borne across the broader economy.

In many Florida markets, zoning frameworks effectively mandate larger lots and highercost housing. Minimum lot sizes, frontage requirements and subdivision rules make it difficult, if not impossible, to deliver smaller, attainable homes.

Builders do not choose this outcome arbitrarily. They build what it is legal to build. The result is predictable: Higher-cost housing dominates because lowercost housing is often not permitted or economically viable.

These outcomes are not accidental. Local incentives often favor restriction over production. Existing homeowners benefit from scarcity, while the costs fall on renters, first-time buyers and the workforce. Without statelevel alignment, that dynamic will continue.

The solutions are well understood. Allowing accessory dwelling units, or ADUs, would enable small, lower-cost housing on existing lots and support multigenerational living. Upzoning to allow duplexes, triplexes and small multifamily housing in traditionally single-family areas would expand supply without fundamentally changing neighborhood character.

Both approaches increase the range of housing options, which is essential for a functioning market. A resilient system matches households to different housing types over time, rather than forcing everyone into a narrow and increasingly unaffordable product.

Housing policy in Florida is not guided by a coherent statewide vision. Local land-use rules, state incentives, insurance policy and infrastructure planning often move in different directions. There is no unifying objective, such as maximizing attainable housing near job centers. The result is predictable: Luxury housinơ ơeta built, while rorkfnrce housing gets squeezed out.

The regulatory environment compounds the problem. Zoning restrictions, large minimum lot sizes, permitting delays, impact fees, entitlement risk and layered requirements all translate directly into higher prices. Every added layer of friction shows up in the final cost.

INSURANCE RELIEF Even if supply constraints were addressed, Florida would still face a major cost issue: insurance. Property insurance premiums have become a defining component of housing affordability, and for many homeowners, they rival mortgage payments. A large share of that cost comes from reinsurance, which can account for roughly 40% of a typical homeowner’s premium in Florida. Those costs are driven by expensive and volatile private reinsurance markets and are passed directly through to homeowners.

This is where the Florida Hurricane Catastrophe Fund becomes critical. The Cat Fund was designed to provide a state-backed layer of reinsurance for Florida insurers. But it is noť being used to its full potential.

Insurers’ reliance on and the cost of expensive private-market reinsurance could be reduced if the Cat Fund would take on and expand its coverage of the first layer of risk rather than tapping reinsurers early on. Lower reinsurance costs could then be passed on to consumers. It would be akin to lowering the deductible for Florida insurance companies to access the nonprofit Cat Fund.

In a state where insurance is now a core driver of housing costs, that is one of the few policy lerrera that cmld deliver relief at scale.

PRIORITIZE PRODUCTION The path forward is not complicated, even ifit is politically difficult. Florida needs to prioritize urban infill and entry-level production. That means enabling smaller lots and starter homes; expanding ADUs and missingmiddle housing; reducing regulatory friction; and addressing structural cost drivers like insurance.

Florida does not have a demand problem. It has a pricing problem driven by policy choices. Affordability has been regulated out of existence.