Florida's escalating cost of living – Disappearing dollar

Florida has long been known as a more affordable place to live than many parts of the country, with no state income tax, lower property taxes and a cheaper overall housing stock.

That is starting to change, though, as housing prices have escalated rapidly, along with apartment rents, home insurance premiums and electric rates. Hurricane Ian is expected to make the problem even worse, adding to the housing pinch and sky high insurance rates.

Gov. Ron DeSantis often talks about inflation, but has focused more on issues such as the cost of gasoline, often pinning the blame on President Biden for pocketbook issues Floridians face.

Florida has it's own, homegrown, cost-of-living crisis, though.

As DeSantis seeks a second term, USA TODAY Network-Florida looked at how the governor has tackled some of the state's most pressing pocketbook issues.

Property insurance

The problem: The average premium for a Florida property insurance policy on a home with $300,000 worth of coverage went from $1,960 the year before DeSantis took office to $4,231 today, according to the Insurance Information institute, an increase of 116%.

The cause of the problem: The market is in crisis and only seems to be getting worse.

Companies have been dropping policies, raising rates and going out of business, and that was all before Ian made landfall and compounded the industry's problems even further. Ian is certain to result in billions of dollars worth of claims, further worsening insurers finances.

Insurers claimed they couldn't make money before Ian, even after dramatic increases in premiums, because of fraud and too many lawsuits. They also are struggling with higher reinsurance costs.

Consumer advocates point to other problems, such as insurers being undercapitalized, relying too heavily on reinsurance and siphoning profits into affiliated companies. Ratings agency AM Best put out a report recently showing Florida insurers are "far out of line" in their dependency on reinsurance, which is insurance for insurance companies. Relying on pricey reinsurance instead of their own capital to pay claims forces insurance companies to charge much higher rates.

Sarasota retiree Jeff Wilkinson was facing a $7,000 property insurance bill this year on his 1,100-square-foot bungalow, up from $5,600 last year. He dropped his flood insurance, saving $1,900. "I'm just fed up with it," Wilkinson said of the mounting insurance costs.

What DeSantis has done about the problem: DeSantis approved a pair of bills aimed at easing the property insurance crisis, including one that emerged from a special legislative session called by the governor in May.

The bills made it harder to sue insurers and had other reforms generally favored by the insurance industry. They did nothing to address concerns, however, about companies not having enough reserves or playing financial shell games that make them seem less profitable than they are.

The legislation hasn't solved the problem. Insurers are still failing, and rates still are expected to increase. One of the largest insurers in the state announced it was leaving Florida shortly after the second bill passed, and six have failed in the last six months.

"It continues to be the most treacherous property insurance market in the U.S., which is creating a big burden for Florida homeowners," said Mark Friedlander, communications director for the Insurance Information Institute, adding: "Unfortunately the steps that the Legislature took... just did not solve the crisis."

Republican state Sen. Jeff Brandes has been prescient about the industry's collapse. He believes there needs to be an "emergency taskforce" convened immediately in the wake of Ian to address Florida's insurance problems before they worsen.

"We're in a really bad place in Florida," Brandes told WUCF, adding: "I can't think of a more important issue for the Legislature to tackle."

Home prices

The problem: The median sales price for a single-family home in Florida spiked from $254,505 in 2018, the year before DeSantis was elected, to $420,000 in June of this year, according to Florida Realtors data. That's a 65% increase.

The cause of the problem: Florida has seen historically low numbers of homes on the market as the number of available properties has not kept up with a surge in demand. The good news: That boosted equity of existing homeowners. The bad news: That scarcity drove up prices. The number of homes for sale increased somewhat in recent months, but still is well below normal. With Ian destroying many homes, the market's supply problem could worsen again, although rising interest rates have begun to temper home sales and prices.

The state continues to see significant population growth as the economy rebounds from the pandemic and baby boomers retire to the state in large numbers. Florida grew by 709,000 people in 2020 and 2021, according to Florida Office of Economic and Demographic Research, and is projected to grow by nearly one million more from 2022 through the end of 2024.

At the same time, the cost of building materials increased along with land values and many builders have struggled to find enough workers, all of which has contributed to higher housing costs and an inability to meet demand.

What DeSantis has done about the problem: Working with the Florida Legislature, DeSantis established a $100 million "Hometown Heroes" assistance program this year to help police officers, teachers, health care professionals, military members and veterans pay for a down payment on a home. The initiative was funded out of $338 million budgeted for housing programs this year through the state's affordable housing trust funds, the largest amount in 16 years.

"We're trending in the right direction," with the housing funds said state Rep. Daniel Perez, a Miami Republican who is in line to become House speaker. "We understand the importance of not just affordable housing, but workforce housing."

The state housing money goes to a range of programs, including subsidies to build rent-controlled apartment complexes and other low-income housing. In the past, state lawmakers often swept money from the affordable housing trust funds to pay for other programs. That will stop under a bill signed by DeSantis, which gives the trust funds a recurring, untouchable revenue stream.

But the bill also slashed in half the amount of funding that flows into the affordable housing trust funds from taxes on real estate transactions. So while the $338 million is substantial, it's only half of what would have been collected for affordable housing without the cap, and still below the peak of $442 million devoted to state housing programs in 2006 when the trust funds had a higher cap.

Florida Housing Coalition President and CEO Jaimie Ross said DeSantis has championed full funding for affordable housing programs. "He has been fully supportive of using trust fund money for affordable housing," she said, while also lamenting that the funding was cut in half under a bill DeSantis signed.

Utility rates

The problem: The average retail price for electricity in Florida went from 11.6 cents per kilowatt hour in the late 2018, the year before DeSantis took office, to 13.9 cents per kilowatt hour in June of 2022, according to the U.S. Energy Information Agency. That's a 20% increase.

The average Florida resident used 1,142 kilowatt hours of electricity a month last year. That amount of electricity costs $159 today, up from $132 before DeSantis took office. That equates to an extra $324 a year on average.

The cause of the problem: Electric utilities have been raising rates because of higher fuel prices, which they pass on to customers, but they've also sought significant base rate increases and gained permission to charge more for hurricane hardening under a bill DeSantis signed.

Florida Power & Light, the state's largest electric utility and one of the largest in the nation with 5.6 million customers, received approval last year from the state Public Service Commission for a massive base rate increase that will cost consumers nearly $5 billion over the next four years.

The company says higher rates are needed to upgrade its infrastructure and pay for more clean power projects, but critics say the increase gives FPL an excessive profit margin of 10.6%, which is greater than other utilities.

The rate increase is being challenged in court.

What DeSantis has done about the problem: DeSantis mostly has been quiet about rising electric rates.

The governor did veto a bill loathed by solar advocates that would have made residential solar more costly. The legislation was pushed by FPL, but met with fierce opposition, including from many conservative communities in the Panhandle who are upset at FPL over higher rates after the company took over their regional power provider.

Yet while DeSantis sided with consumers on the solar bill, he has appointed Public Service Commission members who sided with FPL and other utilities on big rate hikes. DeSantis also signed a bill that forced out the state's top consumer advocate on electric utility issues, former Public Counsel J.R. Kelly, who was targeted by utilities.

Kelly said FPL received "near about everything they were asking for" from the PSC during the recent rate case. He believes the profit market the company was granted of 10.6% is unjustified, noting it is higher than other Florida utilities. As for the bill DeSantis signed that forced Kelly out by putting a term limit on the public counsel job, Kelly said it's not hard to see why the utilities wanted him gone.

"It was clear that the utilities were planning to file major rate cases in 2021 and it doesn't take a genius to figure out would you rather be going against somebody that's got years and years of experience versus someone that has just come into the office with no experience in the area of energy," Kelly said.

Apartment rental rates

The problem: Rent for the average two-bedroom apartment in Florida rose from $1,215 at the end of 2018, when DeSantis was elected, to $1,717 in August of 2022, according to Apartment List data. That's a 41% increase. The average renter is paying an extra $6,024 a year for a two-bedroom in Florida since DeSantis took office.

The cause of the problem: Similar to what's happening in the single-family home market, the supply of affordable apartments hasn't kept up with demand as a steady wave of people move to Florida. Additionally, the cost of building new apartments is increasing as building materials become more expensive and other issues, such as the rising cost of property insurance, put upward pressure on rents.

Legal Aid of Manasota Executive Director Linda Harradine said the number of people seeking housing assistance from her office has doubled over the last year, but many of them can't be helped. Landlords aren't renewing leases so they can sell rental homes and cash in on record housing prices, or they're raising rental rates beyond what people can afford. Hurricane Ian destroyed a significant number of rental properties or made them temporarily unlivable, which only worsens the market situation.

"It primarily is a supply and demand issue," Harradine said. "That's what the market will bare, so they're going to find somebody who can pay that much."

What DeSantis has done about the problem: Florida subsidizes the construction of low-income apartment complexes through a program known as SAIL — State Apartment Incentive Loan — which receives funding from the state's affordable housing trust funds. This year, SAIL received just $28 million, with $100 million diverted from the program to fund DeSantis' "Hometown Heroes" home down payment initiative.

Ross said there's a greater need for affordable rentals than affordable single-family homes, and that SAIL is a "critically important program" that shouldn't have its funding raided for other programs. "We have more rental need than we do homeownership need so no money should be taken from SAIL ever," she said.

Handing out housing assistance to police, nurses and teachers plays well politically, though, and DeSantis has been eager to tout the Hometown Heroes effort, kicking off the program with a press conference in Cape Coral in May.

DeSantis' staff also worked to help a developer and major campaign donor to pass legislation that would have made it easier "to convert rent-controlled, affordable-housing units that were built with public subsidies into higher-priced, market-rate apartments and condos," according to the Seeking Rents newsletter. The legislation ultimately was revised to lessen the impact on affordable housing.

Follow Herald-Tribune Political Editor Zac Anderson on Twitter at @zacjanderson. He can be reached at [email protected]

Cost of living

increases during DeSantis' first term

Property insurance

116%

Homes

65%

Apartment rentals

41%

Utility rates

20%

Inside

Crist acted on similar issues as governor. 4A

illustration by hannah lauritzen/Usa today network; and getty images