As we embark on a new year, the recent migration of wealthy individuals to Florida from other states and simultaneous movement of lower-income households out of the state is a trend that merits serious consideration.
In September 2023, an article in RISMedia noted that Florida led the nation in in-migration with 128,710 net new households, according to 2021-22 IRS data. That’s almost 54% more than second-place Texas. This is noteworthy, but the part of the article that truly caught my eye was the differential in average household income for those relocating. Incoming households had an average income of $148,151, while outgoing households averaged $71,840. This represents statewide gentrification on a significant scale.
Suspecting these numbers might be more pronounced in Southwest Florida, I asked my colleagues in Florida Gulf Coast University’s Regional Economic Research Institute to pull data for our three coastal counties. The data confirmed my suspicions. The top five states contributing net new households to Florida were New York, Illinois, New Jersey, Massachusetts and Pennsylvania. While New York sent the most new households, those moving from the Empire State to Florida had incomes only 50% higher than those moving in the opposite direction, the lowest percentage difference of the group. The households moving from Illinois to Florida had average incomes $215,075 higher than those moving from Florida to Illinois, a difference of 62%.
On the surface, the influx of high-income households may seem like something to be celebrated. Their movement to Florida is a clear signal they have figured out what many of us have known for a long time: This is a great place to live. However, continuation of such a dramatic change in the population composition has significant implications with respect to a couple of the Sunshine State’s most pressing issues: housing affordability and workforce development and retention.
While households exiting the state frequently cite high housing costs as a motivating factor, the high-income households moving here see homes in our markets as reasonably priced. These new residents have greater financial capacity, and their activity in our markets puts upward pressure on rents and home prices. Many of these markets have seen steady declines in affordability, with rents and prices currently far exceeding levels that are within reach of the majority of our workforce. Beyond rising rents and prices, the affordability issue is also greatly compounded by rapidly growing insurance costs. The combination is a perfect storm for declining housing affordability.
The implications of this migratory pattern for workforce development and retention are grave. In addition to making it increasingly difficult for workers to purchase homes or afford rent, the increase in home values provides an incentive for those who own their homes to consider selling and relocating to lower-cost-of-living areas. Additionally, many new households moving into the area are older, and, as a result, their presence increases the demand for the array of services that make living in Southwest Florida great.
It should be noted that the data I referenced are from the 2021-22 tax year. It takes the IRS a bit more than two years to make this information publicly available. Anecdotal evidence suggests the migratory pattern has at least continued, and may have accelerated due to Hurricane Ian and its aftermath. Recognition of this gentrification trend and the potential effects across our markets is critical if we want to preserve the quality of life here in our little corner of paradise.
Shelton Weeks, Ph.D., is the Lucas professor of real estate and the Lucas Institute for Real Estate Development & Finance director at Florida Gulf Coast University’s Lutgert College of Business.
