One of the biggest struggles facing homebuyers today is the severe lack of inventory in most markets. When coupled with the high demand, it is easy to see why buyers are so frustrated. According to the Florida Association of Realtors, experts estimate that the current supply of homes is more than 3 million short to meet the demand of buyers. The best solution to the supply problem is building enough residences to meet demand, but there are a plethora of issues facing the building industry today that many believe will take years to remedy.
The problems seem to stem from several key factors including the recession of 2008, the pandemic, and restrictive zoning laws.
What does the Great Recession have to do with housing in 2022? After all, it was 14 years ago and the market has recovered, right? When the recession happened, the building industry took a massive hit. Many building companies were forced to go out of business, and a huge percentage of the workforce changed professions. Building essentially came to a standstill and demand plummeted. Even as demand picked back up as the economy recovered, building did not pick back up as many building companies had to regrow. According to FAR, builders simply did not build enough to keep up with growing demand for years, and this has led to the severe lack of inventory that is driving the surge in home prices across the country.
The pandemic, with its far-reaching and sometimes unforeseeable impact on so many aspects of our lives, is also fueling the problems that the building industry is struggling with. When the world shut down, so too did building companies. For months and months, building projects were stopped in response to the pandemic. In the meantime, a large percentage of the workforce left - just like what happened in 2008. Now that demand is surging, many companies do not have enough workers to complete projects. Further exacerbating the situation are the issues with the supply chain that we have all been feeling in different ways. For the building industry, this not only means huge delays in projects, as shipping times are often unpredictable and months longer than in days past, but also increased prices. The supply chain problems are tacking on tens of thousands of dollars in added cost to an average home build.
Restrictive zoning is an often overlooked hurdle to the building industry. Many areas have zoning laws that prevent the building of structures that can house multiple families. The chief economist of the National Association of Home Builders, Robert Dietz, cites restrictive zoning for things like the ability to build townhouses in certain neighborhoods as one of the reasons for the housing shortage. On many large pieces of land and in many neighborhoods, only single family homes can be built - housing one family - instead of a multi-unit dwelling that could house many.
Building a home in the Florida Keys is even more difficult than most other places in the country. Not only can it be difficult to get and transport materials throughout the Keys, but the designation as an Area of Critical Concern severely limits the amount of building permits that are allotted annually. In several years, there will be no new building permits handed out, meaning that only knockdowns and renovations can take place, which do not add to the inventory of available housing in the Keys. Other ways are being sought in local governments to address the issues facing the housing supply in the Keys. The next several years will assuredly be critical to the Florida Keys real estate market.