Florida's Short-Term Rental Squeeze

18.09.2023 - 18:15 / skift.com / Srividya Kalyanaraman

The sunshine state of Florida is the nation’s fastest-growing state population-wise for the first time since 1957.  In the 1950s, it was newly popular air conditioning that brought people to Florida, and today it’s remote work. 

By September 2022, Florida had welcomed 58.9 million overnight visitors staying in vacation rentals alone, according to the Oxford Economics’ economic impact study done in 2022. Even so, Florida is also the least affordable state to live in — monthly rent in Miami can be as high as 60% of a household’s income, according to a housing affordability study conducted by Realtor.com

Florida has always been a formidable destination for vacation rentals, but it’s increasingly becoming unaffordable for visitors and residents alike. 

At the height of the pandemic between 2021 and 2022, some 58.9 million overnight visitors collectively spent $13.8 billion on vacation rentals in Florida, Oxford Economics said in its economic impact study. These travelers generated 49.2 million room nights across 221,600 properties on 15 million trips. If those stats seem heady, they should. 

The South Florida Business Journal published a study in May that found that Miami has the most Airbnb short-term rental listings per 100,000 people in the country.

At the rate it’s going, Miami will be home to quite a few short-term rental buildings. Developers are building condominium units that are already licensed to be short-term rentals “irrespective of regulations.”

“We design them as hotels and they have both residential as well as commercial licenses,” said Harvey Hernandez,  CEO of Newgard Development Group. The company is developing a 362-unit property in Miami’s main business district. Hernandez added that all but five units are sold, and the building won’t be ready for another three years.

Owners can buy these units to be rented out on Airbnb. Airbnb has been active in Florida making such deals with developers. 

“Challenge we are having is how do we supply this demand faster,” Hernandez said.

“We have some 20,000 investors or buyers that have expressed interest, and we add 1,000 more to the list every month.”

However, it comes with a profit squeeze. 

Rising construction and labor costs put pressure on developer margins. It doesn’t help that lenders have retreated and tightened big construction loans. Hernandez admitted that despite the demand, it’s harder and more expensive to build. 

While inflation is moderating in most of the United States, Florida tells a different story. The Miami-Fort Lauderdale region witnessed a staggering 9% price surge in May compared to the previous year, while nationwide inflation stood at 4% for the same period. In the Tampa-St. Petersburg area, inflation was slightly lower at