Is Florida Just for Rich People Now?

0:04Ryan Knutson:For generations, people have been moving to Florida, the Sunshine State. It's been a magnet for people for decades. That's our colleague Arian Campo-Flores, who lives in Miami. Obviously a lot of retirees have, you know, dreamed of having a little, you know, bungalow on the beach and spending their golden years, you know, fishing and hanging out near the water. It's not just retirees, though. Florida has drawn people from all walks of life. And a big reason is that the state has historically been very affordable. It has drawn people in other age groups, people who are blue-collar workers, who are, you know, nurses, who are teachers, cops and firefighters.

0:52You know, they could find a place to maybe start a new chapter in their lives. and live in a new development.

1:00Ryan Knutson:As a result, Florida's population only seemed to move in one direction, up. But in the past few years, something has changed. That population growth has slowed dramatically. And the only people who seem to be moving to Florida these days are rich.

1:21That appeal that it has long had and that accessibility that it has long had for people around the country who are more maybe middle income or even lower income has really faded.

1:32Ryan Knutson:Seems like that Florida dream is still alive, but only if you have enough money. Yeah, that's a good way to put it. I think Florida really illustrates national trends. It's sort of like you see it in an extreme version here. You know, greater population of millionaires, greater influx of wealthy people, greater array of services aimed at the rich, and yet a real significant squeeze of working class and middle class households. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Wednesday, May 27th.

2:16Ryan Knutson:Coming up on the show, the affordability crisis in Florida.

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3:05Ryan Knutson:The population of Florida has grown steadily for years. And during the pandemic, it drew even more people, especially wealthier ones. The state was a big draw for people from around the country wanted to work remotely and be in a place that had fewer restrictions. And so that really supercharged that influx of people, many of whom were increasingly higher income. Florida is also one of the few states that doesn't have an income tax, which is appealing to those looking to get away from higher tax states. You have wealthy people who have arrived, and then you have uber-wealthy people who have arrived.

3:44We've seen billionaires making news, with buying these vast estates and compounds. Why is it so expensive to go out in Miami? Well, a new report shows that our city just took the spot for the highest concentration of millionaires in the United States. Ken Griffin's big announcement today. He's moving his hedge fund Citadel to South Florida. Mark Zuckerberg has reportedly bought a mansion in Florida with his wife Priscilla. The property is part of a gated community on a small island in Miami that's commonly referred to as billionaire bunker.

4:20Ryan Knutson:So there's been an influx of all these wealthier people that have moved to this state. Has that brought any benefits? On the stimulative side, it is generating demand for high-end construction. It's generating jobs. It's generating service sector employment because there's a lot of, you know, restaurants and services that cater to the wealthy. It's also boosted the tax coffers, because even though there's no state income tax, there are property taxes. So there are positive economic benefits to this influx of wealth. But this influx of wealthy people to Florida has also had an unintended consequence.

5:02Ryan Knutson:It's made the state more expensive, and that's driving out lower and middle-income residents. So the homes get pricier, neighborhoods get gentrified, and so it squeezes people who are on the lower rungs of the economic ladder. And, you know, Florida is not a place that is known for generating, you know, an abundance of really high-paying jobs. And so if those wages are not keeping up with higher rents and higher housing prices, it's forcing a lot of people to leave. This is a dumb question, but why, I'm not sure I fully understand why wealthy people moving somewhere would result in costs going up for everybody.

5:54Well, because they can push up prices for, you know, the existing inventory of homes. I mean, I witnessed it myself in where I live. The home prices started to really climb because you had a lot of people who could afford to bid up those homes coming in. And in my neighborhood, the prices went up 50 percent, 60 percent because there was just so much demand from people who are coming from states where they are probably earning more. and then they were moving into this market, which did have lower-priced homes, and then they started bidding up the prices.

6:35Ryan Knutson:As more affluent people flock to Florida, the state's economy is starting to tailor itself to that. Look at Miami, for example. So there are numerous examples of new services or new restaurants or new venues that have cropped up that cater to a really wealthy demographic. And so, you know, one example is luxury storage spaces. And these run, you know, three to five million dollars. There are these really large spaces in a very kind of secure environment with like security guards and gates to get in. and they're designed for very wealthy people to display their prized possessions, their fancy cars, their wine collection, their fine art.

7:24It's like a 7 ,000 square foot storage unit that has all the bells and whistles. And then you have increasingly private clubs that have opened up, social clubs that are, again, aimed at wealthy people who want to kind of hobnob with other wealthy people. And so you just see more and more of these kinds of things that are really aimed at the high end, highest end of the market, that are becoming more common.

7:52Ryan Knutson:But aren't these wealthy people that are moving there, aren't they creating jobs? I mean, a lot of them are business owners. Well, so there's a few unique dynamics to it. So some of these really extremely wealthy people who have moved to Miami have really just moved themselves to Miami, but their main operations and their main places of employment where they're actually, you know, where their workers are, remain in other states. And so even though they themselves are coming, in many cases, it doesn't involve like a wholesale relocation of a company with hundreds, even thousands of jobs that pay six figures.

8:37Ryan Knutson:That is rare. Meanwhile, Floridians are contending with another problem. Home and flood insurance premiums are skyrocketing because there's been so many powerful storms over the past few years. For some people, we're talking double, triple, over a course of, you know, a number of years. And that really changes the economic picture. I mean, a lot of people have been getting priced out of Florida solely on the insurance piece of this. All of these forces have put a dark cloud over the sunshine state. Now, fewer people are moving there, and a lot of people are leaving, which is a problem for a place that has for years relied on growth.

9:21This is a state that has long depended on continued growth, continued real estate development to power its economy. You drive around the state and you see that. There's just construction throughout and new strip malls and new commercial sectors. And so it's a state that's really predicated on growth. Its economy is predicated on growth. And so if fewer people are coming and more people are leaving, that becomes a problem because there are so many sectors that really depend on that.

9:57Ryan Knutson:A few weeks ago, Arian wrote an article that summed up these trends. and a lot of readers responded in the comments. Many shared kind of their own concerns or their own experiences in the state, how, you know, they themselves had felt like they were getting priced out of the state. And so it drew a lot of comments, more than 1 ,000 comments. And one of the people weighing in on Arian's reporting was a bit more high profile, Florida Senator Rick Scott. He tweeted the story and said that this raised concerns for him about the direction that Florida was heading in. And that it illustrated how the state had gotten off track.

10:41And he said that it was these trends that were outlined in the story were bad for business and bad for Floridians. And so given the senator's interest, we thought, well, maybe we should, you know, reach out to Senator Scott and engage him on this and see what he has to say about these affordability issues. That's after the break.

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11:45Morning. Morning, how you doing? Nice to meet you.

11:49Ryan Knutson:A few weeks ago, our colleague Arian flew up to D.C. to sit down with Republican Senator Rick Scott. Scott also previously served as the state's governor from 2011 to 2019. So we met at his office in Washington, D.C., just across the street from the Capitol. And, you know, he gave us plenty of his time. We sat down in his office, which is adorned with lots of flags and lots of memorabilia from Florida. Senator, thank you so much for taking the time to sit down with us. Really appreciate it. I wanted to start off by going through some reader comments. And proceeded to talk about some of these issues that the article had raised, and I ran by him some of the comments that our readers had.

12:35What are the implications of having an economy that is increasingly skewed toward the wealthy? I think that is happening. If you look at Naples, if you look at Palm Beach, even some of the areas in Miami, the higher end is doing fine. Rich people are doing fine, right? And the poor are having a hard time. So this can't go on, right?

13:00Ryan Knutson:What stood out to you the most about what he said in the interview? you? Well, you know, I funny enough, the very first story that I did for the Wall Street Journal was about him when he had just been elected governor. You know, his whole thing as governor was that he was going to be the jobs governor. And so more than 15 years later, you know, he still had this like lapel pin that says jobs on it. And that was kind of the lens through which he was looking at it. You know, I think a main point that he was making is that the state needs to create the types of jobs that are going to allow people to afford to stay in Florida.

13:41We should be the driver of jobs for the country. People want to be in Florida. I mean, when you're just flying to Florida, you're happy, right? So what do you have to do? You've got to recruit companies. You've got to make the best place to do business. You've got to have the best education system. You've got to have the best, most secure neighborhoods.

14:02Ryan Knutson:And you've got to play to your strengths. So all those things have to happen, I think. As more low - and middle-income Floridians struggle to make ends meet, Scott says the solution is to create more jobs in the state. He talked about trying to make the state more attractive to employers that will hire people with good-paying jobs. And he gave examples of, you know, some employers that are already here, like Lockheed Martin, like Embraer. Those are companies that are involved in the aerospace industry in a part of the state, you know, known as the Space Coast. The private space sector is something that's growing.

14:42And Florida has been pretty successful in capturing a decent share of that market. And so he talked about wanting to, you know, create more of that.

14:52Ryan Knutson:How much is that something that he can actually do, though, as a U.S. senator? Well, he acknowledged that they are somewhat limited at the federal level in terms of what they can do. He did talk about trying to help to the extent possible on the housing front to try to create more affordable housing, to create policies that would incentivize that. But a lot of this does, you know, depend on what happens at the state and the local level. Creating more affordable housing is something that most states are trying to figure out. Not just Florida. And federal lawmakers have been discussing a new bill that aims to boost the supply of affordable housing across the country.

15:33Ryan Knutson:The bill, called the 21st Century Road to Housing Act, includes some big ideas to make homes more affordable. It would be a significant overhaul of federal housing policy, and it creates incentives to create a larger supply of new construction and more affordable construction. It also seeks to restrict the involvement of institutional investors in buying up single-family homes, which has been a factor in regular folks being able to afford those homes. The bill has bipartisan support, but Scott was one of just a handful of senators who voted against it. In his statement, the senator said the bill was, quote, a haphazard attempt to put a federal government-sized bandage over a problem that was caused by the federal government.

16:24Ryan Knutson:Scott proposed a different bill to help first-time buyers save for a down payment, but it hasn't advanced.

16:34Ryan Knutson:Scott says that one way to bring about change in Florida is to simply make more people aware of the affordability problem. One thing I've hoped by having a conversation like your article and promoting your article is to have people focus on it. We have elections this year, and so I hope that everybody that's running will really focus, because this is what's really important to people. I hope they'll focus on how do you get more jobs, How do you make sure your education system is the best? How do you keep people safe? How do you drive down the cost of living? Because that's what people care about.

17:06Right.

17:10Ryan Knutson:What does it say about America that Florida, which was sort of once this like, you know, the dream of Florida, affordable retirement, that it was a state that had a low cost of living, that it's no longer that, that it's becoming something much more expensive? Yeah, I mean, I think it illustrates trends that we're seeing nationally. It's sort of, you know, a real illustration of this K-shaped economy that has been getting a lot of attention, particularly over the past few years, where you have the very affluent who are really, you know, driving the economy in a lot of ways. And they're doing well and they have the ability to weather any of these sort of, you know, financial and economic headwinds that the country is dealing with and to keep on spending.

17:59But then you have the lower end of that K, of that economy that is really struggling and is having to cut back and is getting squeezed financially, is having to be very careful with their household budgets. And so they're not participating in this economy. It's sort of hard to get your head around, but over time, you come to realize that this state is increasingly a place that caters to and draws more of a wealthy population. And that changes, you know, the identity of the state.

18:57Ryan Knutson:That's all for today. Wednesday, May 27th. The Journal is a co-production of Spotify and The Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow. Thank you.