Jacksonville has some of the most overpriced rents in the country, the result of waves of people moving into the area during the pandemic and the shortage of places to rent, new research shows.
Rents here average $1,724 per month, which is 13.36% higher than they should based on historical data, according to a study by Florida Atlantic University, Florida Gulf Coast University and the University of Alabama.
The area is the 13th most-overpriced market in the nation, although other cities in Florida fared worse, the study found.
All five of the most overpriced metros in the U.S. are in Florida: South Florida, Fort Myers, Tampa, Sarasota-Bradenton and Port St. Lucie, in that order.
Rents in South Florida average $2,832 per month — almost 22% higher than they should based on past rents, the study said.
“Florida is a popular destination under normal circumstances, and it’s even more desirable now because its pandemic policies strongly favored consumers and businesses,” said Ken. H. Johnson, an economist in FAU’s College of Business. “Landlords can charge exorbitant rents because if the existing tenants do not accept the new lease terms, other people will accept them quickly. This all points back to a persistent inventory shortage in rental units.”
Institutional investors shouldn't be blamed, Johnson told WJCT News. They merely set rents in line with what the market will bear.
"Rents are driven by supply and demand of rental units," he said. "There is no reason to suspect that corporate owners have market power such that they can distort market pricing. Thus, I doubt if the run-up in rents is being driven by corporate landlords."
More likely, the sharp rent increases result from out-of-state transplants and developers who have struggled to build more units because of supply-chain shortages and the rising cost of materials, the researchers said.The team — Johnson, Bennie Waller of the University of Alabama and Shelton Weeks of FGCU’s Lucas Institute for Real Estate Development & Finance — started analyzing rental markets in Florida earlier this year before expanding the study nationwide.
They used past leasing data from Zillow’s Observed Rental Index to statistically model historic trends from 2014 and determine where rents should be and compare those to current rents. The higher the difference, the more overvalued a market is.
The increases are unusual, the researchers said, because rents tend to be less volatile than housing prices, which react more easily to external forces such as mortgage rates.
“Higher rents will persist until inflation comes under control and we build enough units,” Weeks said. “In the meantime, people will have to make hard choices.”
The traditional solution would have been moving to the suburbs and driving farther to work, Waller said, but the high cost of cars (48% higher than last year) and gasoline (51% higher) makes that difficult now.
“Moving to cheaper areas still involves higher costs,” Waller said. “This is crippling to the average person on Main Street.”
Miami-Dade County recently adopted an ordinance that requires landlords to give at least 60-day notices for rent increases above 5%. Some housing advocates call for more measures such as rent control, but Johnson said restricting landlords from charging market values discourages development and leads to poorly maintained rental properties.
“We want an immediate solution to this problem, but there is none,” Johnson said. “There is going to be a reckoning from this latest housing crisis.”
