Miami Has a Lot in Common With San Francisco

Despite significant differences in taxes, politics and weather, metro Miami, population 6.1 million, shares crucial characteristics with the big metropolises of the East and West Coasts. It’s vibrant. It’s diverse. It’s cosmopolitan. It’s also getting more and more expensive to live there — in part because the area has been building new housing at roughly the same rate relative to population as New York and Boston.

One reason for this is geography. With the Atlantic Ocean on one side and the vast Everglades wetlands on the other, Miami never had a lot of room to sprawl. When Massachusetts Institute of Technology economist Albert Saiz set out a decade and a half ago to measure “The Geographic Determinants of Housing Supply,” he found that, among large US metro areas, Miami, Fort Lauderdale and West Palm Beach ranked second, third and seventh in how much of the land within 50 kilometers of the city center was under water, on too steep a slope or otherwise undevelopable. (The three areas have since been combined into a single Miami-Fort Lauderdale-Pompano Beach metropolitan area.)

The Miami area’s less-than-bountiful supply of developable land is now pretty much all developed. In 2013, the Census Bureau found it to be the country’s ninth most densely populated metropolitan area, on a population-weighted census-tract-by-census-tract basis,(1)and the most consistently dense in the sense that neighborhood density remained high even 50, 60 or 70 miles from downtown Miami. Adding new housing in the Miami area, as in other coastal metro areas, thus requires building in already built-up neighborhoods.

Tall apartment buildings are part of South Florida’s DNA, and Miami and nearby cities have continued to add new ones in and around their downtowns and other commercial districts. But for a variety of reasons — scarce land, high construction costs related to hurricane risk, continuing caution in the wake of the last housing bust, which hit Miami hard, and a steady supply of ultra rich buyers from Latin America and elsewhere — these new buildings are even more likely than those in other regions to skew toward superluxury. Over the past two years, the average sales price per square foot has been about 50% higher in Miami for new housing than for existing buildings, according to real estate brokerage Redfin. Nationwide there’s been effectively no difference, and the only metro area I found with a significantly bigger price gap than Miami was New York.

Meanwhile, adding density to existing single-family neighborhoods is about as hard to do in metro Miami as it is elsewhere, with the area settling into the development pattern common on the coasts that housing economist Issi Romem once dubbed “pockets of dense construction in a dormant suburban interior.” Some states have been pressuring cities and suburbs to break out of this single-family rut, but Florida seems to be pushing in the opposite direction, with Governor Ron DeSantis’s administration suing to stop one northern Florida city from ending single-family-only zoning. Last year, in what may have been a fluke but felt a little like a sign of the times, Miami Beach turned down a new Frank-Gehry-designed apartment tower while the famously developer-wary Southern California beach city of Santa Monica approved one. 

One result of this constrained housing supply has been a steady outflow of Miami area residents to cheaper locales. The Census Bureau tracks domestic migration by county, and its statistics show Miami-Dade County losing an average of about 40,000 people a year, net, to other parts of the US over the past decade, with Broward County (Fort Lauderdale) turning negative more recently and Palm Beach County still experiencing net domestic inflows but not nearly enough to make up for Miami-Dade’s losses.

More recent estimates from Placer.ai, a location analytics firm that has had success identifying population trends later confirmed by the Census Bureau, indicate that the Miami metro area experienced a net domestic outflow of 1% of its population, about 60,000 people, during the 12 months ended in March, with the biggest net flows going to the Orlando and Port St. Lucie, Florida, metro areas.

This doesn’t mean metro Miami is shrinking. Broward and Miami-Dade counties have had a few more births than deaths in recent years (Palm Beach County hasn’t), and the region attracts many people from outside the US. It was the near-halt to immigration early in the pandemic that caused population to decline from April 2020 to July 2021, but that has since normalized. Migration to and from the Miami area follows a pattern similar to that seen in New York, San Francisco, Los Angeles and other coastal cities a decade or so ago, with international inflows mostly or entirely canceling out domestic outflows.

Also reminiscent of the 2010s California data is that the people coming in are more affluent than those leaving, although Miami-Dade and Palm Beach counties really took this to new heights early in the pandemic. The average adjusted gross income of the 45,160 federal income taxpayers who changed their addresses to Miami-Dade County between 2020 and 2021 came to $229,662, while that of the 59,292 who left was just $66,354, according to the Internal Revenue Service (which hasn’t released more recent data), while in Palm Beach County the 44,354 new taxpayers averaged $242,684, and the 38,649 departed ones $96,395.(2)Measured by the overall net inflow of income, Miami-Dade and Palm Beach had no real peers among the largest US counties in 2020-2021, and Broward was also a top performer.

Swapping out poorer people for richer ones can of course be great for state and local finances, although Florida’s lack of a state income tax does limit the bounty. And unless the transition also raises incomes substantially for the locals who stay behind, it will be politically fraught for a region where the median household income in 2021 was just $63,814, compared with a national median (as measured by the Census Bureau’s American Community Survey) of $69,717. The combination of low incomes and rising housing prices has pushed metro Miami down to eighth-to-last place in the Federal Reserve Bank of Atlanta’s Home Ownership Affordability Monitor for April, with listings website RealtyHop ranking the city of Miami dead last for housing affordability in June.

The two least-affordable metro areas in the Atlanta Fed’s ranking are Los Angeles and San Francisco, two places with perennial housing problems and, in recent years, many other problems too. There’s been a long-running debate over whether San Francisco’s woes in particular are due mainly to poor governance or inadequate housing supply. Miami may be about to help us figure out the answer.

More From Bloomberg Opinion:

• What Do US Growth Zones Have in Common? New Housing: Justin Fox

• The Real Estate Bust America’s Suburbs Need: Conor Sen

• Miami Crypto Bet May Fail But Was Still Worth It: Jonathan Levin

–With assistance from Jonathan Levin.

(1) That is, the Census Bureau calculated the population density of every census tract, then averaged that on a population-weighted basis across metro areas.

(2) These are per-tax-return numbers. The number of individuals moving was higher and the per-person incomes lower.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Justin Fox is a Bloomberg Opinion columnist covering business, economics and other topics involving charts. A former editor and writer at the Harvard Business Review, Time and Fortune, he is author of “The Myth of the Rational Market.”

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