There is a catastrophic economic storm approaching. Homeowners, renters, businesses, investors, employers, employees and lenders are feeling the impacts already. To avert the worst of the impending economic disaster, we need immediate and meaningful legislative action.
With no state income tax and a welcoming environment, Florida has been, to this point, attracting new residents and economic development. However, Broward County, according to experts, is among the least affordable markets in the country due to a lack of housing stock combined with wages failing to keep pace. But the threat to our economic vitality is not simply a problem of housing stock or the rising cost of goods and services. It is the category five impact of skyrocketing property and auto insurance premiums combined with new legislative mandates for condominium owners.
Sun Sentinel
Mike Ryan is the mayor of Sunrise.
Reportedly, property and auto insurance premiums have been increasing 42% and 24%, respectively, or more. For seniors, the resulting large monthly maintenance increases are devastating; if they cannot pay the increases, they face foreclosure. For homeowners, increasing premiums alter spending decisions. Businesses are passing these increases on to consumers, further aggravating inflationary impacts. For new home buyers, the property insurance premium crisis is destroying the dream of home ownership. As landlords pass on increases, renters are also in pain.
Legislative action on property insurance intended to lower premiums attacked alleged claim abuses. Yet, premiums keep rising.
If the premium increases were not bad enough, Florida legislation enacted in response to the tragic Champlain Towers collapse requires many condominiums three stories and higher to perform expensive studies related to structural building integrity, and then to fully fund the necessary reserves through additional assessments to fix structural issues. These studies and required reserves can add up to a massive financial hit, especially for those on fixed incomes.
Condo owners wanting to flee this storm may discover not only lower sales prices due to assessments but, because of necessary structural repairs, their building has been removed from the Fannie Mae approved list of buildings for lending. Until the structural repairs are completed, potential buyers will not qualify for conventional loans and must instead seek higher rate unconventional loans, further reducing the sales price.
We are already seeing the consequences. For single family homes, according to data from the county property appraiser, average sale prices have increased 8% or more across Broward. However, the average sale price of condominiums has slipped from $210,000 to $205,000, even with limited housing stock. This backslide of condo sales value is the canary in the coal mine, warning of the potential disaster for our seniors and hard-working families wanting to sell before it is too late.
This crisis is different than the 2008 economic collapse, which was a systemic bank-induced market crash and was addressed with emergency infusion of capital, saving banks and riding out the foreclosure crisis through local support. But those strategies won’t work now. Tallahassee and our federal partners must take new, emergency legislative action.
As to the insurance crisis, some say a lack of state regulatory oversight, combined with allowing companies to extract profits through management fees or being able to “cherry pick” policies, explains why the insurance market is hurting our residents and businesses. Recent proposals to address the crisis focus on the complexities of the reinsurance market, necessary to spread the risk of primary insurers, or asking the federal government to help spread insurance risk with other states.
For our condominiums, we need an immediate legislative pause and amendments. While the goals of the legislation enacted after the Champlain Towers tragedy were laudable, like many things with government, the pendulum swung way too far. We do not have a widespread problem of three-story buildings collapsing. Yet, if we do nothing, this new law may cause our entire condominium housing economy to collapse and seniors and hard-working families to lose their homes.
We need an Economic Emergency Operations Center, like what we deploy for approaching storms and post-storm recovery, to focus on immediate strategies to bring state and federal assistance, consider legislative interventions, and develop meaningful strategies to save our homes now. It is not an overstatement that the entire economic vitality of South Florida is at risk. And, as South Florida goes, so goes the state.
Mike Ryan is mayor of Sunrise and an attorney.