What is the Real Cost of Living in Florida?
If you have to ask, serious research and consideration may be warranted before committing to a move to the state of Florida. This is particularly true if:
- Your move involves the sale of your current home and the purchase of a replacement residence in Florida.
- You will be living in Florida full-time and will not own a home in another state.
- You are retired, disabled or otherwise live on a modest fixed income.
- You will have to work for a living in Florida to pay your living expenses.
Why do I say this? Because Florida is not a clear low cost of living leader like it was in the last century. Prior to the year 2003 or so, you could move from just about any other state in the U.S. and expect to find lower housing cost, lower taxes and a lower cost of living overall. All of that has changed. The cost of living in Florida is now higher than it is in most other states, according to the Missouri Economic Research and Information Center (information derived from the Council for Community and Economic Research) data from 2017. Here’s a few examples:
- The cost of groceries are higher in Florida than in most states.
- The cost of transportation is higher than in most states.
- Utilities will cost you more in Florida.
- The cost of housing in Florida is higher than the national median. However, Florida has a far higher overall crime rate than most states. If you’re looking for a city or town in Florida that has crime rates lower than the national average, the cost of housing in most of those places will be far higher than the national average. If you find a place in Florida with cheap housing, check to see if high crime rates are the cause.
- The sales tax may be higher because Florida counties can tack onto the state sales tax rate.
- An insurance trade magazine reported that starting in 2014, Florida has the highest homeowners insurance rates in the country.
Steep Housing Cost Peaks and Valleys
The cost of living in Florida is far more unstable than most other U.S. states because the population and the economy of Florida is more unstable. For example, real estate prices in Florida fell by an average of 60% at the beginning of the “great recession” of 2008. If you were living in a home in Florida that was valued at $200,000 before the recession, the value dropped to about $80,000 shortly after.
If you took out a mortgage to buy that home, you may be still be paying that higher cost of living monthly payment for a home worth far more than its value. That might be disturbing, but not necessarily a big deal, unless you wanted or needed to sell. If you wanted (many people who move to Florida will eventually decide to move out) to sell at that point, you would have to write a big check to the bank, just to give your house away. If money is tight, the last thing you need is to take that kind of a loss or have a foreclosure on your credit record because you can’t write that check. Nobody who moves to Florida plans on moving out, but this is what happens to a high percentage of people.
You may be considering a move to Florida after seeing many articles that tout how low the cost of living in Florida is right now. Be careful because many of those articles are poorly researched and written by people who never lived in Florida and don’t know the true costs. Many of these write-ups are based solely on what real estate prices were in the past. They don’t consider the cost of water and sewer which can be outrageous compared to elsewhere. In the state of Florida, real estate taxes are adjusted YEARLY based on value that rise every year that home prices do. They may not take into consideration having your AC running 24 hours a day for nearly the whole year.
Your fixed income or wages may allow you to comfortably pay the bills now, based on the real estate taxes and insurance that were on the home when you bought it. What happens to that affordability if your real estate taxes and insurance rise EVERY YEAR as home prices go up? I have sold many homes in Florida for people who could no longer afford their home because of rising real estate taxes, insurance, etc.
Cost of Living in Florida Wildcard Dangers
After the record damage in Florida from hurricanes in the prior decade, homeowners insurance skyrocketed. Rates more than doubled or tripled for some homeowners. I again sold many homes for people who could not afford the vastly higher premiums. Suddenly insurance companies wouldn’t touch many properties. They became uninsurable until the state formed an insurance company of last resort for homeowners that had no where else to turn. That state backed entity is still one of the largest insurers in Florida today and even Florida’s governor has said in the past it may not be able to pay homeowners the promised insurance coverage if a powerful hurricane hits. That home you buy in Florida today could become a place you can’t afford next year if Florida’s hurricane activity continues to return to normal. Remember, hurricane season in Florida is 6 months long, every year.
Uncertain Future Cost of Insurance
In many parts of Florida if you use a mortgage to purchase a home, you will be forced to carry homeowners, flood, wind, sinkhole and possible other insurance. Events such as the appearance of yet another sinkhole in November 2013 that is swallowed homes and future events could lead to banks to require sinkhole insurance in areas where it wasn’t required previously. It could also lead to an increase in sinkhole insurance rates for people who already pay it. That could force some people from their homes because they can no longer afford the combined rising cost of insurance in Florida. When to many people need to sell at the same time, that can affect real estate values.
Why should you consider flood insurance or other insurance, even if it’s not required? Because most insurance companies won’t pay for damage caused by “flooding” under a regular homeowners insurance policy. Your homeowners policy may cover damage to your home but not from a flood, sinkholes, etc. The more homes that get swallowed by sinkholes, the more areas sinkhole insurance may be required in order to finance a property and the higher the cost of living will increase. Can your income keep up? See the November 2013 sinkhole story in the video below.
The Cost of Living in Florida, the Bottom-line
Moving to Florida if you’re well off financially with a high income
The absence of a state income tax many give the state of Florida an advantage over other states, but only for high income earners. If you don’t invest a high percentage of your assets in a Florida home, you probably shouldn’t worry too much about the cost of living in Florida with the possible exception of further flood insurance reform. If you’ve ever seen people while watching the news who live in a flood zone near a body of water who have lost everything from flooding but swear they will rebuild yet again, what you’re seeing is the taxpayer bailing these people out, through the federal flood insurance program. When they reform this program because the taxpayer piggy bank is broke, these people will be forced to pay flood insurance premiums that reflect the real risk. The real risk is high and growing and once rates reflect this, many flood zone home owners won’t be able to pay. FYI, most people live along the coast in Florida and many entire communities are in a flood zone. In many areas you can’t buy a home that isn’t in a flood zone because every structure is in one. There are new floods zones being created when water damage from flooding occurs in an area where it hadn’t happened in the past.
Moving to Florida and working for a living or living on a modest fixed living.
People thinking of moving to Florida because they’ve saw someone touting the low cost of living in Florida should do research and proceed with caution because the cost of living in Florida can change faster than just about anywhere else. If you will be working for a living, sure you won’t have to pay a state income tax but you almost certainly will be earning less than doing the same job in the state you moved from.
The cost of living in Florida is determined mainly by housing costs. Move to Florida after a housing bust and whether you buy or rent you may experience a lower cost of living than your previous home state. But that low cost of living will probably be temporary. The problem is that because they are so many people moving in and out of Florida, the state experiences higher highs and lower lows when it comes to the economy and housing. If you move to Florida today to enjoy a low cost of living, you may not be able to afford it 3 years later. This isn’t your grandmother’s Florida, the days of a perpetual low cost of living in the sunshine state are over for good.
Ron Stack “That Best Places guy”