Inflation rates in the Tampa-St. Petersburg-Clearwater region of Florida have seen a significant decrease, dropping to 1.8% in the 12 months ending in May. This is in stark contrast to Honolulu, Hawaii, which saw the nation’s highest inflation rate at 5.2%. The varying rates can be attributed to the pace of home construction in each region, with increased housing supply contributing to lower inflation rates in Tampa, Houston, Minneapolis, and Denver. In contrast, Hawaii continues to struggle with chronic undersupply of housing, leading to a housing affordability crisis.
The housing market in Hawaii has long been plagued by a lack of available homes, exacerbated by last year’s Lahaina wildfires, while Florida has experienced a boom in residential construction driven by a growing economy and influx of new residents. The Federal Reserve has been grappling with stubbornly high housing costs, which make up a significant portion of the CPI, but recent moderation in price pressures has nudged the Fed closer to cutting interest rates, which are currently at a 23-year high. Wall Street anticipates the Fed will implement the first rate cut in September.
The Tampa Bay region’s fast-growing economy has been supported by an influx of new residents, particularly during the Covid-19 pandemic, as retired Baby Boomers and remote workers sought warmer weather and lower living costs. However, housing costs have surged in recent years, leading to an all-time high inflation rate in 2022. Despite this, developers in Tampa have increased construction efforts, leading to a decline in median rent prices and a boost in economic development across the region.
In contrast, Hawaii continues to face challenges related to its high cost of living, with a housing shortage due to factors such as the state’s isolation, inefficient zoning laws, and opposition to development. The state’s housing crisis has led to multi-generational living arrangements and lawsuits against developers, further exacerbating the cost of housing. Governor Josh Green recently extended the state’s emergency proclamation on housing, which aims to address some of these issues by waiving fees and requiring developers to build affordable housing units.
Both Florida and Hawaii are grappling with high insurance costs, with Florida residents dealing with surging home insurance costs due to hurricanes and an exodus of insurers. In Hawaii, higher insurance costs have been compounded by last year’s Lahaina wildfire, which impacted the rental market in the area. Despite these challenges, both regions are seeing continued economic growth and development, with Florida experiencing a surge in homebuilding and economic transformation in downtown Tampa. Efforts are being made in both regions to address housing affordability and supply issues in order to mitigate inflation and improve overall quality of life for residents.
