Orlando Faces Decline in Housing Permits While Rents Stabilize
Orlando, Florida, is experiencing a significant downturn in housing permits as the local market grapples with various challenges. The number of permits authorized in the Orlando-Kissimmee-Sanford metro area has reached its lowest level in five years, signaling potential issues for future housing supply.
What Is Happening?
According to recent data, from November 2023 to October 2024, the region processed 23,163 housing permits. This figure is over 6,000 short of the peak high of 29,379 permits recorded in 2021. This decline continues a three-year trend since 2021 and is the lowest since 2017. While it is important to note that not all permits lead to actual construction, the number of permits is a critical indicator of the housing market’s future supply, which has implications for local rental prices.
Where Are the Challenges Coming From?
Experts attribute the drop in permits to multiple factors negatively affecting the housing market. Amanda White, vice president of government relations and research at the Florida Apartment Association, highlights inflated mortgage rates, a complicated lending environment, and significant increases in development fees. These elements contribute to making new construction financially challenging.
Local Legislation’s Role
In an effort to boost housing development, Florida’s Live Local Act has been introduced. However, cities like Orlando have opted out of the law’s tax exemption aimed at encouraging the construction of various housing types. Orlando city officials previously assessed that the housing supply for residents earning between 80% and 120% of the median income was “adequate.” This decision to opt out could hurt the construction pipeline, according to critics like White.
Housing Supply vs. Demand
Despite the diminished number of permits, Orlando has witnessed a considerable influx of new residents. From 2022 to 2023, Florida recorded a net gain of 126,000 people moving in from other states, making it the second highest state-to-state migration trend behind Texas. However, this increase in population growth presents its own challenges, particularly as Orlando competes with states such as North Carolina and Georgia, which offer significantly lower median rents.
Current Rental Market Conditions
Despite the declining construction permits, the median asking rent in Orlando remains stable at approximately $1,700, according to housing data reports. The stagnation in rents suggests that while the housing supply is not increasing, demand overall may be plateauing as well, in part due to external economic conditions and migration trends.
Conclusion
The decline in housing permits in the Orlando area raises important questions about the future of the local housing market. With significant headwinds affecting new construction and municipalities opting out of incentives aimed at fostering development, the repercussions may be felt for years to come. As the rental market stands at a critical crossroads, potential residents and investors alike will be watching closely to see how these trends evolve.
