Relocation boom or housing crisis? Unless rising housing prices across the region are curtailed, South Florida will fall off the short list of desirable places for companies to relocate

South Florida CEO, Oct, 2004 by Harold L. Lewis

South Florida, to many, is paradise. Temperate weather and easy access to beaches and waterways make it an enjoyable getaway. Its low violent crime rate, compared to other major metropolitan markets, puts families at ease when moving here with children. No state income tax means employees pocket more of what they make. The economy is robust, and jobs, especially in the service sector, are bountiful. Such job availability means spouses are likely to find employment upon arrival, shortening any economic stress upon families moving to a new market.

But clouds loom in paradise. Rising property prices mean many executives--but not their managers--can afford the style of home they might have left behind in other markets. The reality is that property taxes and home and auto insurance costs in South Florida often outpace those in other areas.

Therefore, convincing companies to relocate to South Florida can be a challenge. Making an informed decision about a move to this region requires all players involved--from facilities managers to human resources directors, senior management and even current employees planning to move with the company--work in unison toward a holistic and beneficial outcome.

This will remain the case for the foreseeable future as real estate values continue to grow, bringing in tow rising insurance premiums and tax rates.

Some high-profile success stories of companies relocating to South Florida exist. The Scripps Research Institute will open a branch in north Palm Beach County, and DHL relocated its corporate offices from San Francisco to Plantation. Boca Raton-based ADT relocated a financial group from Denver. Those, and other buyers, who arrived early have enjoyed steadily growing equity in their residential properties, spurred on by the market's overall upward housing valuation trend.

But many other buyers were shell-shocked on arrival when they found high-priced, smaller homes on parcels that were smaller and more expensive than those they left behind. For some, the result was housing located 20 miles or more from their office. For those who know, South Florida is alarmingly like metropolitan areas such as Atlanta, and southern and northern California, where residential areas near business districts are out of reach of the masses and long commutes are the norm.

A recent study reveals just how dramatic and potentially damaging the emerging housing bubble can be for the middle-class work force. Broward County's median home cost is $222,000, and a similar residence in Miami-Dade County tops $237,000. Single-income families in those counties would have to earn $69,000 and $73,000, respectively, to afford such homes, according to the Center for Housing Policy's study of 136 US metropolitan areas (The center is the research arm of non-profit affordable housing advocate The National Housing Conference.).

The South Florida population in particular has grown dramatically, helping make Florida the fourth-largest state in the US. But with that growth has come competition for existing homes, especially along coastal areas, which, in turn, has driven up home prices.

Politicians, prospective home-buyers and wary corporate executives considering a move to the state are leery of what the numbers will mean for companies hoping to relocate here. For many, the reality has hit home: As one relocation expert said, "Everyone wants a $200,000 home on the water."

But we are no longer in the 1980s, and there are no $200,000 homes on the water. For employees that means searching for suitable housing that in most cases is increasingly found farther from the workplace, which forces more cars on highways ill-suited for such traffic volume.

From a financial perspective, more homebuyers are purchasing homes beyond their means through non-traditional funding, such as adjustable loans, at ratios approaching 100 percent of the purchase price. All this at a time when the prime lending rate is forecast to continue its recent rise.

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Something has to be done to curtail ballooning housing prices, or South Florida increasingly will find itself off the short list of desirable communities to which companies are relocating.

It is easy to blame local government for the problems and to demand it devise and implement solutions. Corporations hoping to relocate to South Florida must also get involved if they hope to entice their employees to move here. Such proactive involvement must include:

* Underwriting relocation, housing, closing or commuting costs.

* Supporting telework, ride-share and vanpooling programs.

* Relocating to regions closer to more affordable housing stocks.

* Lobbying local governments for affordable or subsidized housing, and mass transit.

Additionally, new, middle-class residents will have to become comfortable with the idea of living in a townhome, or other smaller residence, as that will be the staple of "affordable" housing in years to come.

The problems facing companies planning a move to South Florida are not insurmountable. They simply require a holistic approach from facilities managers, human resources directors and corporate executives to ensure all employees have a suitable place to call home--and one that's not beyond paradise.