Florida was one of the states hit hardest by the collapse of the housing market. In August it had the fourth highest density of homes repossessed by banks. Its real estate prices continue to struggle as inventory grows. To make matters worse, however, builders continue producing more and more houses and condos. But a new referendum called "Amendment 4" that will be voted on in November might help Floridians to have a say on at least that part of the problem.
How the Amendment Would Help
Why do developers continue to build homes even though there's weak buyer demand and an already bloated inventory? The local governments continue to cooperate with them, providing incentives to allow them to build, and blindly approving land use changes so they can create more excess housing and commercial space. Amendment 4 would allow Florida residents to restrain at least some of that overbuilding. It would require voter approval for land use changes. For examples, if a developer wants to convert a farm to a 50-story condominium, then voters must give the nod.
A New York Times article by Damien Cave on the amendment today explains just how serious the overbuilding problem is in Florida with some specific examples:
Even now, with about 300,000 residential units sitting empty around the state, the push to build continues. Since 2007, local governments have approved zoning and other land use changes that would add 550,000 residential units and 1.4 billion square feet of commercial space, state figures show.
A rural area like Jackson County has room for 996 years of residential growth at current rates, according to a 2009 state analysis. Charlotte County has 162 years of growth in its plan, while St. Lucie County has the capacity to house its growing population for the next 212 years.
So why are county commissioners and other local politicians approving these projects? The developers lobby hard and have deep pockets to help their campaigns. In a Miami Herald op-ed from earlier this week, a local attorney Tom Connick, who is in favor of the amendment, writes:
If Amendment 4 fails, it will mean that the same broken system that has hurt our quality of life because of overdevelopment will continue. The broken system is one in which local elected officials are influenced by developer money, and developer lobbyist money will continue to exclusively decide land-use changes, with citizens not having a vote.
And of course, overbuilding is precisely what led to Florida deep economic problems to begin with.
So what are some of the criticisms of Amendment 4? One opposition group website provides "frequently asked questions" containing several complaints. The first is that "this 'Vote on Everything' amendment would force Floridians - not the representatives they elect - to decide hundreds of technical comprehensive plan changes each year." Well, yes, that's kind of the point. Voters would definitely have to do the work, but they could also more directly affect their economic destiny. When a major vote comes up for a large new development that will further increase their housing inventory, they have the power to outweigh political lobbying by developers.
The next item on the web page dramatically states: "the Vote on Everything amendment would cause Florida's economy to permanently collapse." This is a pretty amusing claim, because there's no possible way to substantiate it. Even if it did cause a decline in economic activity, surely the economy would not "collapse" entirely, and obviously not "permanently." Less construction will direct some investment away from the real estate industry, but that money will instead move to growth industries that could produce sustainable jobs for Floridians -- unlike mindlessly building ad infinitum.
Another complaint is that the amendment will kill jobs -- as many as 267,247, according to a study that the opposition group commissioned. First, in the short term, few construction jobs would be lost. Developers already have an approved pipeline of over 550,000 residential units at 1.4 billion square feet of commercial space, as the above NY Times excerpt says.
There may be fewer construction jobs in the medium-term with less building. Yet the cost of saving those jobs is too great. Even more jobs in other industries would ultimately be lost than saved in construction if developers continue to live in their false-dream of an unending real estate bubble. Additional inventory will drive down real estate values and cause higher taxes due to subsidies for developers and excessive infrastructure requirements. These consequences of overbuilding will further depresses the economy, giving its residents less money to spend and resulting in weaker sentiment, which will harm growth.
Even if Amendment 4 is not a perfect solution, it does offer an alternative to the status quo, which obviously has not served Florida well. In August it had the fifth highest state unemployment in the U.S. at 11.7%, well above the national average. Nonsensical overbuilding is a failed approach for the state's economy, but as long as the local governments rubberstamp all developer requests, nothing will change.