Why is rent so high especially in Ocala?

There are several reasons for this and it comes down to what we learned in economics 101; supply and demand. Supply includes the amount of rental and for sale housing within different price ranges. Demand includes the amount of people that need that housing.

The supply side problem can be improved by adding more units of rental and for sale housing in different price tiers. We will call the separate tiers affordable, attainable/workforce and luxury. According to Habit for Humanity, affordable housing is housing for people making below 80% of the area median income (AMI). Workforce housing is housing for people making between 81%-120% of AMI. Luxury housing is for folks making above 120% of AMI. These are general figures. In some areas such as New York City and San Francisco where housing is really expensive the figures would need to be much higher. The area median income for households in Ocala was $42,361 in 2020.

The challenges with adding housing are many. They include nimbyism, excessive regulation, land prices, financing costs, planning costs and construction costs. Nimby stands for Not In My Back Yard. This is a culture when local people don't want certain types of real estate class types built in their area. At a low level communities may say "You can build apartments but not too many." On the middle level communities may say "We only want houses built in this area no apartments." On the extreme level communities may say "We do not want any new construction in this area." Communities are loud voices and can influence public officials that need to vote on approval of new developments. Sometimes they have valid concerns but an anti construction culture where community concerns cannot be overcome in any way is not healthy.

NIMBY can lead to excessive development regulation. This can done by limiting building heights, limiting number of units for a site, requiring certain types of materials or mechanical equipment, requiring certain street sizes or access points, etc. All of this adds time for a development to come online, but also adds costs. Land prices have been increasing rapidly in many markets. When housing demand is high landowners want more for their land which makes sense. Financing costs aka interest rates have been going up this means that the cost of real estate will only get higher. Real Estate Owners must make a certain amount of cashflow to pay investors to take the risks of development which can take 3-5 years on average from start to finish. Planning costs also called soft costs are the professionals that need to be hired to inspect and design a new project. This includes surveyors, planners, engineers, architects and consultants. All of these professionals need to be paid in advance of any new development generating income. Lastly, the final items is construction costs. Construction costs also known as hard costs include materials and labor costs. Because of high construction demand and overseas problems with supply chains materials are expensive. Labor in the United States is also high because we don't have enough construction labor.

The demand side problem is based on population and jobs. When there are more jobs in an area more people move there. People also move to places for amenities such as sports, good weather, beaches, rivers, etc. Ocala Florida is a city with a lot of outdoor activities and is close to major attractions such as Disney World. This makes it attractive place for new families. It is also more affordable than cities like The Villages, Miami, Orlando, Tampa and Jacksonville. It is well located with great highway access for those who enjoy road trips and recreational vehicles. Cities want people to move in as this adds to the tax base to have more and better government services. This helps politicians achieve their goals and keep their jobs. More people also help local businesses thrive and hire more people. For these reasons we foresee population growth to keep increasing in the Ocala Florida Marion County market.

Another item that is pushing rents up are operating expense increases related to inflation. Apartment communities have a number of operating expenses including Taxes, Insurance, Payroll, Repairs and Maintenance and more. The costs have been increasing significantly in recent years. This pushes up rents as property owners must be able to pay those expenses and make a risk adjusted return.

In conclusion, rents are high for many reasons but is based on Supply and Demand. The supply side problems include the NIMBY mindset, excessive regulation, land costs, financing costs, planning costs and construction costs. The demand side challenges are population and job growth. Ocala Florida is one of the fastest growing cities in the United States (USA) and we don't foresee a slow down anytime soon.