Cape Coral nabs top spot on most overpriced rental markets in country, study says

This story has been updated with new information.

Cape Coral renters are paying the highest premiums in the country, beating out major cities like New York City, Miami and San Diego.

Florida Atlantic University released a study Monday on how short-term rentals and homeowner associations are driving up Florida's rents, with Southwest Florida among of the worst impacted. It works with FGCU and the University of Alabama on the study.

According to Ken H. Johnson, Ph.D., an economist in FAU’s College of Business, the state’s rental crisis is due to “an abundance of short-term vacation rentals and oppressive restrictions from homeowner and condominium associations.” 

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He further explains that short-term rentals, including those through Airbnb, Vrbo and other websites, keep units out of an exhausted housing market. Additionally, he cites many HOAs across the state limit owners from renting their units during the first year or ban renting altogether.

“Both of these take away units that could be rented to the public, and it’s the shortage of available units that drives rental rates higher,” Johnson said. “While developers and local governments clearly need to build more units, that’s not the only solution to this problem.”

Florida secured nine spots within the top 21 of the Waller, Weeks and Johnson Rental Index, which highlighted the most overvalued rental markets among the nation’s largest metropolitan area. The data shows where rents should be compared with current rents.

Here are all of the spots Florida placed:

• Cape Coral - 1
• Miami - 2
• North Port - 3
• Tampa - 7
• Orlando - 12
• Deltona - 14
• Palm Bay - 16
• Jacksonville - 18
• Lakeland - 21

In the study, Cape Coral-Fort Myers renters lead the nation in paying 18.05% above the long-term leasing trend. The average rental premium paid in the U.S. is 7.40 percent.

Here are the rest of the Cape's statistics:

“As a state, we need to realize that the current rental crisis is hurting our economic growth potential and making it increasingly difficult for service workers to live within reasonable distances of their jobs,” Johnson said.

However, not everyone agrees with the study's findings. Airbnb representatives reached out to the News-Press on Jan. 12, questioning the validity of the study and brought forward census numbers the impact vacation rentals have had on the state's housing crisis.

They found that according to the 2021 American Community Survery, Florida has 830,000 units for "season, recreational, or occasional use," which is roughly 8% of the state's 10,050,000 housing units. In 2010, the figures for "seasonal, recreational, or occasional use" were 877,000 units, which is about 10% of the state's then 9 million housing units.

They outlined that the share of vacation rentals has declined over the past decade and yet the state is still experiencing a housing crunch.

"Census data indicates the share of housing units used as vacation rentals has remained constant since 2010, and yet the cost of housing is up everywhere, for everyone because the country simply has not built enough housing," an Airbnb spokesman said within an email. "The need to prioritize building new housing is an issue in communities large and small across the country, and Airbnb is committed to working with local officials on efforts to support housing solutions and Florida's vacation rental industry which continues to provide economic opportunity throughout the Sunshine State." 

So, what might change in the future? Johnson said that owners of short-term rentals may find greater returns in converting their properties to long-term rentals due to the steep rental increases in the past two year.

He added that HOA boards choosing to relax or eliminate rental restrictions will also increase property values for their residents.

“In both cases, there are incentives for owners and HOA boards to change what they’re doing, and at the same time, they would be helping to ease the rental problem in Florida,” Johnson said. “Markets will work in time, and we will slowly build enough units to ease this crisis. But there also can be relief in the interim.”