St. Pete housing demand continues to outpace supply

Just hours before St. Petersburg formally entered a Memorandum of Understanding with Pinellas County to share its remaining $21 million in emergency rental assistance, City Council members heard that the demand for homeownership in the city continues to vastly outpace supply.

Assistant City Administrator Rob Gerdes presented members of the St. Petersburg City Council with an update on the city’s 10-year housing affordability plan during a Housing, Land Use and Transportation Committee meeting Thursday. Over the last 10 years, Gerdes said the city enjoyed a significant increase in wages and a reduction in poverty rates.

Then the pandemic hit, leading to the current housing situation, Gerdes said.

“We’re experiencing strong growth,” he said. “I think we’re also experiencing a lot of new household formation, and we’re experiencing inflationary pressure.

“So, you put all those things together, and we’re seeing dramatic rent increases. Of course, we’re seeing those all over the country, but they’re significantly stronger here.”

Despite local residents struggling to keep up with soaring prices, Gerdes said many people around the country and state find the area affordable. People continue to pour into the city, and Gerdes said demand for homeownership continues increasing alongside the price of rent.

Gerdes said city officials are concerned that St. Petersburg is now moving backward regarding its housing affordability.

“That’s really what I think we all want to work on and try to address,” he added.

Gerdes explained that new household formation, especially among millennials, has led to higher absorption rates. He said vacancies fill shortly after hitting the market, and supply cannot keep up with the incessant demand.

According to CoStar Rental data, the cost of rent increased between 22-27% from the end of 2020 through the end of 2021. The cost of buying a home in the area has seen a similar jump. Gerdes showed that the percentage of cost-burdened households in St. Pete dropped from 44% in 2010 to 33% in 2020, and he now worries the city will break that positive trend.

“This is lagging data,” he said. “The concern is that when we start to see 2021 and 2022, this number is going to be going in the wrong direction.”

While current residents feel the burden of a rising cost of living, Gerdes relayed data showing that Tampa Bay is still more affordable than Orlando, and significantly cheaper than Miami.

St. Petersburg’s 10-year housing plan began on Jan. 1, 2020, and the goal is to impact 7,000 households across the city. That represents a 75% increase over the previous decade. The plan calls for increasing the supply of affordable, workforce and market-rate units, increasing homeownership opportunities and helping low to moderate-income homeowners to remain in their residences.

“If you’re a homeowner, then you’re protected from some of these rent increases and cost of housing,” said Gerdes. “If we can get more people into homeownership, then we can protect them …”

The city plans to create and preserve 2,400 multi-family units for those making less than 120% of the area median income (AMI). That would double production from the last 10 years, but it will not come cheap. The city estimates it would take $60 million in developer subsidies to achieve that goal.

Gerdes said the city currently has 740 affordable housing units “in the pipeline” that he is highly confident will make it to market. Of those units, the city designated 543 at 60% or below the AMI. Just 44 of those units are complete, although that number does not include the most recent developments.

The city continues to work aggressively with developers, said Gerdes, and he expects to bring several more housing developments to city council throughout the year. He said the city is also focusing on utilizing city-owned land, worth $10 million, to more effectively construct affordable housing.

Committee Chair Brandi Gabbard, also a real estate professional, noted the most recent data – from January 2021 – showed the county’s housing inventory decreased 43.6% year over year.

“It is incredibly challenging for people when they are looking to purchase with a loan,” she said. “Time after time, you will see sellers accept even what might be a slightly lower offer from a buyer because it’s cash.

“These cash buyers are coming in – and they’re not all hedge funds and major corporations – they’re people who have sold their properties up north, they want to move here and they’re bringing their cash with them … ”

Gabbard said she hears a lot of naysayers regarding increasing a city’s density, but St. Petersburg has unique characteristics that leave it few options. Those characteristics include water surrounding the city on three sides and nowhere left to build but vertically.

“It (creating more density) is really of the major tools in our toolbox as we move forward,” she said.