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Homeownership affordability in metro Orlando is at its lowest point since at least January 2014, the oldest data available from the Federal Reserve Bank of Atlanta. The bank this month released its latest data, which shows that Lake, Orange, Osceola and Seminole counties in January all met the Federal Reserve’s definition of unaffordable.

Central Florida home prices, already on the rise, accelerated upward in 2020 and 2021. The Orlando area grappled with a lack of affordable homes before the Covid-19 pandemic, but this data shows it’s only getting tougher to become a homeowner here.

 

COVID-19 Impact on Orlando Housing Prices

 

The Federal Reserve Bank of Atlanta calculates a monthly Home Ownership Affordability Monitor index for the U.S. and its major metro areas. The index is derived from a formula that accounts for the median household income, median existing home price, interest rate, property taxes, property insurance, down payments and private mortgage insurance.

Metro Orlando’s Home Ownership Affordability Monitor index in January was 85.4, down from 89.9 in December. Anything less than a 100 is considered unaffordable. Orlando’s index was above 100 as recently as May 2021, when it scored a 101.5.

Affordable housing is a longstanding need in Central Florida, and the National Low Income Housing Coalition reports metro Orlando faces a 70,000-unit shortage of affordable homes. Many of the planned and ongoing projects to build more affordable homes in the area focus on apartment development.

However, that does not provide residents with the opportunity to own their own homes, which helps families build equity and generational wealth. That’s a problem, Camille Reynolds Lewis, executive director of Winter Park-based Hannibal Square Community Land Trust Inc., told Orlando Business Journal.

Hannibal Square’s approach to affordable home development is distinct from many local organizations and developers. Hannibal Square owns the land on which the homes are built, and the property is leased to homebuyers through a 99-year ground lease. This makes homes more affordable by eliminating the high cost of land from the equation.

Hannibal Square will bring more homes to Orange County this year. The organization in December started site development on 30 townhomes in the mixed-use Orange Center Boulevard development, and it’s preparing for the permitting process for a 24-townhome development in Apopka.

It’s not surprising affordable housing construction is skewed toward rentals, Reynolds Lewis said. While rental property owners can recuperate costs through continuous rent payments, Hannibal Square doesn’t bring in any money once it sells a house.

Meanwhile, 25.9% of metro Orlando home purchases in fourth-quarter 2021 were made by investors, according to Redfin Corp. Orlando homeownership opportunities are being taken away, Reynolds Lewis said. “We have so many absentee inventors purchasing single-family homes and converting them to rentals.”

 

New Homeownership Opportunities in Florida

 

Still, local government officials appear to be recognizing the need of preserving homeownership opportunities in the Orlando area. Both Orange County and the city of Orlando have been cooperative in granting or exploring development fee subsidies for Hannibal Square, Reynolds Lewis said. “Local governments are starting to see it. People are starting to realize this is going to be a huge problem if we don’t provide homeownership opportunities.”

It’s unclear how diminished home affordability will affect the broader housing market. Nationwide, homes are expected to become less affordable this year while rock-bottom inventory levels are projected to improve.

Experts are split on what that means for the residential real estate sector, Zillow Senior Economist Jeff Tucker wrote in a January report. A survey of U.S. economists and housing experts by property data firm Zillow Research Group Inc. found 41% expect home sales to increase in 2022 while 41% said sales will slow. Eighteen percent answered home sales will stay the same.