Tampa Bay needs affordable housing. Why do luxury condos dominate?

Over the past decade, Justin Callahan watched the evolution of downtown St. Petersburg unfold around him.

From the porch of his 1920s bungalow apartment, he saw a block of efficiency apartments get torn down and replaced by million dollar townhomes. He saw an old hotel converted into trendy studios that get pricier with each year. He saw modest homes repurposed as Airbnbs.

Then in September, he got a notice that his lease would end in May. His property manager, Times Square Properties, could not be reached for comment.

“It was a feeling of ‘oh it finally happened to us,’” said Callahan, 35.

When he scanned downtown for rentals, he found plenty of flashy new high rises but nothing that came close to the $1,200 a month he was paying.

As long-time residents like Callahan struggle to find affordable housing, some have criticized the proliferation of luxury condos and apartments in St. Petersburg and Tampa. They fear that these projects are driving up housing costs for the entire community.

Others say our cities need more growth, not less, to solve the housing shortage and bring prices down.

The Tampa Bay Times reviewed building permit records in the cities of Tampa and St. Petersburg. More than half of the 64 large multi-family housing projects that have started or completed construction in the past five years have been advertised as “luxury” or “high end.”

In that same time, median rents increased 38% in Tampa and 36% in St. Petersburg according to data from real estate firm CoStar.

Elected officials in both cities have acknowledged the need for more affordable housing. But developers say that financing those projects can be an uphill battle. Catering to a wealthier clientele is an easy way to guarantee profits in uncertain economic times.

“Building prices have escalated precipitously over the past several years,” said Phillip Smith president of Framework Group, a Tampa-based real estate company that builds both affordable and market-rate apartments. “It costs 50% more plus, to build a building now then it would have cost just a few years ago.”

Most of the increases are tied to labor and materials, he said. That means building a modest affordable apartment can cost nearly as much as an upscale building with marble countertops and a pool.

The demand for these projects is undeniable.

One Tampa, a 42-story tower with units ranging from $1 million to $5.1 million reached $200 million in sales in under four months, according to Brian Van Slyke, Regional President at Kolter Urban. Two other projects backed by Kolter — The 70-unit Hyde Park House in Tampa and the 192-unit Saltaire in St. Petersburg — both sold out before construction was completed. Condos range between $900,000 and $5.6 million for Hyde Park House and $900,000 and $7.2 million for Saltaire.

“Luxury apartments are just a really visible show of change,” said Nathan Hagen, co-founder of the pro-housing group YIMBY Tampa. “It’s like all of your angst about housing is easy to attribute to this thing.”

His organization believes the crux of the problem is not the type of housing that’s being built but the lack of housing overall. When there’s not enough supply to meet the demand, prices increase.

“Our position is not that only luxury homes are going to fix everything,” Hagen said. “But the alternative of no homes is only going to make the situation worse.”

There’s a large body of research that shows building more housing — regardless of the price point — can increase affordability for everyone.

A 2021 research paper published in the Journal of Urban Economics used data modeling to see how building market rate units in a city would impact housing demand in lower-income areas.

According to the paper, “some households who would have otherwise occupied cheaper units move into new units, reducing demand and lowering prices for the units they leave vacant.”

However, the paper acknowledged there are certain real-world factors that the model doesn’t consider. For instance, if a lot of people move from outside the metro area, or if a large number of homes are used as investment properties, it can dampen the positive effects of construction.

Elizabeth Strom is an associate professor at the University of South Florida’s School of Public Affairs specializing in housing issues. In the five years she’s lived in the Tampa Bay area, she’s seen an influx of wealthier residents coming from cities like New York and Washington, D.C.

With that trend showing no signs of slowing, “It’s important to have that upper-end housing,” Strom said. “The idea is that if you don’t want wealthier people to move into previously low income neighborhoods, you better build them housing somewhere else.”

Until the housing market reaches equilibrium, many will be forced to move further from city centers to find something in their price range, Strom said.

For Callahan, the money he would’ve spent on rent if he stayed in downtown St. Petersburg was enough to cover his mortgage on a home near Brandon. So he left.

Callahan works in information technology and saved enough to be able to move. But the lowest-income renters may have nowhere to go.

To help the most vulnerable among us, “We’re going to need public policy solutions,” Smith said. “The market is not going to solve this problem alone.”

The Tampa Bay Times has a team of reporters focusing on rising costs in our region. If you have an idea, question or story to tell, please email us at [email protected].

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