Gainesville, Florida
This Hotbed of Growth Needs Real Estate Solutions
By Carole VanSickle Ellis
In June of this year, Gainesville, Florida’s home prices were on their way up, much as they have been for the last decade. However, this past June’s median sale price of $365,000 was a far cry from a decade earlier when median homes sales were less than one-third of today’s price tag.
Alachua County, which contains the majority of the Gainesville metro area, has been a popular market for real estate investors for years due to the inherent benefits of investing in the southeastern United States, in general, and in the state of Florida, in particular. The combination of low cost-of-living expenses, no state income tax, low sales tax rates, and an extremely temperate climate have created a demand for Florida housing for decades.
With the advent of the COVID-19 pandemic, housing demand skyrocketed. Even with many companies partially or entirely abandoning remote work practices in 2022 and calling employees back to offices in larger metro areas, that demand continues to create a white-hot market in central Florida as well as on the coastlines. Gainesville, with its central location (two hours of driving from Orlando and Jacksonville), the local presence of the University of Florida, and its position in the north central region of the Florida High Tech Corridor, is set to remain a market where housing demand is high and availability is scarce for the foreseeable future.
“For every home based on a [given] price point, you will have possibly 10 buyers that want that home,” observed one local agent in May of this year. She noted that listings had plummeted to only about a fifth of the volume the area has seen in previous years. Although listing volumes have risen slightly since Spring 2022, rising interest rates will likely keep many buyers out of the market, keeping competition fierce even if the bidding wars involve three or five buyers instead of 10.
Realtor.com analysts still rate the Gainesville market as a clear sellers’ market, noting that at the end of the summer, homes were on the market only 49 days. However, investors should note that homes are selling slightly below list price. In August, the median list price was $320,000, while median sales prices were just under $290,000.
Given that the national median home price exceeded $440,000 midway through this year, however, demand in Gainesville is unlikely to ease to the point that prices will fall in the near future.
A strong demand for housing from multiple, distinct populations of residents and ongoing scarcity issues have created an environment in Gainesville where fix-and-flip investors are thriving. While much of the rest of the country has posted falling returns for fix-and-flip deals, Gainesville flipping rates are still high. In fact, nearly one-sixth of all transactions are flips, according to ATTOM Data’s Q1 2022 “U.S. Home Flipping Report,” and cash buyers have a distinct advantage.
“As interest rates continue to go up, cash buyers should be in an even greater position of competitive advantage in the fix-and-flip market,” wrote ATTOM Data executive vice president of market intelligence Rick Sharga.
He added that investors with “larger, better capitalized” businesses could begin to increase their activities in the coming months. In the category of markets with a population of less than 1 million, only Durham, North Carolina, had higher flip rates than Gainesville.
As of August 2022, available inventory was still falling, with 5.6% fewer homes for sale in the area than there were in July. While interest rates may be decreasing the volume of competition for properties, those still in the thick of things are highly competitive.
A Prime Location for Education & Tech
Gainesville is not necessarily the first market most investors might think of when they think of the sunny state of Florida. It is located in the northern, central part of Florida, without beach access (although Flagler Beach is about 90 minutes away, which places the city solidly in the “beach-proximal” category so important to many COVID-fueled moves), and about two hours from Disney World.
However, Gainesville is home to the University of Florida and a clear landmark on the Florida High Tech Corridor, a 23-county region anchored by three of the largest research institutions in the country: the University of Central Florida (UCF), the University of South Florida (USF), and the University of Florida (UF). Of those three, Gainesville’s hometown university, the University of Florida, is ranked fifth on the U.S. News & World Report list of best public universities in the country, boasts an on-site student population of roughly 75,000, and is highly affordable.
The Florida High-Tech Corridor was founded by the Florida legislature in 1996 as an economic development project intended to attract and retain technology companies. At that time, several companies in residence in the state were being actively courted by other states and even countries. The corridor was originally conceived as part of a larger plan to incentivize existing companies to reinvest in the area rather than relocate and to also bring in new tech companies from other areas.
Gainesville’s University of Florida has served as a full partner and co-chair on the Florida High Tech Corridor Council since 2005. The institution also plays an active role in chairing and supporting the growth of related initiatives including grant-matching programs, STEM programs that connect students with experts in industry and help the state retain young, professional talent, and a variety of magnet programs in the Gainesville area centered around the life-sciences industry and artificial intelligence innovation.
Gainesville has benefitted from the corridor and UF’s position as an anchor in its development both directly and indirectly. There are many nonprofits dedicated to innovation and business incubation now located in the Gainesville area, while the university itself prioritizes workforce development programs that create and sustain valuable jobs in sectors known for creating more employment and lasting opportunities.
At time of writing, UF had recently made headlines for surpassing $1 billion in research spending on developing treatments for diseases, new agricultural products, and “engineering solutions,” among other advancements. This makes UF one of just 15 public universities to achieve this type of investment in research. Most of the research occurred in UF’s colleges of health, veterinary medicine, and food and agricultural sciences, and much of the capital came from federal agencies.
Statewide, the impact of this type of research is estimated at about $4 billion and 20,000 jobs annually. UF’s share of that is “more than 40%,” reported UF Board of Trustees chair Mori Hosseini shortly after the announcement that the university had breached the $1-billion milestone.
Tackling the Ongoing Need for Student Housing
A prime investment sector in the Gainesville area is, not surprisingly, student housing. However, developers in this niche market have encountered some hurdles in recent years.
Although Florida’s public health policies permitted a return to classrooms much sooner than did many other states’ and, furthermore, UF welcomed a record number of students in 2021 and is likely, once the numbers are in, to have repeated the performance in 2022, student housing continues to be a hot-button issue for the area.
One of the biggest issues is that student housing directly competes with affordable housing in this market, while many student housing developments are underway in historic areas of the city. Both sides of the issue incite protests from local residents and larger affordable-housing advocacy groups.
Areas of the city like University Heights South Historic District are points of contention. The district is immediately adjacent to the University of Florida’s Innovation District, which is already home to many student housing developments and a location for more in the future.
As these projects cut into available workforce housing, some housing advocates are demanding student-housing developers incorporate a percentage of workforce housing (housing affordable to households earning median income in the area) into student housing. Both types of development run up against historic preservation boards as well.
Investors who can navigate these turbulent waters successfully or identify other workable solutions for the relatively affluent college student population to access housing will tap into a booming market with a great deal of economic resilience.
“The student housing market will grow from a total of 8.5 million beds in 2020 to 9.2 million by 2031,” estimated the National Multifamily Housing Council in the midst of COVID-19 lockdowns.
In Gainesville, that growth is likely to be concentrated because of looser restrictions on returning to campus and the classroom that exist in many other states.
Dedicated to Attracting Investment & Fostering Opportunities
One of the most appealing things about investing in the Gainesville area is that the local environment is one dedicated to growth, innovation, and investment.
Programs like Qualified Target Industry (QTI) tax refunds, incentives for companies creating
high-wage jobs in value-added industries (like life sciences, biotech, and other foci of the High Tech Corridor and UF) and the Qualified Defense and Space Contractor (QDSC) tax refund, an initiative intended to bring in defense-, homeland security-, and space business-related companies, bring millions of economic development dollars, associated jobs, and general population growth to the area.
Other programs include the Capital Investment Tax Credit (CITC), a tax credit intended to grow capital-intensive industries in the area, and the High Impact Performance Incentive Grant (HIPI), which is intended to grow high-impact facilities like corporate headquarters, advanced manufacturing, life sciences, and semiconductor plants.
These programs and others like them combine to make the entire area an extremely investor-friendly environment.
Furthermore, this is a city that will welcome the creativity associated with real estate investing at its finest because, above all, Gainesville is still growing and needs market solutions to help that growth accelerate and continue.
Sidebar
Top 10 Major Employers
(by workers employed and economic base)
University of Florida
UF Health Shands System
Veterans Affairs Medical Center
Alachua County School Board
City of Gainesville
North Florida Regional Medical Center
Gator Dining Services
Nationwide Insurance Company
Alachua County
Publix Supermarkets
Sidebar
Could Gainesville End Single-Family Zoning?
Like many cities in the United States, Gainesville, Florida, struggles with affordable housing. Specifically: how to create it, how to sustain it, how to keep it affordable, and where to put it. Unlike many cities in the United States, Gainesville is seriously considering doing away with the concept of single-family housing (or at least single-family zoning) in order to potentially solve the problem.
Gainesville’s city commission recently voted in favor of eliminating single-family zoning, which would mean that duplexes, triplexes, and quadplexes could be built on land previously designated for “solo” homes. The city commission and the mayor are in accord that the move would increase housing stock and improve affordability in the metro area. The Gainesville commission must take a second vote before it passes the measure and evaluate a staff study dealing with a potential sunset provision, which would set an expiration date on the policy.
In the meantime, the Florida Department of Economic Opportunity has warned that it believes the new policy will have the opposite effect from that which is intended. They noted that the current plan does not provide “clear guidelines to preserve affordable housing in the city.” In a letter to the city commission, the department said, “Affordable housing is an important state resource. Through the inconsistent planning approach in the City’s comprehensive plan, the creation and preservation of this state resource is adversely impacted [through]…endangering the elimination of substandard housing conditions, the provision of adequate sites, and the distribution of housing for a range of incomes and types, including mobile and manufactured homes.”
Gainesville mayor Lauren Poe said he would take the department’s advice “into consideration” but wanted to move forward with the policy before he leaves office. A vote could come as early as November of this year.
