EconSouth (Third Quarter 2004)

Paradise Found (or Lost)?

The tide of older Americans moving into the Sunshine State is rising. While the newcomers bring affluence, policymakers are confronting the issues caused by their rapidly swelling ranks.

Located off Interstate 75 near Ocala, the Villages of Florida is an archetype for one of the hottest trends in retirement: the active adult community. Some 45,000 people call the Villages home, but only people 55 and older can live there. They are lured by the sales pitch of a “hometown” lifestyle in the sun that involves driving golf carts to various leisure activities, including golf, tennis, and dancing.

In many ways, the booming Villages community—whose growth belies its humble origins in 1983 as a small mobile home park—parallels Florida’s swift transformation in recent decades from a land of orange groves and sleepy towns into an economic powerhouse in the sand. As the state’s population swells, Florida has enjoyed rapid growth and an influx of wealth as it grapples with the problems that accompany such changes: overcrowding in some areas, compromised environmental quality, and rising health care costs.

Florida’s fast growth
Florida’s population increased by more than 3 million during the 1990s to nearly 16 million, an increase of 23.5 percent, according to 2000 U.S. Census data analyzed by the Federal Reserve Bank of Atlanta. During the same period, the U.S. population grew by 13.2 percent.

Moreover, because of Florida’s famously agreeable climate, the character of growth in the state has been unlike growth anywhere else in the nation. The state has a moderate rate of natural population growth by birth, and the percentage of residents who were born there is low: 32.74 percent, a statistic that contrasts sharply with the 60 percent of the national population who reside in the states in which they were born. Florida’s population growth is notable for its massive rate of in-migration and the relatively high average age of this population. In 2000, more than 22 percent of Florida’s population was 60 or older, compared with 16.3 percent for the United States as a whole. This figure has held steady in Florida, where 23.6 percent of residents were 60 or older in the 1990 Census. Moreover, the state is becoming grayer as people live longer: Florida’s population over age 80 increased from almost 4 percent in 1990 to more than 4.6 percent in 2000, whereas 2.8 percent of Americans are over 80.

Migration into Florida is expected to gain momentum as the baby boomer generation, born between 1946 and 1964, moves into the active adult demographic range. By 2015, 77 million Americans will be 50-69 years old, and about 45 million of this group are likely to relocate, according to Del Webb, a division of Pulte Homes that specializes in developing active adult communities.

“Because the peak of the baby boomers just turned 50, you’re going to have another 10 or 15 years with huge numbers of young elderly moving into Florida,” said Stanley K. Smith, director of the Bureau of Economic and Business Research at the University of Florida in Gainesville.

Because jobs have been available in Florida at a time of weak employment in many other parts of the country, the state has also become a destination for young families, many of whom end up providing services to retirees in one way or another. (This influx is apparent in the Florida population in the 30Ð49 age range, a group that increased by nearly 30 percent from 1990 to 2000.) As a result, in many parts of Florida, residents barely noticed the 2001 recession because of strong demand for services, especially in health care, education, and tourism.

Catering to the boomers
There is a strong business case to build communities for the glut of aging Americans who consider themselves young at heart. Fresh from their peak income years, many are financially secure. They rarely have children who are still in school, and they require fewer health care services than people over 70.

But too often developers overlook the harsh reality that baby boomers won’t be active forever. As baby boomers age, the fun-loving communities now under construction may have to accommodate both nursing care and fitness centers.

“Thirty years down the road, people’s retirement needs will change,” said Andrew Kochera, a senior policy adviser for the American Association of Retired Persons Public Policy Institute. “My question is, will the communities be able to change in terms of what they’re offering?”

Perhaps no other state has an economy that depends on retiree influx as much as Florida. A vast service-based economy has developed to support these affluent new residents who demand housing, retail, recreation amenities, health care, roads, and other government services. “Retiree migration is a growth industry, and it’s an impetus to other types of growth,” Smith said.

Because retirees often have relatively steady incomes from pensions, social security, and interest on savings, Florida banks reap the benefits of a rock-solid depositor base. In contrast to younger customers who normally have a lot of money and debt tied up in their homes, typical retirees move to Florida after years of saving and bring along plenty of liquid assets—on average, $1,000 cash for every year of employment.

William G. Smith, president and chief executive of Capital City Bank Group in Tallahassee and a member of the board of directors of the Atlanta Fed, described the influx of deep-pocketed residents as “an amazing phenomenon that provides for a lot of stability.”

As they age, Floridians will increasingly strain federal Medicare programs for the elderly, and more and more people may draw from the largely state-funded Medicaid programs.
Deals with older customers who offer tens of thousands of dollars in cash on the spot are not uncommon for Florida car dealers and homebuilders. “Retirees don’t drive around in junkers,” he said.

In 2000, direct spending by Floridians who were 50 and older, along with the value of their federal health benefits, was estimated at $150 billion, according to the Destination Florida Commission, which was created by Florida Gov. Jeb Bush to explore Florida’s future as a retirement destination. Because retirees don’t typically use schools and they pay a large sales tax (Florida has no income tax), they represent a net benefit to the state of $2.8 billion in taxes. “A healthy retirement industry is critical for the overall current and future prosperity and well being of the state of Florida,” the commission’s 2002 report states.

Shadows in the sunshine?
But money is not enough to offset a growing perception that growth has diminished the appeal of Florida as a retiree destination, a concern that prompted Gov. Bush to form the commission to study the issue. Some 59,000 “mature” residents left Florida in 2000, according to the report.

Apart from challenging lifestyle questions, difficult issues of dependency confront Florida policymakers. As they age, Floridians will increasingly strain federal Medicare programs for the elderly, and more and more people may draw from the largely state-funded Medicaid programs for low-income households.

Given these pros and cons, more longtime Floridians are ambivalent about the retiree influx and the economic growth that comes with it. For example, while they enjoy more options for shopping, they cope with worsening traffic.

Growth along central Florida’s Interstate 4 corridor and elsewhere has sparked increasingly testy debates about growth.
A vocal antigrowth movement is winning adherents with an agenda to slow the pace of in-migration, ease the paving of rural land, and preserve as much of Florida’s natural environment as possible.

States compete for retirees

As Florida grapples with sprawl and other social issues, neighboring states are boosting their efforts to gain a larger share of retirees. In part because of the migration of older Americans, the Southeast grew faster than the rest of the country. Between 1990 and 2000, population for the six Southeastern states increased 18.5 percent to nearly 42 million, or 15 percent of the country. By contrast, the United States as a whole, with a population of 281 million, grew approximately 13 percent during the same period. The states with the highest rate of out-migration included New York, Illinois, California, New Jersey, Michigan, Ohio, Pennsylvania, Massachusetts, and Connecticut.

Migration shifts are evident at Houston Springs, a new community now under construction in Perry, Ga. About 150 miles north of the Florida line off I-75, Houston Springs targets the same active adult demographic segment that many Florida developments do. Developers plan to build 2,000 units (for 4,000 people) on 494 acres with homes costing $100,000–$400,000, prices that are lower than those of comparable communities in Florida, especially along the oceanfront.

Migration shifts are evident at Houston Springs, a new community now under construction in Perry, Ga., which targets the same active adult demographic segment that many Floridian developments do.

“Middle Georgia is usually not viewed as a retirement destination,” said Jeff Moredock, managing director of Houston Springs. “But the reality is that many retirement destinations are saturated as well as expensive. When you look at the folks who are moving, not all are terribly wealthy. A large segment is middle income. They’re not in a position to buy a beachfront condo in Florida, so there’s an opportunity for us here.”

Officials in nearly every Southeastern state set goals and budget money to attract retirees, either through national advertising campaigns or through programs such as Mississippi’s Certified Retirement Cities. In that program, the state offers tax breaks and other incentives for residents over 65 who live in qualified communities.

Mississippi officials justify the tax breaks on the grounds that each retirement household brings to the state disposable income equal to 3.7 factory jobs. Each relocated retiree household brings an average of $320,000 in assets and has median annual income of about $33,000. Moreover, that money tends to stay close to home since some 90 percent of retiree income is spent locally for goods and services.

“We are not about age restriction here,” said Diana O’Toole, program manager for the Mississippi Development Authority. “We are looking for people who want to be assimilated into our communities.”

Retirement patterns change

Despite the backlash against growth and the increasing competition from other states, Florida remains a top destination for retirees. But, added Susan MacManus, professor of political science at the University of South Florida in Tampa, “We’re going to see a completely different pattern of retirement.”

Having pretty well saturated the southeast coastal region of Florida between Miami and Palm Beach, more retirees are moving out of that part of the state than are moving into it.

But Florida is a big state; its diverse geography still offers plenty of open spaces that are attractive to older people. For example, the St. Joe Co. owns 825,000 largely uninhabited acres primarily in northwest Florida, including miles of oceanfront. The company’s Web site said this land is planned for development that will eventually become “as unique, special and evocative as Nantucket, Napa Valley or Santa Fe.”

In the few years since the 2000 Census, the University of Florida’s Smith said the state’s population growth actually gained momentum, and he projects this decade’s growth rate will surpass that seen during the 1990s. According to Smith, Florida’s population is expected to increase by 3.4 million between 2000 and 2010, with an estimated 89 percent of that growth coming from in-migrants.

Homebuilder Del Webb ranked Florida as the top state baby boomers are most likely to consider moving to. And three Florida destinations made the list of the Retirement Living Information Center’s Top 10 “hot counties” for active adult homebuyers.

The top destination in the United States is Florida’s Sumter County, home to part of the Villages. The booming community, which sprawls across three counties and encompasses 25,000 acres, sees about 300 homes on average built each month. The Villages is about halfway to its capacity of 100,000 people, and in light of the projected growth in Florida, the developers have good reason to believe they will reach their final goal.

Said Professor Smith, “I keep waiting for growth to slow down, and it hasn’t happened yet.”

Aging Boomers, Population Influx Reshape Southeastern Demographics

Age Trends in the Southeast and
the United States
Source: U.S. Census Bureau

As Americans have steadily moved southward, the Southeast’s population growth has outpaced the nation’s. This influx of people has also changed the demographic profile of the region. Data from the 2000 U.S. Census and the 2002 American Community Survey, a new nationwide study from the Census Bureau, paint a fresh picture of the region.

Key demographics, including age, educational level, poverty rate, household income, racial identity, and immigration trends, show that the composition of each Southeastern state varies widely. Taken as a whole, however, the data help explain how rapid economic and population growth have affected the region.

Population growth
While Louisiana has an unusually high percentage of native-born residents (nearly 80 percent compared to 62 percent for the U.S. population), the Southeast overall is an increasingly diverse, fast-changing area.

Between 1990 and 2000, the population for the six Southeastern states increased 18.5 percent to nearly 42 million people; the population in the rest of the country grew at just over 13 percent during the same period. Florida added the most population of any Southeastern state, gaining more than 3 million new residents for an increase of 23.5 percent. Georgia, which gained 1.7 million new residents since the 1990 Census, experienced the largest percentage growth (26.4 percent) of any state in the region. Many of these newcomers were lured by Atlanta’s strong economy.

Diversity and aging
The Southeast’s population has grown not only larger but also more diverse. The Hispanic community grew dramatically, increasing in every state in the region. In just 10 years the Latino population grew from 1.2 percent to 5 percent in Georgia and from 11.7 percent to 16.5 percent in Florida. At the same time, the percentage of white residents declined slightly in each of the region’s states.

Like the rest of the United States, the Southeast’s median age is increasing as the baby boomers age. In both the Southeast and the United States, the percentage of the population aged 30-39 shrank from 1990 to 2000 while the percentage of the population aged 40-59 grew (see the chart).

Income and education
After the end of the Civil War, the Southeast struggled for a century to keep pace with the rest of the country in terms of income and education. Since the 1960s, however, the region has made great strides, and data from the 2000 Census show that the area continues to catch up. In 2000, for the first time in 20 years, a state in the Southeast—Georgia—surpassed the national average for median household income. Measured in 2000 dollars, Georgia’s 1999 median household income was $43,357, up more than 17 percent during the 1990s. Mississippi’s growth was even greater as median household income rose nearly 25 percent during the same period, nearly twice the rate of the rest of the country. Despite this growth, however, Mississippi still ranks near the bottom nationally in median household income.

New data also offer encouraging signs about the progress of education in the Southeast. The 2000 Census shows that the percentage of residents 25 and older without a high school diploma fell sharply in all six Southeastern states. In 1990, 29.4 percent of the region’s residents 25 and older lacked a high school diploma, according to Census data; that figure declined to just over 22 percent in 2000. At the same time, the percentage of people in the Southeast who attended or completed college and who attended or completed graduate school increased. Census data indicate that in 1990, 41 percent of Southeastern residents 25 and older had some college education, but in 2000, 48 percent had some college education.


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