Soaring House Prices and Wages of Local Government Employees

Local governments in Florida are concerned that the same soaring house prices that have boosted their revenue base have also increased the wages they have to pay to attract a qualified work force, especially relative to similar local governments in many other states where the housing boom has been less remarkable. The doubling of Florida house prices over the past six years that increased local property tax revenue raises concerns that a shortage of affordable housing will undermine their efforts to recruit and retain employees. In this article, we note that the relevant determinant of how wages will change in the long run is the implicit rent of owner‐occupied housing—which is theoretically equivalent to user cost of housing—and the actual rent of apartments and rented houses in an area.