Tourism has rebounded strongly in the Keys since Irma, but the storm decimated the stock of housing where workers could afford to live. Rebuilding is accelerating the trend toward an upscale future — further worsening the housing crisis.

Among the several rental homes David Rice owns in the Florida Keys is a duplex in Marathon, built in the 1970s across the street from the water. Rice rented the duplex to a school employee and a person who works in resort marketing. Each paid $1,200 a month — cheap for the Keys. The low rent reflected what Rice, Monroe County’s mayor, calls his “altruistic part” and his belief he was getting a decent return for a property he’d owned for a long time.

Then Hurricane Irma crossed the Keys on Sept. 10 by Cudjoe Key, forcing the sea across the road into his duplex. Given the scale of damage, government regulations require that Rice rebuild to the current, tougher building code and elevate the structure to avoid future flooding. His insurance will leave him $130,000 to $150,000 short of what he needs to do that. If he borrows, he’ll have to raise rent to about $2,000 a month. Annual rents for those two working Keys residents will suddenly rise by nearly $10,000 each.

Multiply Rice’s duplex by perhaps thousands and you begin to understand the quandary for the Keys and its economy as it moves forward.

The hurricane destroyed 1,179 homes in the Keys and caused major damage to another 2,977. The total amounts to at least 8% of the Keys’ housing inventory. Houses built to recent code — elevated, with metal roofs, impact-resistant windows and tougher siding — sailed through unscathed. “We are a great case study of the old building code versus the new building code. It was like night and day,” says Keys state Rep. Holly Raschein.

But older properties like trailer parks and Rice’s duplex took a beating. And much of that damaged housing stock was home to working-class Keys residents, already living on the edge in the county with the highest cost of living in Florida.

Without an affordable place to live, many have left. Some 724 workers disappeared from the county labor force in October, the month when the Keys’ labor force typically grows as the tourist season gears up. Unemployment in the Keys in October was just 3.2%, compared to 3.6% for the state. Hiring signs abound — from a public school looking for teacher subs to the Key West Courtyard Marriott, where the high-def digital sign showcases images of resort beauty alternating with a helpwanted message.

“The Keys are going to survive and thrive. They always have,” says Key West attorney Bart Smith, but, he adds, “You’re going to see a lot of employers without employees.”

The crux of the problem is housing. “We have literally been talking about this for 30, 40 years,” says County Commissioner Heather Carruthers.

Workforce housing — the nomenclature preferred over “affordable housing” in the Keys — is an issue in many upscale Florida markets, but most have a relief valve: Workers can commute from a cheaper suburb or county. (The joke for years was that Palm Beach County’s affordable housing program was St. Lucie County.) Many workers in the Upper Keys can drive down from Florida City, but the farther from the mainland you go, the harder it is to make a commute work.

According to a study, a Keys household needed to pull in $26.27 per hour — about $54,640 a year — to afford a two-bedroom, market rate rental. That’s a tough nut for a tourism worker. With Irma, “the housing crisis has exploded,” Raschein says.

The Keys’ trouble is four-fold: High land values, a land-poor county, an economy founded on low-paying tourism jobs and a housing supply constrained by a peculiar Keys institution: The Rate of Growth Ordinance — known to all by the shorthand ROGO, which limits the number of building permits that can be issued there.

ROGO stems from a decision by the state in 1975 to designate all of Monroe County an “area of critical state concern,” the only such county in Florida. To ensure that the Keys can be evacuated in 24 hours, the state has capped the number of dwellings that can be built. (Many in the Keys say it’s an anti-growth measure masquerading as a hurricane safety issue.)

And so someone who wants to build a home or hotel has to either acquire an existing dwelling or seek an “allocation” through ROGO’s byzantine points and rating system. “If there’s five people down here who understand all the rules, I would be surprised,” says Jim Saunders of Bayview Homes in Key Largo, a modular home developer who also makes a business of navigating ROGO.

The Keys are down to their final 300 or so allocations. In 2023, those run out. “What’s going to happen after 2023, God knows,” says Brian Schmitt, managing broker of Coldwell Banker Schmitt Real Estate. Unless the law changes by then, the only way a new house or hotel will be added in the Keys will be by tearing another down.

That dims the prospects for more workforce housing. Already, with some exceptions, a mobile home can no longer be replaced by another mobile home. Mobile homes could give way to modular homes factory-built to the Keys’ strict building codes, but they are “by no means cheap,” acknowledges county property appraiser Scott Russell, who says they can be valued at $399,000 to $499,000.

Upscale, upscale

Meanwhile, older housing continues to give way to substantially more expensive housing. Late in 2017, the developer of the private Marlin Bay Yacht Club in Marathon began selling its 84 Dutch Colonial style residences, which are elevated nine feet above grade, and 99 boat slips. Marlin Bay looks like a second-home buyer’s dream. Residences run from $1.75 million to $4 million. It replaced a mobile home park. Sales executive Patrick Lenihan says interest has been high. “There’s not a lot of new product. There’s so much demand for the Keys and so little inventory,” Lenihan says.

The Keys’ success also continues to spur upscale commercial development that, because of ROGO, unintentionally further shrinks the workforce housing supply. The recently opened Perry Hotel was built on Stock Island, the longtime working and workforce-housing key just up from Key West.

Brad Weiser of Miami-based developer Hostmark Hospitality says investors initially were skeptical about the location, once the site of a fish processing plant, but after they saw it was an easy shuttle bus ride to Key West and saw its location on a marina, they bought in.

Over a decade, developer Matthew Strunk assembled the 12 acres for the hotel site, an artist village, eateries and a distillery- to-come along with a 20-acre marina. The marina has the expected fishing and touring charters but also live-aboard slips, the ability to accommodate megayachts and also hosts commercial fishing vessels; as part of its governmental approvals, the developer had to preserve a working waterfront. But to get permission to build under ROGO, the hotel’s developer bought a trailer park elsewhere in the Keys, closed it and used a portion of its alloted living units for the hotel site.

It remains to be seen whether the storm will provide momentum for the county’s initial efforts to address the housing issue. Since Irma, the county took the first step in a yearlong process of streamlining its approval system to encourage workforce housing development. Among the measures being considered: Relaxing height restrictions and increasing densities, both of which draw — at a minimum — skepticism from existing residents. The county also is looking at asking developers about siting a “tiny house” — 750 square feet — on county land as a demonstration of a possible solution.

The house is affordable, but what really drives costs upward are the government requirements for site design, certifying elevation and a host of other mandates such as spraying for subterranean termites. “Who cares about subterranean termites in Monroe County?” asks Saunders.

Don’t expect an easy fix. Says Rice: “It seems like everything has a negative effect on our affordable housing market.”

Tourists Undeterred

On a drive down the 112-mile Overseas Highway along the island chain road in November, hundreds of piles of debris on the roadside showed the most tangible remnants of Irma — vegetation, couches, appliances, a ruined RV, a boat with “SS Irma” written on it.

Sharp-tongued and fed-up residents gave Monroe County Mayor David Rice and his fellow commissioners an earful about those piles at a late November meeting originally called to discuss housing. Other vestiges of Irma? A few resorts remain closed, including Hawks Cay at Duck Key, which will be shut into the summer. A number of businesses are still shuttered, and as of November more than 3,000 Keys residents were receiving FEMA housing assistance in some form.

However unhappy at the debris piles, Keys residents don’t seem to have lost their senses of humor. “Can’t drown a conch,” reads a spraypainted message along the road.

And in most regards, the Keys seem well on the way to recovery. Key West, on the relatively soft side of Irma’s eye, looks unscathed. Visitors line up at the corner of Whitehead and South streets to take selfies at the “Southernmost Point” concrete buoy, repainted after being defaced by the storm. “Anyone who is open is doing very well,” commented Key West attorney Bart Smith.

The new Perry Hotel, for example, opened in May, lost only a couple days from the storm and has enjoyed strong occupancy since, says Brad Weiser of Miami-based developer Hostmark Hospitality. “This is one of the best hotel markets in the United States,” Weiser says, on a par with San Francisco, New York and Honolulu, the nation’s best. “We’ve been thrilled.”

Citizens and the Keys

• Statewide, damage from Hurricane Irma generated 62,500 claims for state-run insurer Citizens Insurance. Of those, 9,092 were for insured properties in the Keys.
• Average claims statewide were $13,827. In the Keys, the average Citizens claim was $14,848.
• Citizens spokesman Michael Peltier says the deciding factor in claims trends was whether a home was built to the current building code — elevated to the 100- year flood plain and with the exterior built to withstand 180 mph winds. Homes with metal roofs fared much better than homes with composite shingles.
• Peltier says it’s likely that many residents will not rebuild in the Keys and will take their insurance settlement and sell the property. For Citizens, 60% of the insured homes were not compliant to current codes. Many residents will not have enough insurance proceeds to cover the code compliant changes the homes will require.

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