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Reporting from Miami: An economic roundtable with Jeremy Hobson
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Is Miami the city of the future? What economic challenges does it face going forward? In a roundtable discussion with host Jeremy Hobson, Miami residents Paola Iuspa-Abbott, Andrea Heuson and Dan Grech weigh in.
“Miami is halfway between the developed and the developing world,” says Dan Grech, formerly of Marketplace and now the news director at WLRN Miami Herald News.”The distance between the poor and the rich here is probably closer to Cartagena, Managua, Buenos Aries, than New York or even Los Angeles.”
But according to Grech that class discrepancy also gives Miami a unique entrepreneurial edge that doesn’t exist in other parts of the U.S. “Poor people tend to be entrepreneurs, because they can’t make a living in the normal traditional way. And with the kind of job loss we’ve seen in Florida, I think entrepreneurship is heavy here.”
Andrea Heuson, a professor of finance at the University of Miami, thinks Miami stands alone in its recent housing market recovery as well. “Having lived through the previous condo boom and bust that we had in the 1980s, I saw how long it took to recover from that,” says Heuson, “and I see how little time it’s taken our real estate markets, both residential and commercial, to recover from the most recent downturn.
“In all of the major segments of the real estate market vacancies are down, rents are up, people are happy, standing room only.”
Daily Business Review reporter Paola Iuspa-Abbott attributes that growth to what she says is known as the South American business model.
During the housing crisis when financing wasn’t available for potential buyers or potential builders, Iuspa-Abbott says Miami developers looked to South American countries for a new model. In places like Argentina, where there isn’t a culture of borrowing to buy a home, developers discovered that people pay cash.
“They said, ‘oh fantastic,'” explains Iuspa-Abbott, “so that’s what we’re going to do. We’re going to copy the model where … people gave a fat down payment. We’re going to use part of that down payment to fund the construction, to pay for the construction of the project, and then we get the remaining of the money at the closing.'”
Bigger down payments meant less risk for developer, and the buildings continued to go up. But if the city is to continue to grow and live up to Mayor Tomás Regalado’s prediction — that “Miami is what the United States will be in 25 to 30 years” — then all three panelists agree there are major economic issues to address first. Among them are the city’s struggling public education system, insufficient public transportation, rising sea-level threats, and the city’s great wealth and poverty divide.
“Some of the most expensive condos ever built are being built right now,” says Iuspa-Abbott. “You have projects where the cheapest condo is 4 million or 1 million, but then you have 50,000 people on the waiting list for public housing, so if Miami is the city of the future, I hope that is corrected, because we want a perfect future, not an imperfect future.”