From the days of Henry Flagler through decades of retirees, northerners have found their way to South Florida. But this time, local development officials say, is different.
No longer are they seeking second-home sanctuaries. Many are now bringing their businesses…
The DDA’s numbers tell the story. The number of SEC-registered investment advisors in downtown Miami has nearly doubled since 2014, from 42 to 82…
Among Empire Staters moving to the Sunshine State, more than 40 percent now have incomes of $150,000 or above. That’s up from 31 percent in 2015.
Longtime South Florida developer Armando Codina anticipated what the change in tax deductions would do — and he sensed an opportunity. As the well of South American buyers began to dry up for his Doral properties, he says, here was a new group of not just investors, but potential residents, who he could recruit to come to live in the Miami suburb.
So he created a campaign, Unhappy New Yorkers, to entice that very group to come down. The accompanying website, www.unhappynewyorkers.com, has received more than 22,000 visitors since going live earlier this year. Codina says he has two more planned in January: UnhappyNewJersey.com and UnhappyConnecticut.com.
“These are places that are either going to have to tax more, or reduce spending,” he says of those states’ fiscal problems. “You can’t put that back in the bottle.”
Codina’s site has a simple calculator to show New Yorkers considering moving to Miami-Dade how much they would be saving.
A New York household with an income of $100,000 a year would save $24,649 by relocating to Florida. For an income of $200,000, the savings is $49,509. For an income of $500,000, the savings is $119,922. For an income of $1 million, the savings is $235,197. For an income of $5 million, the savings would be $1,238,286. These are annual savings.
Codina is right about the impact this money moving to Florida is going to have on New York City and New York State’s fiscal picture. You have an increasingly far-left electorate in the Northeast who wants substantially all of the burden of government services to fall on the wealthy. And the state is losing residents, net-net, wealthy and otherwise. So a smaller pool of wealthy residents will be paying ever more in taxes at the state and local level, and potentially at the federal level, depending on what happens in 2020. This means the financial incentive to leave will only increase as time marches on. You are likely watching the beginning stages of a downward spiral. (The downward spiral is very much underway in Illinois.)
I’d hate to be someone with a New York, New Jersey, Connecticut, or Illinois government pension, that’s all I can say. You are ultimately counting on broke millennial socialists to pay for your employment benefits. And eventually you will become the target of their ire.
New York is also actively driving its high earners’ businesses away with aggressive auditing tactics. It used to be that people would become residents-on-paper in Florida for the purpose of saving on income taxes, but increasingly desperate municipal tax collectors are making sure they pack up the whole caboodle:
Permanently changing a residence can be complex, especially for high earners. The old axiom of six-months-and-a-day is no longer enough, according to attorney Mark Klein, chairman of New York-based firm Hodgson Russ LLP, as auditors from up North now scrutinize oft-overlooked details in their residency investigations.
Klein gives the example of a client who spent 150 days of the year in New York. That’s less than the 184 days that would establish residency. Problem was, the client only spent 90 of those days in Florida, and the rest of the time traveling. Response from an auditor: You’re still a New Yorker.
Today, Klein says, auditors use a “near and dear” test. Attorney Barry Horowitz, partner at New York-based law firm Withum, often advises clients to ensure their kids’ photos are on the refrigerator of their Florida residence. Pets, too, need to be in the Sunshine State, he says.
The total cost of relocating can add up to as much as $500,000. But the savings end up being enormous.
“You make it up even independent of tax savings,” De Yurre said. “You make it up on what they’re buying here — there’s just no way it’s going to be as expensive as it is in New York.
According to data from Knight Frank Research, Douglas Elliman/Miller Samuel, and Ken Corp., $1 million now buys you 346 square feet in New York City, compared with 972 square feet in Miami.
In South Florida, luxury real estate used to be the province of folks relocating from South America. (If you visit Miami and Ft Lauderdale, entire swaths of town are folks from South America. You are far more likely to hear Spanish than English in any business.) Now it’s people relocating from the Northeast.
The Cochran Group, one of the top luxury real estate brokers in the world and located in Palm Beach, set up a Miami office. They are now doing hundreds of millions of dollars a year in financial transactions helping tax refugees relocate.
They’ve helped build “hedge fund row” in Miami:
For years, wealthy Miamians have clustered in a few high-profile communities. Among the lowest-profile, but highest-wattage, was North Bay Road in Miami Beach, home to the likes of Jennifer Lopez and Matt Damon.
Now, the lower portion of North Bay Road has become what Corcoran Group’s Johnston calls “Hedge Fund Row.” Its principal tenants include Starwood Capital’s Barry Sternlicht and Owl Creek Asset Management’s Jeff Altman.
That’s not the only Miami Beach boomlet: Locals say South of Fifth on Miami Beach is also attracting a coterie that includes Clifford Asness, founder of hedge fund AQR Capital Management, and tech entrepreneur John D. Marshall. Marshall has seen enough of his cohort move in that he is building a school, according to his attorney, Michael Larkin.
“He’s emblematic of a lot of South of Fifth residents,” Larkin said of Marshall. “It’s wealthy folks who have moved down all other parts in the north. It’s our little Aspen here.“
Conveniently investor Jordan Levy, the Softbank executive, purchased South Pointe Tavern earlier this decade. He now holds court at what he refers to as his “office” there.
I feel like it’s a pretty much a matter of time until Silicon Valley folks start to trickle in. They do tend to follow the money.
Miami is attracting high-earning younger professionals from places like New York and Los Angeles. The outliers among Generation X and Millennials:
Real estate agent and lawyers say a relatively younger crowd, though one with plenty of disposable means, is now being drawn to the Miami area’s lifestyle amenities, ones not found in the Palm Beach area.
As Wendy Holman put it: “[We moved here] because it’s awesome,” she said. Holman, her husband and four young children made the move to Coconut Grove so she could run an orphan drug investment firm. She said her company is beginning to hire locally.
Or take Dipanshu “D” and Julie Sharma, two young entrepreneurs who moved to Bay Harbor Islands after D sold his business.
“We tried L.A. — and we hated it,” D said.
Meanwhile, Florida governments are in a wildly different position than their peers up north. While governments up north haggle over new revenue measures to pay for legacy personnel costs like pensions, Florida’s Republican governor just introduced a new budget with a billion dollars in new education spending, including pay raises for 101,000 public school teachers. In Chicago, teachers have to strike for two weeks to see a fraction of that, because their government is basically a Ponzi scheme at this point.