Young people are flocking to Florida. It's boosting the state's economy, but living there comes with hidden costs.

• People are moving to Florida in record numbers, and not just retirees.
• Young people are being lured by the weather, a lack of state income tax, and more job opportunities.

Since the start of the pandemic, the US has seen a mass migration of people moving to new states, and no state is gaining more newcomers than Florida.

Florida, which has long attracted new residents thanks to its beaches and absence of state income tax, is getting an economic boost driven by young Americans seeking new opportunities. While the state benefits from this influx, it also faces challenges such as increased living costs that are sometimes less obvious, and it could hurt the residents and the state in the long run.

Florida's population jumped by 1.9% from 2021 to 2022, with a net gain of 417,000 new residents, making it the fastest-growing state in the country. What's more, an analysis of Census Bureau data published by Smart Asset in November indicated the state had become one of the "hot spots" for millennials. And more people may be looking to move there: A March 2023 report from the real-estate outlet RedFin found that Florida dominated the list of the cities Americans want to move to the most.

"While homes in these places cost considerably more than pre-pandemic, they remain comparatively affordable," the Redfin report said. "The typical home in most of the popular destinations is less expensive than the typical home in the top origins."

Florida's economy is growing thanks to the newcomers

Florida's population surge is driving the state's robust economy and demand for housing.

The Sunshine State's economy is projected by Wells Fargo to expand in 2024, propelled by a robust job market. While Wells Fargo economists say they expect some "cooling" in the state's labor market, they say the unemployment rate will remain relatively low thanks to a continued surge of working-age residents.

The state also experienced strong economic activity and a healthy job market. GDP growth surpassed the national average for 11 consecutive quarters, and the third-largest payroll increase of 2023 was recorded in October.

"Employers continue to add jobs at a robust clip," the Wells Fargo economists wrote. "Strong economic fundamentals fueled by steady in-migration and a flood of corporate relocations raise the odds that Florida continues to outshine the nation over the next few years.

From August through September, the state's payroll increase was projected to be 2.6% over a full year, outpacing the national average of 1.5%.

Additionally, Florida's real-estate market has not fallen as sharply as the rest of the country's.

Wells Fargo reported that the 5% decline in home sales in Florida in 2023 was less than half the national average of 11%. The economists cited the less expensive housing in Florida compared with the three states where the most residents were coming from — New York, California, and New Jersey.

A surge in new businesses is providing jobs for new residents

While Florida's population is surging, it's coming at the expense of once-trendier states such as California and New York.

This dynamic can be seen in data from the US Census Bureau, comparing Florida's growth with the recent sharp decline in New York.

In addition to the weather and tax environment, the big reason for Florida's population surge is increased opportunities for remote work. But there are also a ton of new businesses opening up shop in the state.

HireAHelper.com's analysis of SEC filings said the number of corporate headquarters in Florida increased by 86% in the 12 months ending in March of 2023, the largest growth rate of any state. It reported that three locations in Florida — Jacksonville, Tampa, and Miami — made up the top 10 US cities gaining the most corporate headquarters.

But despite job opportunities and relatively affordable housing, there are some hidden costs that new residents often overlook.

Florida has some costs that surprise some new residents

Florida is not immune to economic challenges. Home insurance and the rising cost of living present unique challenges to residents and potential homebuyers.

Policygenius reported home insurance prices were rising faster in Florida than any other state, jumping 68% in the 12 months ending in May 2023. Thanks to the more damaging weather, Floridians paid more for home insurance in 2023 and the second-most for car insurance compared with other states.

Meanwhile, inflation in the state is still much higher than the national average. Of the 14 metro areas tracked by the consumer price index in December, the Miami area saw an inflation rate of 5.7% compared with one year ago. That was the highest among all the cities and about 70% higher than the national average of 3.4% — the Tampa-St. Petersburg area was tied for second highest among the nine areas tracked in January at 3.9% year over year.

Forbes also found in November that Florida was the fourth most expensive state for healthcare, mainly because the state's businesses cover less of the cost than other parts of the US.

So, while Florida's status as one of just nine states without an income tax can save new residents thousands of dollars, insurance, inflation, and healthcare could wipe out the gains.

In 2021, the Miami real-estate agent Michael Bordenaro told Business Insider that up to 50% of his clients chose to leave the state within a few years of moving there.

BI spoke with several people who abandoned the state, and the reasons included the increased cost of living, severe weather, low wages, and a "vacation feel" that eventually wore off.

This article was originally published in December 2023.