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Florida land boom of the 1920s

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The first real estate bubble in Florida was primarily caused by the economic prosperity of the 1920s coupled with a lack of knowledge about storm frequency and the poor building standards.

1922 Florida billboard promoting the sale of lots

This pioneering era of Florida land speculation lasted from 1924 to 1926 and attracted investors from all over the nation.[1] The land boom left behind entirely new, planned developments incorporated into towns and cities. Major investors and speculators such as Carl G. Fisher also left behind a new history of racially deed restricted properties that segregated cities for decades.[2][3]

Among those cities at the center of this bubble were Miami Beach, Coral Gables, Hialeah, Miami Springs, Opa-locka, Miami Shores, and Hollywood. It also left behind the remains of failed development projects such as Aladdin City, Boca Raton (original plan), Chevelier, Fulford-by-the-Sea, Interocean City, Isola di Lolando, Okeelanta, Palm Beach Ocean, Poinciana, and Sun City. The land boom shaped Florida's future for decades and created entire new cities out of the Everglades land that remain today.

The story includes many parallels to the real estate boom of the 2000s, including the forces of outside speculators, easy credit access for buyers, and rapidly appreciating property values,[4] ending in a financial collapse that ruined thousands of investors and property owners, and crippled the local economy for years thereafter.

Background and history

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In the background were the well-publicized extensions of the Florida East Coast Railway, first to West Palm Beach (1894), then Miami (1896), and finally Key West, 1912. The Everglades were being drained, creating new dry land. Finally, World War I cut off the rich from their seasons on the French Riviera, increasing the appeal of parts of the U.S. with a Mediterranean or Tropical climate.[citation needed]

The economic prosperity of the 1920s coupled with a lack of knowledge about storm frequency and the poor building standards used by boom developers set the conditions for the first real estate bubble in Florida.[5][6] Miami had an image as a tropical paradise and outside investors across the United States began taking an interest in Miami real estate. Due in part to publicity stunts and deed restrictions, developers saw a large influx of Northern tourists and potential residents.[7][8] Developer Carl G. Fisher of Indiana became famous by purchasing a huge lighted billboard in New York's Times Square proclaiming "It's June In Miami".[9] Fisher's publicity and investments along with those of concurrent pioneers Lummus and Collins correlated with rapidly rising prices, and the boom began.[10][11] Brokers and dealers speculated wildly on commodities as well. They ordered supplies in excess of what was actually needed and sent shipments to general destinations. The result was railroad freight cars became stranded, choking the movement of rail traffic statewide.[12]

The impact of the boom would extend beyond Miami and southern Florida. Tampa saw growth during this period as well, but had a more diversified economy than Miami which included manufacturing and tourism. Miami's economy was primarily based on tourism despite failed attempts during the 1920s to diversify the city economically.[13] Jacksonville, the largest city in Florida, would not be as affected by the boom because municipal leaders had decided to work on expanding industry and commerce rather than tourism after World War I.[14]

By January 1925, investors were beginning to read negative press about Florida investments. Forbes magazine warned that Florida land prices were based solely upon the expectation of finding a customer, not upon any real land value.[15] The Bureau of Internal Revenue began to scrutinize the Florida real estate boom as a giant sham operation. Speculators intent on flipping properties at huge profits began to have a difficult time finding new buyers. To make matters worse, in October 1925, the "Big Three" railroad companies operating in Florida—the Seaboard Air Line Railway, the Florida East Coast Railway, and the Atlantic Coast Line Railroad—called an embargo due to the rail traffic gridlock of building materials, permitting only foodstuffs, fuel, perishables, and essential commodities to enter or move within the state.[12] Also in 1925, Florida began to pass laws further regulating real estate; with salesmen being required to have licenses and offices which as a result led to a boom in demand for office space.[16]

Then, on January 10, 1926, the Prinz Valdemar, a 241-foot, steel-hulled schooner, sank in the mouth of the turning basin of Miami harbor and blocked access to the harbor. It had been on its way to becoming a floating hotel.[17]

Because the railroads were still embargoing non-essential shipments, it now became completely impossible to bring building supplies into the Miami area, and the city's image as a tropical paradise began to crumble. In his book Miami Millions, Kenneth Ballinger wrote that the Prinz Valdemar capsize incident saved many people from huge possible losses by revealing cracks in the Miami façade. "In the enforced lull which accompanied the efforts to unstopper the Miami Harbor," he wrote, "many a shipper in the North and many a builder in the South got a better grasp of what was actually taking place here."[18] New buyers failed to arrive, and the property price escalation that fueled the land boom stopped. The days of Miami properties being bought and sold at auction as many as ten times in one day were over.[citation needed]

End of the boom

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Devastation after the Miami hurricane of 1926

Although the railroads lifted the embargo in May 1926, the boom was about to end.[12] The 1926 Miami hurricane ended the boom and the much smaller 1928 Okeechobee hurricane made certain it was extinguished.[19][20][21] The 1926 hurricane destroyed "whatever public enthusiasm for Florida vacation properties and real estate development that remained," as there had been little preparation for the storm.[22]

Florida's economic decline predated the start of the Great Depression. Therefore, it had fewer resources and more debt "than other regions of the nation." Large amounts of local debt financing through bonds worsened the economic situation in the state with most of it coming from the years of the land boom. During the land boom, many local governments sold bonds to pay for projects related to development. After the boom, local government did not have revenue proceeds to pay down bond debt. This resulted in widespread unsecured bond default.[23] Another contributing factor was that numerous counties in southern Florida would take out "large loans" during the boom to help build infrastructure projects to entice developers which led to these counties going into debt.[24] Doyle Carlton was elected in 1928 as governor and during his tenure he tried to put a limit on the amount of bonded debt local governments could hold.[25] He faced opposition from state representatives in northern Florida whose counties had less debt and did not want to pay for their southern counterparts.[24]

Deposits in Florida banks had increased steadily between 1922 and 1925, but then started to decline; by 1926 smaller banks began to fail because of many withdrawals by depositors and defaults on loans. Bank assets flowing into the state started to reverse. A "surplus of funds" and easily available credit also began to dry up.[26]

Murphy deeds

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The collapse of Florida land values caused a severe financial crisis for the state government.  Land values had dropped nearly to the vanishing point, but the property was subject to property tax assessments far in excess of its current value.  Many property owners simply abandoned the property and did not pay the taxes.  Under state law, the state could not sell the property for less than its assessed value.  To remedy the situation, in 1937, the Florida Legislature passed the Murphy Act.[27] The Act permitted the state to sell tax delinquent property for what could be obtained.  Deeds issued to purchasers, colloquially known as “Murphy deeds,” reserved certain rights to the state.  Years later, these reservations in many cases enabled the state to acquire rights-of-way without having to pay compensation.[28]

See also

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References

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  1. ^ Ballinger, Kenneth. Miami Millions: The Dance of the Dollars in the Great Florida Land Boom of 1925. Miami, Florida: The Franklin Press. p. 5. Retrieved 17 July 2021.
  2. ^ Ellis, Guy Worthington; Lincoln Road Association; Egbert, Jane (January 1941). "Lincoln Road: The World's Most Beautiful Shopping Center". No. VII:5. The Florida Teacher. p. 18.
  3. ^ Kleinburg, Howard; Moore Parks, Arva (October 1, 1994). Miami Beach: A History (First ed.). Centennial Press. pp. 136–137. ISBN 978-0962940231.
  4. ^ Rapp, Donald. Bubbles, Booms, and Busts: The Rise and Fall of Financial Assets. Springer. p. 164.
  5. ^ Library of Congress. "Devastation in Miami from the 1926 Hurricane". Publisher: United States of America. Retrieved 3 July 2022.
  6. ^ Barnes, J. (October 14, 1998). Florida's Hurricane History. The University of North Carolina Press. p. 330. ISBN 978-0807824436.
  7. ^ Cooke, Bill (March 10, 2016). "Remembering Miami Beach's Shameful History of Segregation and Racism". Miami New Times. Retrieved 3 July 2022.
  8. ^ Simonoff, Harry (January 12, 1951). "Oscillation Of Anti-Semitism In Greater Miami". The Jewish Floridian. p. 3.
  9. ^ The Beginning of the Road
  10. ^ Lummus, J. N.; Signed Affidavit (November 21, 1949). "The Early History of Miami Beach". Clerk Archives City of Miami Beach. City of Miami Beach. pp. 1–5. Retrieved 3 July 2022.
  11. ^ South Florida: A Brief History Archived 2010-04-29 at the Wayback Machine
  12. ^ a b c Turner, Gregg (2005). Florida Railroads in the 1920s. Charleston: Arcadia Publishing.
  13. ^ Jarvis, Eric (2010). ""Secrecy Has No Excuse": The Florida Land Boom, Tourism, and the 1926 Smallpox Epidemic in Tampa and Miami". The Florida Historical Quarterly. 89 – via University of Central Florida Libraries.
  14. ^ Miller, Philip Warren (1989). Greater Jacksonville's Response to the Florida Land Boom of the 1920s (MA thesis). University of Florida. Retrieved May 9, 2022 – via UNF Digital Commons.
  15. ^ Florida in the 1920s
  16. ^ Clark, James C. (October 28, 1990). "UNDERWATER LOTS! SWAMP CITIES! $10 DOWN! WELCOME TO FLORIDA, THE LAND OF SUNSHINE, SURF AND SCAMS". Orlando Sentinel (Digital). Archived from the original on 24 May 2022. Retrieved February 25, 2022.
  17. ^ Boulton, Alexander O. (May 1990). "Tropical Twenties". American Heritage Magazine. Retrieved November 26, 2014.
  18. ^ Ballinger, Kenneth (1936). Miami Millions: the dance of the dollars in the great Florida land boom of 1925. Miami: The Franklin Press, Inc. p. 139.
  19. ^ McIver, Stuart (September 19, 1993). "1926 Miami: The blow that broke the boom". South Florida Sun-Sentinel. Retrieved 3 July 2022.
  20. ^ Barnes, J. (May 21, 2007). Florida's Hurricane History. The University of North Carolina Press. p. 330. ISBN 978-0807858097.
  21. ^ Evans 2011, pp. 2–6.
  22. ^ Evans 2011, pp. 4–5.
  23. ^ Evans 2011, pp. 5–6.
  24. ^ a b Pearia, Alicia A. (2007). Preserving the Past: Library Development in Florida and the New Deal, 1933-1942 (MA thesis). Florida State University. p. 48 – via DigiNole.
  25. ^ Evans 2011, pp. 6–7.
  26. ^ Evans 2011, p. 4.
  27. ^ Ch. 18296, §2, Laws of Florida (1937)
  28. ^ Browns, Henry; Brown, Rebecca (2009). "MURPHY DEED RIGHT-OF-WAY RESERVATIONS: A 1930S TAXPAYER BAILOUT YIELDS RIGHT-OF-WAY COST SAVING". The Florida Bar.

Sources

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Further reading

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