Florida's Property Tax Reform: What Does It Really Mean?

Florida's Property Tax Reform: What Does It Really Mean?

This November, Florida voters will have the opportunity to vote on a historic property tax reform measure. As is usually the case with something this significant, there is no shortage of rumors surrounding the amendment, and my goal here isn't to tell you how to vote, but rather to provide some clarity on what we actually know.

So, let's start with the facts.

Approval requires 60% of the vote, and, if approved, Amendment 3 would increase the homestead property tax exemption to $150,000 on January 1, 2027, and $250,000 on January 1, 2028. It's important to mention that the increased exemption would only apply to the non-school portion of your property taxes. Moving forward, the exemption would also be adjusted for inflation.

For non-homestead and commercial properties, the annual cap on increases in assessed value would be reduced from the current 10% to 5%.

The amendment also addresses people who become Florida residents after December 31, 2026. They would receive the existing homestead exemption once they qualify, but would have to wait until their fifth year of exemption to receive the increased exemption available to existing Florida residents.

What About Local Governments?

One of the biggest arguments against the amendment is that cities and counties could lose a significant amount of property tax revenue. And truth be told, that's a legitimate concern.

Where I think the conversation sometimes goes off the rails is when that concern turns into a blanket statement that local governments are simply going to "go broke."

The impact isn't going to be the same everywhere.

Take Miami-Dade County as an example. A $250,000 homestead exemption is going to mean something very different in a community where homes routinely sell for $400,000 than it will in a community where they routinely sell for $2 million.

In communities with lower property values, increasing the exemption to $250,000 could remove a significant portion of the tax base from local taxation. That's a big deal, both for the municipality and for the homeowner.

Those municipalities could face some very real budget challenges. They may have to make difficult decisions about spending, services, or other sources of revenue. In communities with rapidly increasing property values and significant development, however, the long-term effect could look very different.

That's why I think it's difficult to make a blanket statement about what this amendment will do to every municipality in Florida. There are simply too many variables.

What About Affordability?

There's another side to this that I find interesting.

We all know that affordability has become a serious problem in South Florida. And when we talk about affordability, we tend to focus on the price of the home and the mortgage payment. But property taxes are part of that monthly payment too.

If lower property taxes make the monthly cost of owning a home more affordable, could some buyers who have been priced out of the market come back in?

Possibly.

And what happens when demand increases? You guessed it, prices can go up.

Could that eventually create another affordability problem? Maybe. Nobody really knows.

But I do think property taxes should be part of the affordability conversation. A homeowner shouldn't find themselves unable to afford a house they already own simply because the tax burden has become unmanageable.

So, What Does This All Mean?

For homeowners, the potential benefit is pretty straightforward: a larger exemption could mean significantly lower non-school property taxes.

For seniors and others living on fixed incomes, that could be particularly meaningful. For prospective buyers, lower ongoing property taxes could reduce the monthly cost of homeownership. And, potentially, that could make owning a home a little more attainable for some families.

As a father, I also can't help but think about our kids. A lot of young people who grew up here are looking at today's housing costs and wondering whether they'll ever be able to afford to stay close to their families. If reducing the cost of homeownership helps even a little, I think that's worth discussing.

But there is another side to this.

Local governments depend heavily on property tax revenue to pay for the services we all use. Significantly reducing the taxable value of homestead properties will have consequences, and some municipalities will almost certainly feel those consequences more than others.

Could some communities eventually be forced to dramatically restructure the way they operate? Possibly. Could an extreme case someday involve a municipality no longer being financially viable and returning to an unincorporated area? I think that's an extreme scenario, but it's one of the concerns being discussed.

Ultimately, I don't think either extreme tells the entire story.

"This is going to bankrupt every city in Florida" is an oversimplification.

"This has no downside whatsoever" would be one too.

The amendment could provide substantial tax relief to Florida property owners, while also reducing an important source of revenue for local governments. Both things can be true at the same time.

Regardless of where you stand, make sure you understand what you're voting on before you vote.

Fun Facts — At Least They're Fun to Me...

The last major property tax reform of this magnitude dates back to 1992, when Florida voters approved what became known as Save Our Homes, limiting annual increases in the assessed value of homestead properties to 3%.

There were concerns about the financial impact on local governments then, too.

Here's the interesting part.

Amendment 10 passed with only 53.6% of the vote.

Under today's rules, it wouldn't have passed.

Why?

Because in 2006, Florida voters approved another constitutional amendment requiring future amendments to receive at least 60% of the vote instead of a simple majority.

And here's my favorite part:

That amendment received only 57.8% of the vote.

Basically, the amendment that created the 60% requirement wouldn't have passed under the rule it created!

If nothing else, history shows us that Florida voters can be pretty divided when it comes to major constitutional changes. I can't wait to see how this one plays out.