Our Hot Real Estate Market Can Put A Damper On Moving
If Florida did not have a “Save Our Homes” provision that caps assessments to homestead property, my property taxes would be much higher than the $3000 or so per year that I currently pay. And I might be more inclined to move and cash in on the increased equity.
Many area homeowners are in the same situation. On the one hand, it’s nice not to have to pay astronomical taxes to stay in a home. After all, the houses haven’t changed much, and they still fulfill the same purpose. But if needs have changed, and homeowners want to downsize or just get a house with a bigger garage, the tax-saving provision creates a barrier.
Since properties are re-assessed when owners change, and on average county taxes are about $2000 per year per $100,000 of taxable value, the penalty for moving, even to the same house, can be thousands of dollars a year.
Take an example homeowner who purchased a single family home for $125,000 just 5 years ago, just before the current boom in prices. With a $25,000 homestead exemption, the tax value then was about $100,000 and the taxes would be $2000. With a 3% cap, the highest today’s assessed value could be is $140,000 less $25,000 = $115,000, with taxes around $2,300. But if sold at a likely $300,000 today, the buyer will end up paying about $5,500 in taxes each year. And unless the seller is downsizing or moving to another area, the seller’s taxes will increase by the same amount.
The tax cap has probably contributed a bit to the heated prices, if owners are more reluctant to move and thus the housing supply is more restricted than without the cap. However, it has also allowed the county and cities to limit increase in the mill rates even while costs have increased, since all the new owners are helping increase the tax base. If the cap was not present, it is likely that tax increases for everyone might have been more moderate and the tax base might be the same.
I doubt the cap contributed much to the recent rise in prices. The past five years appear to be related to the end of the tech bubble, the aging of baby boomers, and the decreasing availability of land in our area. But the cap has probably hindered some Florida resident move-up buyers, and can hinder them more the longer they remain in their homes. Some legislators are suggesting changes, but just like the original cap, they may have their own set of unintended long term effects.
Tags: save our homes