Florida’s REAL Property Tax Problem
No matter how loudly Florida’s barbarians* scream that every dollar of tax money taken from them goes to support government waste, and whine that they should pay little or no tax on their Florida properties, the main property tax crisis in Florida isn’t a tax crisis at all. It’s a real estate pricing crisis.
My wife and I began our move from Maryland to Florida by purchasing a small, one-bedroom trailer in 2001. We paid $32,000 for it, including land. As you might expect, our property taxes were negligible even without a homestead exemption.
About a year later we decided to move permanently to Florida. We had already become legal residents — in large part because by doing so we saved about $8000 per year in state income tax we otherwise would have had to pay in Maryland. Giving up the Maryland equivalent of a homestead exemption cost us an additional $800 or so in property tax on the place we still owned there (and spent less than one third of our time actually using). We kept the Maryland house only because we had one grown child still living in it, and because our total cost of ownership for it was less than he would have had to spend on an apartment.
But the young man moved out, and we moved into a $72,000 (including land) double-wide trailer in Manatee County. We sold the Maryland place. And since we were living in a low-cost Florida place, our property taxes here were still far lower than we had been paying in Maryland.
That was in 2002.
In 2004 we bought a duplex in Bradenton’s Village of the Arts — for less than $150,000. We “de-duplexed” the place and moved a relative of mine who is on disability into the smaller unit. Our property taxes were (and still are) lower than they would have been if we’d stayed in Maryland.
Back in 2002, there were plenty of sub-$100,000 properties available in this area. If you were over 55, that price category gave you scads of choices including moblile homes, villas, condominiums, and even a reasonable selection of smaller single-family homes in modest (but not “bad”) neighborhoods. Even if you were under 55, you could usually find a home to buy that you could afford one way or another; $150,000 would get you a brand-new place in a brand-new development out in the boonies or a pretty decent older place in an established neighborhood close to downtown.
Now, in 2007, a $200,000 place is considered “affordable housing” around here. And builders want special incentives to build “affordable housing” instead of putting up nothing but $300,000+ McMansions.
In other words, a whole lot of people, including me and my wife, originally moved to Florida in part because it was cheap to live here. Now it’s not cheap, so not as many people want to move to Florida.
And guess what? If we collectively decide that a two-bedroom, one-bathroom $80,000 home is worth $240,000 (which is pretty much what happened in Florida between 2002 and 2005), why are we surprised when taxes on it are three times as high as they were back when its market value was $80,000?
Property taxes may be part of the Florida home affordability problem, but they are not nearly as big a part of it as speculation-based real estate overpricing.
I mention that we bought our current home for less than $150,000 in 2004. In 2005 and 2006 several Village of the Arts properties that are no larger and not necessarily much nicer than our place sold for over $300,000.
We are homesteaded, which means our property taxes can only go up a little bit (3%) per year. The people who paid $300,000 or more for similar properties are, naturally, paying more than twice as much in property tax as we do.
Now rationality is returning to the Florida real estate market. The speculators have either pulled out or are trying to pull out, although a lot of them are taking losses or even going bankrupt in the process. And please, do not doubt for even a second that real estate speculators have been the main reason for inflated Manatee County housing prices, as I wrote back in 2005.
Hopefully, as Florida housing prices go back to where they should be — that is, to the point where a two-income, middle-class family can buy a decent house without financial stress — property taxes will come down along with real estate prices.
If property taxes don’t drop along with real estate prices, with or without legislative action, then we need to vote out today’s legislators and local government officials (mostly Republicans) and replace them with new officeholders who will be more realistic and far-sighted than the current crop.
And you know what? I suspect we will replace a lot of the current crop of Florida officeholders over the next few years, and that the turnover will be good for almost everyone — except real estate speculators, who don’t deserve our sympathy or support, anyway.
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*If “taxes are the price we pay for civilization,” those who are against all taxes must dislike civilization and are, therefore, barbarians.
July 2nd, 2007 at 4:52 pm
Great post. I agree!
July 6th, 2007 at 3:06 am
Yes and no. First off, the government has NO business taxing one’s primary residence. End of story. Is it ours or are we leasing it from the county? What the heck?
Beyond that, I have not seen the county services triple as have our taxes. Now we want a reduction and they are lying to us by stating that services will be cut. The should cut their necks and not lie to citizens who believe their crafty lies.
I think we can all agree that most counties could be run much more efficiently and probably provide better services with about half the budget.
July 19th, 2007 at 1:24 am
So, you want house prices to go back to $80,000? That’s unrealistic and it won’t happen. The speculation you blame is not as prevalent as the media makes it out to be. People are simply willing to pay a premium for living in paradise, despite hurricanes, taxes, etc.
July 25th, 2007 at 4:08 pm
edo, if you think we can all agree on that then you need to let some oxygen get to your brain. The only thing that will happen to counties with half the budget is that they’ll be able to provide half the services. And I guess that’s fine, if you’re one of the lucky ones whose house won’t ever catch fire or whose kids won’t need educating. Tough beans, though, if you’re poor and depend on the county for things like medical care or bus service. But I guess that’s what they deserve for not having money in the first place, huh? ‘Cause we all know that if they were worthwhile they’d have money.
August 4th, 2007 at 7:34 am
I have owned my condominium in Tierra Verde (St. Pete Beach) since 1987; purchased for $150,000 and now worth approximately $525,000 (350% increase). I reside in Michigan and live in Fla. for approximately 4 mos./ year. My property tax bill during that period has increased from $1,100/yr to $7,300/yr (663%). Other than road use, fire, and police protection, I don’t use any other state or county services. In addition, I cannot vote as a non-resident (taxation without representation).
I don’t know what percentage of Fla. real estate taxes are collected from non-residents, but I believe it is a very significant amount. In the past 5 months alone, 3 of my “non-resident” and long-time neighbors have placed their units up for sale. Two have already moved to N. Carolina.
Many other units in my complex are also for sale. You don’t have to be an economist to understand that as real estate prices continue to fall, a “meltdown” in property tax revenues will soon result. If the “snowbirds” do not get a fair amount of relief soon, this trend will not be reversible.
October 29th, 2007 at 3:24 pm
“And guess what? If we collectively decide that a two-bedroom, one-bathroom $80,000 home is worth $240,000 (which is pretty much what happened in Florida between 2002 and 2005), why are we surprised when taxes on it are three times as high as they were back when its market value was $80,000?”
here is something i never understood. (please note that the following numbers are all fictitious)
let’s say in 2002 there were 50 such houses, at a total property value of $4,000,000. the millage at 0.015, each house would owe $1,200.
now in 2005, the property value is $12,000,000. if the millage is unchanged, each house would now owe $3,600.
should the millage not go down to maintain parity? i mean, if the property value were never to increase, don’t the local governments raise the millage to increase the total amount of property taxes? this is something i never understood, i.e., why do the local governments not revise the millage?
- s.b.
October 29th, 2007 at 9:14 pm
Actually, local governments often do cut millage rates. Then the mayors or city councils or county commissions that did it boast about how they “cut taxes,” which brings puzzlement to the faces of people whose tax bills have gone up despite those “tax cuts” because the cuts never seem to be even close to the amount that assessments go up.
Remember: none of this falls on the backs of full-time Florida residents living in “homesteaded” properties. We get a maximum tax increase of 3% per year (except for school taxes and some other exceptions). The ever-larger burden falls on commercial property owners, landlords, and those who, besides a primary residence elsewhere, can also afford a second home in Florida.
Fair? No way. But I doubt that whatever the legislature does this year on the property tax front will be much better. Reality = people who live in Michigan but own second homes here don’t vote in Florida, while those of us who live here year-round do.
- Robin
May 16th, 2008 at 2:31 pm
In a nutshell, Florida is cooking the Goose that lays the Golden Egg! Florida’s economy, to a no minor extent, is based on the non-residents from all over the world coming here to spend their money and pay their taxes. Ironically theses non-residents are not using near the services (schools and medical) that the full-time residents consume, yet these non resident are being taxed (without representation and without any voice what so ever) in a manner lacking any semblance of equity. “Snowbirds” that have dutifully saved and planned for their retirements by purchasing, visiting and maintaining their property until such a day arrived, are now being taxed out of their retirement homes. Where do they go now? Their homes are now “For Sale” in the already depressed housing market in Florida, which really doesn’t have a fair chance of recover because the new homes are only attractive to existing residents (the longer the better)….. simply because the residents arose against the original homestead monster they created, and further inflamed the situation (against the positions of the finest economic and legal minds and advice,) and by of all things, making their homestead exemptions “transferrable,” and to no others! Florida is achieving parity with common third world dictatorial states with such immature and unscholarly actions. I’m embarrassed for the legislators that had to let this happen in order to stay in office. It is embarrassing as an America, that other countries will be able to take a “lesson” at our expense.
Needless, and sadly to say, that a college level freshman Economics 101 course could have guided us out of this problem in 50 words or less.
Letting the taxpayer and “puppet” politicians ignore sound advice, and set such devastating economic policy, is akin to letting the children of the 1940’s and 50’s decide whether or not they wanted to have a polio vaccine! Polio is virtually nonexistent due to the sound advice of the elevated minds in the field
The test of this discriminating and unconstitutional homestead policy may fly in prejudicial local and state courts, but their wisdom will be sorely challenged at higher levels.
If ever there was a recent cause (non race related) for revolt, it is before us now; but it can never take flight, because those being discriminated against are a disjointed group spread out all over the world, and the Florida residents are like jackals at their heels; ironically chasing the very resource needed most desperately for economic recovery, into oblivion. I am ashamed to be a Floridian in partnership with such bold faced larceny.
Bob
September 23rd, 2008 at 9:04 am
I am an international real estate broker here in Bradenton. We have a broad clientele from all over the world.
During my master thesis in economics at the University of Bayreuth, Germany, I was always surprised about the big dependence upon taxes based on non income values here in Florida.
Back then in the 90s the values looked reasonable (compared to Europe), however there was always criticsm because of stratetic problems which theoretically arise when you rely broadly on these kinds of taxes like Florida does.
One point is, once the taxing authority is able to increase the assessment base, the revenues will increase automatically.
And this happens without “raising” taxes. Because of unavoidable discrepancies in valuation when you estimate values, people have a hard time to complain. This got even harder when a “voting” part of the taxpayers voted to step out of the system (Save our FL homes). The big problem: As voters strepped out they didn’t object anymore when taxes were raising for non-homesteaders, because they were exempt.
In my option there can only be a solution:
The society has to decide whether to accept severe cuts in services or the society has to accept the level of taxes.
In both cases the burden of taxes has to be shifted away from non-income based valuation towards income based taxes, like sales and income taxes.
Florida has to get its reputation out as “a reasonable place to live and the best place to enjoy the wonderful strand, sand and surf.”
Thanks Axel Weiss, Weiss & Weiss International
September 27th, 2008 at 11:12 pm
I am a Canadian home builder looking to buy investment property in Miami Beach where I spent the summers of my youth. I was amazed to learn of the potential property tax grab I was about to get into. After some research and thought on the matter, I realize I may be in better a position than I thought. Here’s why. I buy a condo for say $120,000 in a not so wonderful part of Miami Beach and it is in need of a renovation. Let’s say the property sold for $190,000 in 2006, with a property tax of $3000/yr. Can I not sick the property assessment people on myself and have them come in and re assess the value pre reno, thus bringing down the tax for the following year? How will the down turn in the market effect the future property taxes in Florida?
I understand that some people still have $15,000 taxes however, within 3 years, I would imagine their property tax should go down substantially . Lastly, those who sold in 06 at the top of the market can now come back in at 30-40% better off, thus offsetting their tax grab of the last 10 years, get re assessed at the lower rate and living happily ever after, or at least until the next boom sends the taxes skyward, starting the whole thing over again.
Just rambling,
Andy