Property Taxes Just One Part of the Problem
Someone sent Tom Blackburn of the Palm Beach Post a letter last week to offer cash for his house. They would pay less than full value, but pay it as soon as right now, plus pay closing costs.
The letter is further proof that no bubble bursts without inflating someone’s balloon. That cold call by mail is a sign of the times.
There are also weird Florida mortgage refinancing offers floating around for people with adjustable rate home loans that suddenly require them to send the mortgage lender more money than they ever imagined plus the keys to a new Rolls Royce every month.
As higher-than-normal foreclosure rates suggest, more people are living in houses they can’t afford. If they were (at one point) getting rich from the Florida real estate bubble, they are now left with houses they can’t flip. Some will sell at a loss rather than wait for their total investment to unwind.
Home ownership in Florida is in a perfect storm.
Houses have been selling at median prices that are two times as much, or more, than people with median incomes prudently can pay. Crowds of people have turned out to complain to a panel of lawmakers about property taxes on the inflated values. And our homeowners insurance premiums have gone through the roofs that survived three hurricanes.
Most of that is missing us. True, our insurance now costs almost twice as much as our property taxes. But having lived at the same address since it took effect, many of us are full beneficiaries of the Save Our Homes amendment that we pleaded with everybody not to vote for back in 1992.
As the fair market value of all homes soared during the happy time for developers, our assessed value didn’t soar because it was artificially capped by the amendment.
Now we pay taxes on only about half of what the house would sell for and enjoy public services paid for by recent home buyers, renters, part-time residents and businesses. We are coddled; they are not.
Under the banner of Save Our Homes, Florida now deliberately divides residents into classes - first-class homeowners (like us) who reap the rewards of staggering home price appreciation, and second-through-10th-class homeowners who bought after the amendment took effect in 1995, but before the latest taxable year.
A new, lower class is added each year. Homeowners just starting paying a Florida mortgage are classified as losers, along with the renters and the seasonal residents. In time, the new owners will get into a class, unlike the others.
As retirees, we should be looking for something smaller. But even after taking a profit selling our home, we probably would be worse off from a financial perspective. California, which went down this dead end before Florida, is full of empty-nest baby boomers in four-bedroom homes but taxed into staying by the higher costs on the smaller alternative.
Having them stay put shrinks the housing market for growing families and drives up the cost of Florida mortgage loans for everyone else. This is something we told you would happen.
Florida TaxWatch, the independently funded research group that never did like Save Our Homes, recommends repealing it. That would require another constitutional amendment. As recently as December, TaxWatch conceded that getting repeal past voters is unlikely.
That’s because low-numbered classes make up a majority of voters. For them, it would be like voting for a tax increase. Furthermore, if the repeal were complete in one year and not phased in, it would drive currently fat and happy people (like us) into the street.
Everything about the amendment and anything that can be done with it has more downsides than advantages. But repeal is better than trying to fix it. Tinkering would make things worse in new ways. When you have dug yourself into a hole, more digging won’t get you out.
Florida remains a low-tax state, 39th among the 50 states, actually, in state and local property tax burden in 2006. Save Our Homes, like everything else Florida does with taxes, passed with the implicit hope of laying the tax burden on someone else.
Over time, people who voted for it bought new homes. They didn’t anticipate that when they voted. But that’s how you get the kind of state in which a person can make a living by finding perfect strangers to sell him their house for less than it’s worth.
