Florida Housing Market Slump Slams State’s Coffers

Having reaped ample rewards from a sizzling Florida housing market in recent years, state leaders are now forced to endure the downhill, with Florida economists expected to cut as much as $800 million from the expected funds for the 2007-08 fiscal year.

According to the Palm Beach Post, that reduction would come on top of the $466 million economists cut from the collections expected for the coming budget year during the last meeting of the Revenue Estimating Conference.

Most of the reduction expected Monday will be from slowing collections of taxes on Florida real estate transactions, as well as the sales taxes paid on building materials and big-ticket appliances and furnishings.

“Documentary stamp tax” collections that include real estate transfers grew from $1.3 billion in 2000-01 to $4.1 billion in 2005-06, but are expected to fall to $3.1 billion this year and $2.9 billion next year.

To make matters worse, with Florida mortgage activity continuing to lag, general sales tax collections so far this year are barely ahead of where they were a year ago.

By law, Gov. Charlie Crist, the House and the Senate must accept and use whatever figures the Revenue Estimating Conference sets as they craft a budget for the coming year. No consensus exists, however, on how to deal with the revenue slide at the present time.

House leaders and Crist believe that dramatically abolishing property taxes will spark another real estate boom - a “sonic boom,” in Crist’s words - that will again increase collections.

“I think that will restart our economy, have a lot more sales of homes and purchasing, and make people want to buy,” Crist said.

Others see the clamor to slash property taxes as misplaced, given that even eliminating them entirely for those claiming the homestead exemption, as House Speaker Marco Rubio would do, still would not make South Florida home prices (worth as much as $400,000 for a single-family home) affordable to a middle-class family.

They point to declining public school enrollment in the most expensive South Florida counties as proof that young middle-class families with children have stopped moving in.

“Maybe you ought to roll back the price of housing to 2001 while you’re rolling back the millage,” Paul Piller, lobbyist for the cities of Bonita Springs and Midway, told a key House committee Friday.

That’s a take that Crist chief of staff George LeMieux, a former resident of Broward County, said he can appreciate. But he said government has little control over fundamental housing costs but can do something about homeowner’s insurance and property taxes.

“Those are two things we can address,” LeMieux said.

Ed Montanaro, formerly the head of the Revenue Estimating Conference and now a professor at Carthage College in Wisconsin, said property taxes and especially property insurance were factors but not the main factor.

He cited an underlying imbalance in Florida home mortgage demand and the real estate market, adding that time and time alone will really return things to normal.

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