What About Us? Renters Clamor For Relief as Property Tax Debate Continues

The Daytona Beach News-Journal tells the story of Kim Nguyen, a 19-year-old woman who shudders to think of the squalor she’d be forced to live in if she didn’t have two roommates.

She thinks the $825 rent for her two-bedroom Daytona Beach apartment - which recently jumped up from $775 - is ridiculous.

“The government should step in and put a cap on how much you pay for rent,” said Nguyen, an Embry-Riddle Aeronautical University student who gets only minimal help from her parents for living expenses. “They should base it on peoples’ salaries and the square feet of their apartment.”

That’s not likely. But residential renters like Nguyen might get another type of break. In the kaleidoscopic debate over property tax reform in Florida this spring, renters are getting some attention.

At the core of the debate is a tax system set up to benefit residents who file for the homestead exemption - those who live full-time in the homes they own. Annual increases on taxable values for their properties are capped, though market values have soared.

Because many local governments have kept roughly the same mill rates, the real estate taxes for non-homesteaded properties - including those housing people in the rental market - have soared with market values.

Yet renters tend to make less money than homeowners and pay a high percent of personal income in rent, which includes what some call “invisible” pass-through property taxes.

“We really have an upside-down program in Florida where we take our poor, our starter housing, our first-time employees, people without equity, and we tax them a higher percentage of their income than we do anybody else who has been able to go to that first or second home,” said Rep. Frank Attkisson, a St. Cloud Republican.

The question is how to provide relief.

One argument says the market will take care of renters if property owners get tax relief. Another says that’s no guarantee; there should be direct relief for renters, not only Florida mortgage holders. House Republican leaders have generally contended the former.

Just before the session, they introduced a plan to roll back and cap local government taxes and replace homesteaded property taxes with a 2 1/2-cent increase in the state sales tax. The rollback and cap are meant to provide relief for non-homesteaded properties.

Renters would only get relief if landlords pass along savings.

But it’s difficult to say exactly how rolled back taxes would impact rental rates, said Gary Scarboro, executive vice president of the Apartment Association of Greater Orlando, which includes Volusia County.

In general, property taxes make up about 30 percent of apartment operating expenses. But lots of factors, including competition, determine rental rates, and many property owners have been taking hits as taxes and property insurance increased but the market hasn’t been able to support rent increases.

“That’s such a speculative question,” Scarboro said. “I’m seeing a lot of the property now and there’s not a lot of profit, in fact some negative cash flow. I’m thinking a lot of owners would like to actually make some money on their investment.”

A cap on future tax increases for rental properties would restrict growth of pass-through rent, he said. But some lawmakers want tax relief to go directly to permanent residents who rent their homes to pay the Florida mortgage loan. That idea showed up last week in proposals from Democrats.

“I haven’t polled all of my members on it, but I’m sure most of them would say they want to make sure homeowners and everyday renters - people who live in homes as their primary residence and rent as their primary residence - they feel some relief,” said Miami Beach Rep. Dan Gelber, the House minority leader.

Attkisson presented a similar idea in the House Committee on State Affairs, where he is the chairman. He said he believes renters would benefit because of the market but knows not everyone agrees with that.

“Anything we do is going to be complex and difficult,” he said.