How Eliminating Property Taxes In Florida Could Affect The State’s Real Estate Market

Housing costs, including insurance rates, in the US continued to rise

Florida Governor Ron DeSantis hinted on social media that he would support repealing such taxes across the Sunshine State, but this would require a constitutional amendment.

Joel Brenner, senior economist at Realtor.com, said this could benefit Florida’s market in the short term by helping resolve the inventory backlog.

Easing the property tax burden could ease the burden on homeowners who have been dealing with high housing costs, including skyrocketing insurance rates, and encourage more people to move, according to Brenner.

Brenner said there are now a higher number of unsold homes and homes taking longer to sell than in years past, due to concerns about affordability. People who have been locked into low mortgage rates for several years are finally looking to move, but demand is not where it was compared to a few years ago, when the state had a hot housing market.

“Getting rid of property taxes will slightly increase everyone’s housing budget and allow people to buy a first home or buy a transitional home, or buy their dream home that they might not have been able to afford before because of property taxes,” Brenner said.

However, this would actually increase buyers’ budgets and cause a slight increase in demand, pushing up prices in the short term, he said.

This move could also negatively impact communities in the long term.

“If locally collected property taxes are replaced with an increased state-level sales tax, there will be less local control for cities and school districts to raise their own tax revenues in a way that meets their specific needs,” Brenner said.

He said different municipalities have different requirements, and “a state-level lump-sum tax revenue would be less specialized than a property tax for these requirements.”

Chen Zhao, economic research lead at real estate brokerage Redfin, said there will be “impacts of eliminating the property tax.”

For example, Zhao said buyers could “perceive that local services, such as schools, will suffer as a result,” which “will also reduce the benefits of eliminating property taxes.”

Zhao and Brenner said it is still unclear how the state will raise revenue in lieu of a property tax.

If the state offsets this by raising sales taxes, for example, it “might also discourage potential immigrants to Florida,” Zhao said.

Still, the issue of high insurance costs remains.

“If the cost of insurance due to increased climate risks is high enough to offset the property tax savings, buyers may still be hesitant to buy in Florida,” Zhao said.

But Florida isn’t the only state considering plans to eliminate property taxes. Fiscally conservative leaders in several states are looking to do so, with one Pennsylvania lawmaker arguing that homeowners shouldn’t “pay rent” to the government.

“Property taxes are an issue that is not exactly partisan, because in some areas, it is more of a big deal than in others,” said Rep. Russ Diamond, R-Lebanon, noting the changing relationship between taxes and school district funding.

“For me, the ‘big deal’ is that I want people to own their homes and not have to rent from the government, all across Pennsylvania,” he said.