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How Eliminating Property Taxes Could Reshape Housing in the Sunshine State
Florida is at the center of a growing national debate over property taxes, as Governor Ron DeSantis hints at supporting their elimination statewide. The proposal, which would require a constitutional amendment, has sparked discussions about its impact on homeowners, real estate prices, and local government funding.
Short-Term Gains: Increased Demand and Housing Market Boost
Joel Berner, a senior economist at Realtor.com, suggests that removing property taxes could provide an immediate boost to Florida’s real estate market. Homebuyers, who often factor in property taxes when determining affordability, would see increased purchasing power. This could help clear the current inventory buildup, as unsold homes remain on the market longer due to affordability concerns.
“If you get rid of property taxes, everybody’s home budget increases a little bit,” Berner explains. “This would allow more people to buy their first home, move up to a larger home, or even afford their dream home.”
However, he warns that this surge in demand would likely drive home prices higher in the short term, potentially making housing even less affordable in a market already grappling with high insurance costs and inflationary pressures.
Long-Term Challenges: Funding Shortfalls and Local Government Control
Despite the potential benefits, economists and housing experts warn that eliminating property taxes could have long-term consequences. Property taxes serve as a primary revenue source for local governments, funding critical services such as schools, infrastructure, and emergency services.
“If locally-levied property taxes are replaced with an increased state-level sales tax, cities and school districts will have less control over raising tax revenue to meet their specific needs,” Berner notes.
Chen Zhao, an economic research lead at Redfin, agrees, pointing out that eliminating property taxes could have unintended consequences.
“Buyers might perceive that local services, such as schools, would suffer,” Zhao explains. “This could dampen the benefits of eliminating property taxes and even make some areas less attractive to homebuyers.”
Unanswered Questions: How Would Florida Replace Property Tax Revenue?
One of the biggest uncertainties surrounding this proposal is how Florida would offset the loss of property tax revenue.
“If the state raises sales taxes to compensate, that might deter potential migrants who are considering moving to Florida for its tax advantages,” Zhao adds.
Moreover, Florida’s homeowners continue to face soaring insurance premiums due to increasing climate risks. Even if property taxes are removed, high insurance costs could still make homeownership financially challenging.
A Growing National Debate
Florida isn’t the only state considering the abolition of property taxes. Pennsylvania, for example, is also exploring similar measures. Republican lawmakers argue that homeowners should not have to “pay rent to the government” in the form of property taxes.
“Property taxes are an issue that is not exactly partisan,” says Rep. Russ Diamond (R-PA). “I want people to own their homes and not feel like they’re renting from the government.”
As discussions around property tax reform continue to evolve, homeowners, real estate investors, and policymakers will be closely watching how Florida navigates this high-stakes fiscal debate.
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