More than 62% of Florida voters approved Amendment 3 on Tuesday, passing a measure designed to lower property taxes for homeowners by expanding the state’s non-school homestead tax exemption.
The measure will increase the exemption from $50,000 to $150,000 in 2027, followed by a further increase to $250,000 in 2028. The tax cuts arrive as Joel Berner, a senior economist with Realtor.com, says Florida homeowners are facing growing financial pressures from ancillary housing expenses, such as rising insurance premiums and homeowners association fees.
He says the newly passed amendment could have a positive effect on the state’s real estate market.
“Right now, we’re in an environment where a lot of the ancillary costs of homeownership are rising. Things like insurance premiums, property taxes, HOA dues - all of the above - have become a lot more expensive,” said Berner, who said the reduced tax burden could spur activity among prospective homebuyers. “We’re hoping that removing the friction of these property taxes might help get some buyers off the sidelines.”
He says the tax relief comes as real estate values experience a slight downturn across the region. “We’re seeing prices fall in Florida and in Jacksonville, specifically, in the low single-digits year over year right now,” Berner said.
A modest boost in buyer demand would not harm the current real estate climate, he said. “That’s an OK thing in the market right now because prices have been so soft,” Berner said.
A study conducted by Realtor.com found that when property taxes decrease, home values typically increase, with potential immediate gains of 7% to 9% if property taxes were removed entirely. Berner said lower taxes increase consumer purchasing power.
“There’s definitely the possibility that those tax savings could increase home prices either through the mechanism of more people moving to the state or people just realizing that with a lower property tax bill in their budget for buying a home, their buying power is a little bit greater,” Berner said.
However, he does not expect sharp cost spikes. “I wouldn’t anticipate another intense round of price run-ups like we saw immediately following the COVID-19 pandemic - probably more of a price stabilization than a price run up,” Berner said.
With the property tax exemptions set to reduce local tax collections, state officials may need to evaluate alternative revenue sources to offset the lost property tax income.
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