The argument supporting continuing growth in Florida is incontrovertible. The longer a person resides in Florida, the more their fair share of the cost of government is borne by their newly arrived neighbors.
Florida’s Homestead Exemption and accompanying Save Our Homes cap on assessed property value increases are, by far, the most effective method of subsidizing taxes for long-term permanent residents (voters). Long-term residents save thousands of dollars each year when compared to recent transplants with homes of comparable value.
How Does the Homestead Exemption Work?
Florida’s real estate assessed value and tax status are established by the county property appraiser as of January 1 of each tax year. Beginning on the first full tax year in which a resident establishes permanent residence, the resident taxpayer receives a $50,000 reduction from the True (Market) Value (as established by the county Property Appraiser each January). As of the first January 1 of new homesteaded ownership, all previous exemptions and protected value are eliminated. The new owner’s property tax clock begins with the new Just (market) value.
For a typical Palm Coast homesteaded resident, the property tax saving resulting from the $50,000 deduction is approximately $800 annually. The resident must apply for the exemption by March 1 of the first tax year. Ongoing, the exemption is continuous. Non-homesteaded properties (commercial property, rental homes, apartments, vacation homes, etc.) subsidize homesteaders because they do not receive the deduction.
How Does Save Our Homes Work?
In 1992 Florida voters approved Constitutional Amendment 10, meant to shield homeowners from runaway increases in their property taxes because of booming real estate prices. Beginning January 1 of the second full tax year of homesteaded residence, any increase in assessed value is limited, or capped, to the lesser of the CPI or 3%. This cap is called Protected Value and is cumulative. Since 2008, it is portable within Florida. A homesteaded property owner can move within the state and take a proportionate share of the protected value to a newly homesteaded residence.
What might this mean to you? I can use myself as an example. I recently sold a waterfront condominium which I had purchased in 2011. In 2012, my first full tax year, the unit was assigned a Just Value of $143,400, which increased to $443,838 by 2023.
My 2017 property tax was identical to my 2023 property tax of $2,213 (within a dollar). Meanwhile, the condo’s Just Value doubled from $222,800 to $443,838. After netting out my $50,000 homestead exemption and $281,667 protected value, my 2023 Taxable Value was only $112,171.
Without the protected value and homestead exemption, 2023 taxes would have been $8,223, a difference of $6,010. If the new owner homesteads and the Just Value remains the same, 2024 taxes will be in the $7,432 range, a difference of over $5,000 (assuming that the new owner does not have existing protected value to carry forward to the condo). Beginning on January 1, 2025, the Save Our Homes cap will be in effect going forward. Assuming an increasing market, the new owner’s protected value will continue to grow.
Palm Coast’s General Fund budget grew from $37.4M in 2019 to $55.8M in 2024. During that period, Ad valorem tax revenue grew from $22.7M to $35.2M yet my property tax remained the same. Thank you, new neighbors.
Of 34 identical (same floorplan, all waterfront) units in the same condominium community, the twelve units paying the lowest property taxes are homesteaded. Eleven of the 12 units paying the highest taxes are non-homesteaded. Taxes for these identical units ranged from a low of $2,147 to $8,070.
In Palm Coast, non-homesteaded properties represent 24.7% of all residential properties but pay 37.2% of ad valorem taxes. Homesteaded properties comprise 75.3% of residential property but pay only 62.8% of all residential property taxes.
Another Example: Two similarly assessed homes in the P-Section
One home was purchased in 2003 and is assessed (True Value) for $272,319. Its 2023 taxes are $1,650.56. The other home was purchased in 2022 and carries a Just Value of $279,939 and a 2023 tax bill of $4,220.32, 156% higher.
Legislation being considered for Florida’s 2024 session includes proposals to raise the homestead exemption and to index it to inflation, further insulating existing permanent residents from future tax increases.
Shifting the Tax Burden Some More
Florida is considered a “low tax” state. It has no state income tax. Florida accomplishes this feat, in part, by offloading some of the cost burdens of governing onto people who are either visiting or have recently moved here.
Florida derives approximately 80% of its general revenue from sales taxes, a significant portion of which is collected from snowbirds and tourists. Add to that the tourism bed tax collected by local governments, also paid mostly by tourists.
Impact, permitting, and connection fees levied on a new single-family home in Palm Coast are approximately $21,000 per home. They are paid at permitting time and passed onto the new homeowner. Not just a shiny penny, this amounts to 21 times the average annual Palm Coast non-homesteaded property tax of $987 and 41.5 times the average city property tax of $505.28 levied upon homesteaded properties.
Florida’s continued population growth is inevitable. So too is the concomitant new-home construction, adding strength to the case for Florida’s growth. Over 50% of state residents already live under the jurisdiction of either a homeowner’s association, a condo association, or a coop, and increasingly a Community Development District (CDD). Because municipalities are generally not accepting the conveyance of infrastructure from newly constructed communities, nearly all new residential communities or subdivisions in Florida’s future will result in the mandatory formation of at least one layer of private governing association.
Developers fund and construct new horizontal infrastructure, all built to municipal standards, including roads, common area landscaping, stormwater management system, sidewalks, street lighting, security gates, and amenities. They often designate substantial acreage as a perpetual conservation easement.
The cost of the new infrastructure is embedded into the cost of each new home and is borne by the new homeowner. The association member fees and CDD fees pay for the ongoing maintenance of the new infrastructure. The typical association fee is several hundred dollars per month, yet residents receive no property tax credits even though their taxes help pay for the municipality’s existing infrastructure maintenance. The same is true for amenities. To the extent that residents use the community’s private amenities rather than municipal amenities, they reduce the burden on existing facilities (i.e., their tax dollars are a subsidy). Again, no tax credits accrue to the residents of the private community.
Stormwater Management – Each new community is required to manage any additional stormwater runoff created by the new development. This includes the design and construction of the system as well as its ongoing maintenance, in perpetuity. Yet the new community’s residents are required to pay the same monthly municipal stormwater management fees as existing residents, thus subsidizing the existing system. The current Palm Coast stormwater fee is $22,27/month ($167.24/year) and is scheduled to rise by 75% over the next five years.
Owners’ associations are responsible for the enforcement of the community association documents; and CC&Rs (Covenants, Conditions, and Restrictions). Outside of the association boundaries, these duties are performed by the municipal code enforcement department. Yet the association residents help pay for the code enforcement department through their municipal property taxes. To a lesser degree, law enforcement is also subsidized. They will enforce laws within a private community, but not the community’s CC&Rs.
Palm Coast’s population is aging. Population growth will reinvigorate the gene pool. It will also provide the additional workers that the area needs if it is to attract new businesses. Economic development needs not only new jobs but also workers and homes in which they can afford to live. Aside from education, an aging population requires more expensive public services.
The cost of NO Florida growth will be far greater than the cost of controlled, planned, and managed growth. Taxes will still rise but at a much slower rate. I challenge any homesteaded resident to demonstrate that their property taxes have risen at a greater rate than either the rate of inflation or the growth of the local municipal budget.
To understand the inevitability of Florida’s growth, read: The New Go-To-State. Florida is the New California