Next fall, Florida voters will likely vote on at least one proposed change to property taxes. It’s an effort led by Gov. Ron DeSantis to reduce or eliminate most local property taxes for homeowners. But cutting the annual tax bill may not make buying a home any cheaper.
Research has shown that lowering the expenses of owning a home, like getting rid of property taxes, increases the value of the home itself.
Since taxes are an expense of homeownership, they represent a cost, just like regular maintenance.
READ MORE: What could overhauling property taxes mean for local government IOUs in Florida?
Imagine an old home that hasn't been kept up. It would be expensive to repair and so it would likely fetch a lower price than a similar neighboring home that is newer and in better shape.
Generally speaking, the lower the cost of operating a home — repairs, insurance, taxes — the higher the value of the home, said Joel Berner, senior economist at real estate data firm Realtor.com.
"Just not having to pay property taxes every year going forward, if this goes through, makes a home more valuable," he said. "It's one more expense that you don't have."
His analysis estimated that eliminating all property taxes would boost property values 7%-9% right away.
The median price of a single family home sold in October was flat to up 3.5% from a year ago, according to data from the Miami Realtors Association. An increase in prices as estimated by Berner would add about $45,000 to the median sale price of a single family home in South Florida and up to $28,000 for a condo, based on the average prices of homes sold in October.
Eliminating property taxes " makes home ownership more attractive, makes homes more valuable," Berner said, acknowledging that means it makes buying a home more expensive.
The proposals considered by lawmakers do not imagine zeroing out all property taxes for homeowners. Property taxes that support local public school districts would remain. And local governments would not be allowed to reduce their budgets for law enforcement. How the proposals would treat property taxes dedicated to paying some bonds is uncertain.
Berner estimated cutting property taxes except those for public schools would increase property values by a more modest 4%.
Gov. Ron DeSantis has been clear that he wants to get rid of property taxes for primary residences. "So much of our taxes are paid by people that visit," he told Fox on Friday. He has called property taxes "more oppressive and ineffective form of taxation."
Yet, Berner said housing expenses other than taxes have more of an influence on prices. "The home values in Florida are less sensitive to these price changes due to property tax adjustments because the other costs of home ownership are so high," he said. "Insurance, maintenance, all that stuff is pretty expensive already."
Florida homeowners pay the third highest property insurance premium in the country, according to a November analysis by Bankrate. The average monthly premium was $486, more than twice the national average for a $300,000 home.
Florida Insurance Commissioner Michael Yaworsky said the property insurance market has "stabilized" and "consumers are finding relief." He made his comments last week at the Florida Chamber of Commerce Insurance Summit.
One proposal considered by lawmakers would increase exemptions for property taxes on primary residences carrying a certain kind property insurance.
Gov. DeSantis and supporters have focused on local government budgets in their effort to build support for reducing or eliminating most local property taxes. Opponents question how local governments would generate revenue in the absence of property taxes.
Berner said services paid by property taxes also help underpin property values.
"In order for property values to be boosted or even to remain the same, that's dependent on all of the things that make your local community great," he noted.
