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Property taxes create hardship, hurt home sales in Broward

Author johnbsims3
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#1 | Posted: 15 Feb 2007 07:35 
Property taxes create hardship, hurt home sales in Broward

By Paul Owers
South Florida Sun-Sentinel
Posted February 15 2007

Faced with a steep rent increase, Lori Mays was thrilled to find a quaint condominium for sale in Margate with three bedrooms and a picturesque water view.

But then she did the math and learned her annual property taxes would be about $5,000, a deal breaker for the Coconut Creek widow and mother of three.

South Florida's housing market has slowed substantially in the past year, and consumers, real estate agents and analysts say property taxes are a major reason. As home values soared in the past five years, so have taxes, which get reassessed every time a property sells.

Mays and others are stuck renting. Homeowners also say they're trapped, unable to buy larger or smaller places because their tax bills would double or triple. More people are giving up altogether and bolting Florida for cheaper locales.

Thousands of angry residents have spoken out at public forums in Broward and Palm Beach counties this week. There wasn't enough momentum to change the tax system in the 2006 legislative session, but widespread outrage will make it a top priority for lawmakers when they convene in Tallahassee next month.

"The impact that this is having on the middle class in our community is really dramatic," said Sen. Ted Deutch, D-Boca Raton, who moderated the forums in Broward and Palm Beach counties on Monday.

"It's really unfair," said Mays, 48, an accountant/bookkeeper. "You can find decently priced homes, but the taxes still put it out of the ballpark."

Jeff Levine, a real estate agent for Illustrated Properties in Palm Beach County, uses his house as an example of the dilemma facing homeowners.

On a property he bought 12 years ago for $180,000, he pays annual taxes of about $3,700. The Save Our Homes amendment to the state Constitution prevents taxes from rising more than 3 percent a year on homesteaded properties. Homeowners, however, lose that protection when they move.

So if Levine were to sell and buy a $500,000 home, his tax bill would climb to $10,000. A rule of thumb is that property taxes amount to 2 percent of the sales price.

He'd be facing higher taxes even by downsizing. A $300,000 property, for example, would mean taxes of about $6,000, a 62 percent increase over what he pays now.

Last spring, Palm Beach County Property Appraiser Gary Nikolits said the local housing market would be "brought to its knees" if the property tax system doesn't change.

Some would say that prediction came true. Housing markets across the nation turned soft in 2006, but few places were as affected as South Florida.

More than 8,300 existing homes changed hands in Broward last year, a 26 percent drop from the 11,331 that sold in 2005, according to the Florida Association of Realtors. Condo sales plummeted 32 percent, to 8,996 from 13,253.

Rising insurance premiums and interest rates and the exodus of short-term investors certainly have played large roles in the market downturn, but the property tax quagmire is at least equally to blame, experts say.

Beverly Rothstein, an agent for Exit Team Realty in northwest Broward, said her clients are stunned when they crunch numbers.

"It's like they were hit with a bucket of cold water," Rothstein said. "Many of these people just decide to upgrade their existing homes instead. It's like a big lid on the upward mobility of people or those who just want to downsize."

Some proposals for change would allow homeowners to take their Save Our Homes tax benefits with them when they move.

Under one plan, a resident whose home has a taxable value of $200,000 but who sells it for $400,000 would get to apply the difference of $200,000 to the next home. If the new home costs $600,000, the resident would pay taxes as if the property were assessed at $400,000.

Deutch said making the Save Our Homes protection "portable" is a good idea. But it needs to be part of a broader solution, such as an overall cap on tax increases, he said.

Realtor associations in Broward and Palm Beach counties are suggesting tax revenue caps for local governments. Other possible solutions: doubling the homestead exemption to $50,000 and expanding the Save Our Homes amendment to businesses, residential landlords and part-time residents who can't claim homestead exemptions.

"Everything is on the table," Deutch said. "I can't tell you at this point what we will find agreement on. But it's my belief, and I hope that this is the sense of the other legislators, that what we do needs to be comprehensive."

While property tax changes wouldn't suddenly make the real estate market hot again, they would make it easier to buy and sell.

Three years ago, Al Vazquez, of West Palm Beach, bought an historic fixer-upper next door to his. When his first house lost the homestead exemption, his taxes ballooned to $3,500 from $650.

Vazquez, a 43-year-old geographer, and others are encouraged by lawmakers taking steps last month to reduce spiraling costs of homeowner insurance. They're cautiously optimistic that legislators also will see the importance of fixing the property tax mess.

"It's finally gotten to the breaking point," Vazquez said.

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Property taxes create hardship, hurt home sales in Broward
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