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Sky-high property taxes having dramatic impact on middle class in Palm Beach County

Author johnbsims3
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#1 | Posted: 15 Feb 2007 07:39 
Sky-high property taxes having dramatic impact on middle class in Palm Beach County

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

Almost three years ago, Al Vazquez bought a historic fixer-upper next door to him in the Parker Ridge neighborhood of West Palm Beach. He transferred his homestead exemption to the new house, then watched in disbelief as the property taxes on the first home ballooned to $3,500 from $650.

Carrying two mortgages, Vazquez recently tried to unload the tiny home off Forest Hill Boulevard to a friend for about $200,000, or about 20 percent below market value. "It would have been a steal," Vazquez said, "but his property taxes would have doubled."


South Florida's housing market has slowed substantially in the past year, and consumers, real estate agents and analysts say the 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.

Many residents say they're trapped, unable to buy larger or smaller homes because their tax bills would double or triple. Some decide to upgrade their existing homes instead.

Other people are stuck renting or are giving up altogether and bolting Florida for cheaper locales.

Thousands of angry homeowners spoke out at public forums in Palm Beach and Broward counties this week. Changing the tax system lacked momentum during the 2006 legislative session, but widespread outrage will make it a top priority for state 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 Palm Beach and Broward counties on Monday.

"It's just so patently unfair," said Vazquez, a 43-year-old geographer.

Jeff Levine, a real estate agent for Illustrated Properties in Wellington, uses his house as an example of the dilemma facing many 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 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's paying now.

Last spring, Palm Beach County Property Appraiser Gary Nikolits told a roomful of real estate agents in Palm Beach Gardens that the local housing market would be "brought to its knees" if state lawmakers don't do something about property taxes.

Some 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 8,600 existing homes changed hands in Palm Beach County last year, compared with 13,679 the year before, according to the Florida Association of Realtors. The 37 percent slide was the second-worst in the state behind Naples. Condominium sales also were down, but not by as much.

Rising insurance premiums 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.

Some proposals for change would allow homeowners to take their Save Our Homes 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 could 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 Palm Beach and Broward 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 now claim a homestead exemption.

"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."

Agents and homeowners are encouraged by state lawmakers taking steps last month to reduce spiraling costs of homeowner insurance.

After almost three years of frustration, Vazquez said he can't wait for the day his home sells. "We just want to get rid of it and go on vacation."

Paul Owers can be reached at powers@sun-sentinel.com or 561-243-6529.

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Sky-high property taxes having dramatic impact on middle class in Palm Beach County
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