Some local governments have floated the idea of eliminating property taxes to reduce the burden on homeowners.
Florida Gov. Ron DeSantis hinted on social media that he would support abolishing such taxes throughout the Sunshine State, but that it would require a constitutional amendment.
Joel Berner, senior economist at Realtor.com, said that it could benefit Florida’s market in the short term by helping to resolve the buildup of inventory.
Easing the burden of property taxes could alleviate some of the strain on homeowners who have been grappling with high housing costs, including skyrocketing insurance rates, and encourage more people to move, according to Berner.
Berner said that now there are a higher number of unsold homes and homes taking longer to sell compared with years past due to affordability concerns. People who were locked into low mortgage rates for several years are finally looking to move, but the demand isn’t where it was compared with a few years ago when the state had a hot housing market.
SEVERAL STATES SEEK END TO PROPERTY TAXES: SHOULDN’T HAVE TO ‘RENT FROM THE GOVERNMENT’
“Getting rid of property taxes would essentially increase everybody’s home budget a little bit and allow people to buy a first home or buy a move-up home, or buy their dream home that maybe they couldn’t afford before because it’s a property tax,” Berner said.
However, this would effectively raise buyers’ budgets and cause a bit of a demand surge, driving prices up in the short term, he said.
This move could also negatively impact communities in the long run.
“If locally-levied property taxes are replaced with an increased state-level sales tax, there will be less local control for cities and school districts to raise their own tax revenue in a way that meets their specific needs,” Berner said.
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He said different municipalities have different requirements, and “a blanket tax revenue at the state level would be less specialized than property taxes for those requirements.”
Chen Zhao, economic research lead at real estate brokerage Redfin, said there would be “knock-on effects of eliminating property taxes.”
For example, Zhao said buyers could “perceive that local services, such as schools, would suffer as a result,” which “would also dampen the benefits of eliminating property taxes.”
Zhao and Berner said it is also still unclear how the state would raise revenue in replacement of property taxes.
If the state offsets it by raising sales taxes, for instance, that “might also be off-putting to potential migrants to Florida,” Zhao said.
Still, the issue of high insurance costs remains.
“If the cost of insurance due to intensifying climate risks is high enough to offset the property tax savings, buyers may still hesitate to buy in Florida,” Zhao said.
But Florida isn’t the only state considering plans to abolish property taxes. Fiscally conservative leaders in several states are looking to do so, with one Pennsylvania lawmaker arguing that homeowners shouldn’t have to “pay rent” to the government.
“Property taxes are an issue that is not exactly partisan, because in some areas, it’s more of a big deal than in others,” Rep. Russ Diamond, R-Lebanon said, citing varying relationships between taxes and school district funding.
“For me, the ‘big deal’ is that I want people to own their homes and not have to rent from the government, all across Pennsylvania,” he said.
FOX Business’ Charles Creitz contributed to this report.
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