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Experts Say Tax Change To Boost Home Sales

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By MICHAEL SASSO and SHANNON BEHNKEN, The Tampa Tribune

Published: January 31, 2008

TAMPA - Florida's new property tax amendment should give a boost to the state's housing market and economy, but won't spark a major turnaround, economists and real estate professors said Wednesday.

One of the economists, Chris Lafakis of Moody's Economy.com, said the new portability provision - which lets homeowners take their Save Our Homes tax benefit with them when they move - should encourage some people to build new homes or move into existing ones. But there still are too many homes on the market in Florida, and the state still has an affordability problem, even with falling home prices.

"This will provide some stimulus for Florida's economy, but it won't be the end all, be all," Lafakis said. "But it certainly doesn't hurt."

A day after Florida voters overwhelmingly approved Amendment 1, with 64 percent of the vote, economists, professors, real estate agents and builders assessed the effect. Making the Save Our Homes tax benefit portable may be the most significant part of the new law, but it also essentially doubles the homestead exemption and gives businesses a tax break on $25,000 of tangible personal property, such as equipment.

The amendment also prevents assessments on non-homesteaded property from rising more than 10 percent a year.
Real Estate Agents Expect Relief
Real estate agents overwhelmingly supported the new law and may be the most optimistic. Frank Gregoire, an agent and appraiser in Pinellas County, said he expects the amendment to apply a big boost to the housing market, which will rev up the state's economy.

"The real estate market is the fuel that runs the Florida economy and we were plain running out of gas," said Gregoire, who is seeking election as Pinellas County property appraiser.
Gregoire said he expects to see the relief soon. Real estate agents have said that many people have held off on moving because, until now, they feared their property taxes would balloon because they would lose their Save Our Homes benefit if they moved. That reluctance to move sometimes is called the homeowner "lock-in" effect.

"A huge amount of folks have been holding off on moving because they didn't know if there would be changes in taxes or if there would be portability," Gregoire said. "And first-time homebuyers will benefit from the double homestead, so more of them may be willing to buy now."

However, some professors and economists interviewed Wednesday say the amendment's benefit will be small overall, and that it may have some negative aspects.David Denslow, an economist at the University of Florida, said some people may be encouraged to move now that they can transfer their property tax savings under Save Our Homes. But, in a down real estate market, many of them may fear that they won't be able to sell their homes.

Which feeling will win out? Denslow asked.

"Now you know you can take it tax savings with you, but you remain insecure about whether you can sell your house," he said.

One theory holds that owners of large homes will benefit more from the new portability provision than owners of small homes.

Dean Gatzlaff, chair of Florida State University's real estate department, said people with the biggest houses have benefited the most from Save Our Homes. That's because the value of large homes skyrocketed more than smaller homes during the real estate run earlier this decade. Save Our Homes sheltered much of that value from property taxes.

Businesses, Renters Could Be Hurt

Now that people can take their tax benefit with them, the owners of those big houses would see the most benefit from portability and would be most inclined to move. People with small homes, who likely have a small tax benefit from Save Our Homes, have less of an incentive, Gatzlaff said.

Both Gatzlaff and Denslow said businesses and renters eventually could be hurt by the amendment. It's unlikely that governments will raise tax rates right away, but ultimately they may have to do so to make up for revenue shortfalls caused by the amendment. Because the amendment reduces the tax base of homeowners, businesses may have to make up the difference. Owners of rental properties might pass those higher taxes on to their tenants, both men said.

"It's a shift of the tax burden onto business," Denslow said.

Lafakis said he expects a strong spring selling season in the housing market, in part because of the amendment. But he said that could be offset some by problems in the mortgage industry. Adjustable-rate mortgages continue to reset and many are scheduled to adjust in the spring.

Florida is already among the states with the highest foreclosure rate, and Lafakis said the numbers of delinquencies and foreclosures are expected to rise in the spring.

Reporter Michael Sasso can be reached at (813) 259-7865 or msasso@tampatrib.com. Shannon Behnken can be reached at (813) 259-7804 or sbehnken

@tampatrib.com.

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