Florida Amendment 3 would increase the state’s homestead exemption to $250,000 at the cost of more than $8.7 billion in FY 2029 and $11.8 billion per year by FY 2032, but it would not guarantee Floridians a net tax reduction. If the amendment passed, local governments would have three options: (1) reducing spending, (2) raising property tax rates on all property that remains in the base, and (3) raising other taxes and fees.
Many jurisdictions are likely to rely on a mix of all three options, but to the extent localities respond by raising property tax rates, they will shift the tax burden onto other taxpayers, including renters. I calculate the effects of these shifts in a new paper released today.
If local tax authorities adopt revenue-neutral rate increases (limited by rate caps) to offset the new homestead exemptions, I estimate that once the higher exemption is fully in effect in tax year 2028, total property tax burdens would rise 14.1% on residential rental properties (a 22.6% increase in non-school property tax liability). Taxes would increase by $406 on the average Florida apartment unit (+14.8%), $1,081 on rental homes, and $1,196 on owner-occupied properties that do not qualify for a homestead exemption. For a typical 200-unit apartment community, this translates into approximately $81,000 in additional property taxes each year.
By tax year 2031, fully backfilling Amendment 3 losses would raise taxes on rental property by 14.9%, translating to an additional $544 for the average apartment unit, with the burden on single-family rental homes rising to $1,471. The increased burden on a 200-unit apartment community would be about $109,000. Although renters do not pay property taxes directly, they bear the majority of this burden through higher rents.
The paper breaks out these tax shifts by property category (rental apartments, single-family rental homes, non-homestead owner-occupied residential, and other non-homestead residential) and by rental price, with estimates by county and by select municipalities. It also examines the broader implications for housing affordability and availability.
Florida is not alone in pursuing a high homestead exemption (Texas recently implemented a $140,000 exemption, for instance), though Amendment 3’s $250,000 exemption is anomalously high. It is, moreover, worth far more than $250,000 for many properties, due to Florida’s “Save Our Homes” assessment limit. A typical Florida home that has been owned since 1994 (the assessment limit’s base year) could have a market value of approximately $640,000 by 2028, while only having $250,000 in assessed value and thus owing no non-school property taxes.
This paper is about Florida, but its findings are relevant for other states considering large homestead exemptions or other policies that exempt more property from the tax base. Any resulting tax shifts do not just raise costs for renters (many of whom are young or lower-income), but also reduce returns on rental properties, discouraging future investment and reducing future housing stock.
Obligatory Marketing Note
My consultancy provides tax policy research, writing, and other services, both project-specific and on retainer (or in visiting fellow-style roles). If you are in the market for tax policy research or know someone who is, please let me know.
Please Share this Substack
If you find this Substack valuable, please do me a favor and share it with colleagues and others who may be interested. And if you haven’t yet subscribed (it’s free), please consider doing so!