Real estate professionals question property tax referendum’s viability

Florida officials and real estate industry professionals expect a massive redistribution of public funding if voters approve a sweeping property tax cut for homesteaders in November. 

Local governments have for years enjoyed increasingly valuable ad valorem tax revenue to fund basic public services and amenities. Now they’re reconsidering where else that money could come from. 

“I think it’s just a shifting of money,” said Nelson Taylor, vice president of market research for LSI Companies in Fort Myers. “It’s robbing Peter to pay Paul.” 

At a Southwest Florida Real Estate Investors Society luncheon in Fort Myers on June 9, a panel of regional delegates offered more questions than answers about where those shifts might occur. 

State Sen. Jonathan Martin, whose district includes most of Lee County — including Fort Myers, Cape Coral, Estero, Sanibel, Captiva and Fort Myers Beach — summarized what lawmakers in Tallahassee see as the referendum’s two primary goals: making housing more affordable and encouraging local governments to spend more efficiently. 

The referendum would reduce property taxes for homesteaded residences, but it also would force governments to either cut spending or find new sources of revenue. Legislators and industry professionals say the broader effects on renters, tourists, shoppers — and even homeowners — remain unclear. 

Florida Gulf Coast University economics, finance and real estate professor Shelton Weeks attended the luncheon. Afterward, he questioned lawmakers' claims that the referendum could improve housing affordability or create greater fiscal efficiency, as well as the logic behind what he and others expect to be a widely popular amendment. 

In the same way rising insurance costs played a role in softening real estate prices in recent years, he argued a housing tax cut could push prices higher. 

“We’re told that it is to help with housing affordability, and it will help affordability for those folks who are already in place,” he said. “However, if you look at where this is likely to go, we should expect that the majority of the tax savings will be capitalized into real estate prices moving forward.” 

He added: “So, I would not expect this — nor would I classify this as a ‘lever,’ to use the term that we just heard used in there — to improve affordability. We’re just talking about shifting the cost to somebody else.” 

Gov. Ron DeSantis’ signature ballot measure, Save Our Homes from Excessive Property Taxes, was approved by the Legislature on June 2. Its core provision increases the cap on nonschool homestead taxes from $50,000 to $150,000 next year and $250,000 in 2028 and in perpetuity. 

It also directs state lawmakers to develop a schedule to eliminate property taxes in coming years through general legislation. 

“It’s not up to us,” State Rep. Tiffany Esposito, who represents parts of Lee County, including Lehigh Acres and portions of Fort Myers, said of the referendum. “We simply said you get to vote in November whether you want to get rid of property taxes or not. 

“And now the conversation this summer, to (Sen. Martin’s) point, is, what does that mean? What does it mean for Lee County? What does it mean for Charlotte County? What does that mean for Collier County? What does that mean for the state? And does that affect the services we provide? If so, how?” 

They were rhetorical questions. 

“I personally love that we have mosquito control and sidewalks and streetlights,” she continued. “I like that we have those things. I would like to keep those things. Great. How do we pay for that? If it’s not property taxes, then what does that look like in the delivery of those imperative services for our community?” 

Weeks outlined some potentially unintended consequences of what that could look like. 

The referendum includes a measure that could help protect out-of-state property owners and nonhomesteaders, such as renters, by capping annual assessments on rentals, second homes and commercial properties at 5% instead of 10% per year. 

Nevertheless, Weeks added: “We’re still likely to be shifting more and more burden to people who are essentially the visitors that drive the tourism segment of our economy. And that has long-term implications for us as a state.” 

The referendum also affects governments unequally, not according to which ones are relatively more affordable or fiscally well managed. Cities such as Cape Coral rely more heavily on homesteaded property taxes than Fort Myers, which has a more diverse tax base. 

Wealthier coastal counties are in a better position than some inland counties where revenue comes almost entirely from property taxes. 

Weeks is concerned that as state and local governments search for ways to make up shortfalls through measures, such as budget cuts, increasing sales taxes or raising flat fees or special assessments for services, it could create a more complex and inefficient system instead of improving fiscal management. 

“The idea of being able to enforce some fiscal discipline on any element of government sounds promising and worthy of investigation,” he said. “But I don’t think we’ve given this quite enough thought with respect to those second- and third-order outcomes. Those are the ones that are likely to bite us.” 

Real estate industry professionals also had mixed reactions to the referendum. 

“I’m going to like it,” said commercial real estate broker Randy Krise of the tax cut. “But I’m afraid of what happens on the backside.” 

He added, “There’s no free ride.” 

Cape Coral residential Realtor James Sommers, who spoke to Gulfshore Business the day before the luncheon, called the referendum a double-edged sword. 

“I think for owner-occupants, for homesteaded properties, it would make Florida more desirable,” he said. “Meanwhile, if it only increases the tax on investment properties, second homes and commercial properties, it may make Florida less desirable to those investors.” 

Sommers added: “Yes, I believe anytime you offer the public free anything, it’s going to pass. Is it a political thing, where it’s the illusion of being tax-free?” 

Real estate attorney and property tax consultant Mike Hagen spoke with Gulfshore Business on June 2 shortly after the Legislature approved the referendum. 

“I think it’s going to be a boon for local real estate,” he said. “It’s going to be a big draw. My take on it is that DeSantis wanted something going out that people will remember him for and if it passes, I think they will remember him. He was the guy who was really spearheading it. Overall, I see it as a positive. It will require governments to tighten their belts a little bit, which in my opinion is a good thing.” 

The Royal Palm Coast Realtor Association, Naples Area Board of Realtors, Punta Gorda Association of Realtors and the statewide group Florida Realtors either did not respond to a request for their position on the referendum or declined to take one. 

“We are currently reviewing the legislation and evaluating its potential impacts before determining whether the organization will take a position,” wrote NABOR’s Danielle Hudson, vice president of public policy. 

Florida Realtors President Chuck Bonfiglio replied by email that its members are reviewing the proposed ballot measure and its impacts. 

“We remain focused on advancing policies that expand housing opportunities, support the growth of Florida’s communities, strengthen the state’s economy, and promote the long-term success of Florida’s real estate industry,” he wrote.