Many of the writers and callers that contact us have a common theme, “Homestead Exemption”, or more accurately, the lack of homestead exemption. When it was originally conceived homestead exemptions were to encourage the settlement of Florida by providing a small protection from local property taxes for full time residents. As property values in Florida began to rise rapidly in the 70’s many old time residents found themselves being taxed out of their homes by ad valorum assessments. This was particularly true for older residents living on waterfront properties.

This situation led to new laws being passed that attempted to force local government to lower millage rates to compensate for rising assessments. Laws like the Truth In Millage, or “TRIM” bill, were passed. These laws forced government to advertise what the difference between taxes collected under new assessments were compared to what taxes would have been with no assessment increase. This proved to be difficult to implement and did little to slow the hunger of government for its people’s money.

With little tax relief in sight, the people of Florida reacted by proposing and adopting a State Constitutional Amendment to slow their assessments. This measure was commonly known as the “Save our Homes” Amendment. This new law did the trick. It froze assessments on “Homesteaded “ homes and limited the rise to a maximum of 3.5% per year. This protection remains with the property until it is sold, at which time the assessment is updated to the home’s current value and the cycle begins again.

As with most new laws, there were unintended consequences. One consequence has been the creation of wide differences in taxes being paid by similar, sometimes identical, properties. The other more serious consequence is that it has left businesses and investment properties unprotected from the lust of tax dollars by government. Politicians quickly realized that most non-“Homesteaders” were not voters and business owners were able to pass along higher taxes to their customers. Also, rental property owners passed along these increases, further reducing the number of affordable housing units available.

We believe there are other serious consequences of the “Save our Homes” Act. The most apparent is voter apathy toward large increases in budgets funded by ad valorum taxes. Years ago voting residents anxious about their future taxes usually packed local budget hearings. Recent hearings have played to empty rooms. Essentially, homesteaded property assessments have allowed huge budget increases to be passed with little comment from the voting public.

Another is the affect on the real estate market as the difference between the taxes paid by “Homesteaders” and non-protected properties widens. Many residents now find themselves locked into their homes by the fear of huge tax increases. Some residents wishing to downsize their homes have found that they would be paying much higher taxes on much smaller homes should they step out from behind the “Homestead” shield on their present property. This phenomenon has affected the normal evolution of housing and contributed to the drastic rises in home costs. A normal progression was for residents to raise their families in a larger home and then move on to a smaller one. This allowed the larger homes to be available for the next generation. Now, many older citizens are financially trapped in homes too big for them.

Again the public is looking for protection from its government. This time proposals are being floated that allow residents to carry their “Homestead” shields to new homes. Part time residents are seeking the same protections as their full time neighbors. Business owners are seeking the protections afforded homeowners. Those demanding affordable housing are looking for exemptions on rental properties.

Although reforms are needed, we see another wave of unintended consequences following the adoption of additional protections. We see budgets still out of control of the voting citizens and being driven by special interest groups. Mainly, we see the need for fiscal constraint. Once again we urge local leaders to see the consequences and adopt roll back ad valorum rates. Only by reducing the cost and improving the efficiency of local government can a rational and fair ad valorum tax system be achieved.

Please join us for our Annual Dinner meeting, Wednesday, March 22 at 6:00 PM at the Lost Lake Golf Club in Hobe Sound. County Administrator, Duncan Ballantyne, will serve as the keynote speaker. Reservations are required. Please call the office or visit our website for more information.