Nutty November

Nutty November – Amendment 3

I wrote about Amendment 3 earlier in the year and a bit about planning for it last week. Then this week the news crews came a-ringing and I was interviewed by WPTV and WPBF. So, here we go again. I’ll go back to my recent trip to Chicago and a cab drive to the haunted Congress hotel at 2am to help explain.

The cabbie said he had an extra room for us. If me and my daughter didn’t mind staying with his father in the room next door, he would rent it out to us for the night. Having a glass half full optimistic view on life, you’d think I’d jump at his generosity. However, the half empty part and visions of being a story in some future Netflix killer cabbie documentary storyline made me decline having the gent’s dad as a roomie. He then told us that his dad was the one who arranged for his marriage with his first cousin in West Africa. I still can’t decide which part of the conversation was odder. However, maybe it’s me who is unusual? Different cultures have distinct customs. The taxi driver was married for a long time with fine kids. Who is to say the arranged courtship with the kissing cousin is not right?

Everyone has their own quirks on how they go about things. Buying a house as a snowbird one could say falls under the same category as the quirky cabdriver. You’d think snowbirds (before they first became snowbirds) would sit down in New Jersey and plan out a purchase. They would then come down before it got cold. Close on their home in October and November. Enjoy the entirety of season. But it doesn’t work that way. See, one spouse lays a trap. One 59-year successfully married couple I know had an unusual proposal that I didn’t know about until recently. The ring wasn’t coming soon enough to one parties liking. One day the lady asked about it. The man, frustrated, took a ring out of his pocket and threw it at her in the car. Whatever the romantic plans were, I still don’t know. Mom got the ring and my parents have lived happily ever after since.

In real estate the purchase kind of happens the same way. A couple is down here renting or enjoying their starter home. A friend of theirs buys another bigger home. One spouse looks at that other spouse and starts the plotting. The poor partner isn’t even aware that the dance to buy a home starts. That’s more of a February and March thing with going to open houses and bringing the unwitting spouse over.

November is the slowest month for closings and typically a slow month for pendings with all the holidays. But Amendment 3 has thrown a monkey in the wrench.

If Amendment 3 passes all of that will change. While the buyers who go to open houses in season and buy spur of the moment won’t occur, the rush to for buyers to purchase before December 31 will cause many to have that conversation now.

* Renters/buyers who are on the fence. The tax savings is a big sway in savings for being a homeowner. Renters will get more of the burden if other costs go up.

* New buyers – The 5-year waiting period for the additional $200k in savings is a drag. They will have to purchase and get in by the end of the year. Not so easy to get accomplished as Thanksgiving and other winter holidays cause mortgage and title and other vendor delays.

* Sellers – If a rush occurs, there will be a short-term window of demand. Sellers must be on the market to take advantage of it. Sellers looking to maximize a best price scenario have the advantage of lower inventory right now. If the tariffs stay intact along with the war going on, inventory will go up year over year each month because rates are high. It is a sellers advantage to have it on the market now.

As far as positives and negatives for Amendment 3, this is what I wrote in July….

As of today, Florida law gives a Florida resident $50,000 in homestead exemption. It’s actually the first $25,000 going to all property taxes. The second $25,000 applies to non-school taxes on assessed values between $50,000 and $75,000. Part of that homestead exemption also means that your property taxes can never exceed a 3% increase in a given year.

Non-homesteaded people on the other hand can have rates go up 10% a year. The new amendment would lower that to 5% a year for non-homesteaded, investment properties and commercial properties. For someone like myself, our property taxes can be five to six times less than someone who bought the same type of comparable property next door. This is because we’ve owned it 23 years. Even with portability savings, it makes most people think twice about moving because of the increase in property taxes.

The proposed bill would dramatically increase that benefit:

January 1, 2027: The exemption would increase to $150,000 for the non-school portion of property taxes.
January 1, 2028: It would increase again to $250,000, with future inflation adjustments.
Inflationary adjusted increases from the $250,000 base. The inflationary increases in my opinion are long overdue.

All of this sounds great. More money in our pockets. Who wouldn’t vote for that? What could go wrong?!?

Here is the flip side of things to think about.

1. New Resident Wait

If the amendment passes, someone who becomes a Florida resident after January 1, 2027 would:

Receive only the current $50,000 Homestead Exemption for their first five years in Florida.
Not receive the expanded $150,000/$250,000 exemption until they have been a Florida resident for five years.

While we as Realtors will pitch that for the first five years nothing has really changed, the wait for five years for people who have retired is a turnoff. For people retiring who are older, this might put other states who offer homestead immediately in a better and more competitive state. It also makes it difficult for young people who move from Florida for work and then come back. Think kids out of college who take a job or get transferred out of school. If they want to move back, they really need the extra savings from this bill the most. Now they get penalized for starting their career somewhere else and are disincentivized when moving back. My 22-year-old daughter who was born here and would like to get experience outside of Florida falls in this category for example.

2. Shortfalls & Services

The bill was passed quickly without major studies. We already don’t have income taxes. Will the drop of property taxes mean services are cut? What about unexpected things that can happen? Does a lifeguard get cut from the beach for example? Any shortage means retail taxes go up which disproportionately will affect the lower and middle classes. I volunteer for Big Brothers Big Sisters. The budget is already tight. If it gets squeezed even more that puts kids at risk and there are breaking bad effects not everyone thinks about. Some cities say they will have shortfalls. Especially smaller less affluent ones.

3. Rentals

Housing prices will have a short-term jump. That cost of carry will get passed on to renters. Some renters will need to purchase to stay in the area. With limited supply, it will make it non cost effective to rent for many. The loss of workers in the immediate area is a real concern.

4. First Time Homebuyers

This is a toughie. If you are in a rental without savings, it’s a Catch-22. Without more money to buy and possible increased costs coming your way to pay for services, a higher burden could be put on younger people.

5. Savings Overstatement

School taxes are still included in your property tax bill, so the advertised $150,000/$250,000 exemption does not translate into savings of that same amount. The actual tax savings are significantly lower. Critics have argued that this presentation is misleading, alongside broader legal challenges claiming the amendment is unconstitutional or unlawful.

Summary of Estimated Savings

For a $500,000 homesteaded property under average Florida millage rates, the estimated savings are:

2027 Estimated Savings: Approximately $1,000 per year.
2028 Estimated Savings: Approximately $2,000 per year.
Remaining Taxable Base: Your non-school taxable value would drop to $250,000, while school district taxes would continue to be calculated using the property’s taxable value after the standard school exemptions.

My Exemption Check is a useful calculator for estimating your potential savings.

My take is simple: whenever you can reduce your costs, it’s generally a positive. Lower property taxes benefit homeowners. However, what concerns me is that I haven’t yet seen comprehensive independent studies examining the potential short- and long-term impacts. I’d like a clearer understanding of where funding shortfalls could occur and what services, if any, might be affected. Hopefully those studies are completed before voters head to the polls.

As a Realtor, I also think demand to purchase homes could increase significantly if this amendment passes. Buyers who have been on the fence about establishing Florida residency will need to make decisions sooner rather than later. The same applies to renters considering whether they can get onto the property ownership ladder. Planning for this now instead of last minute will be paramount. Remember, it’s not just about purchasing a home before the deadline—you also need to apply for and establish Florida homestead residency. It’s a lot to do so start that conversation now as prices could jump considerably by the fall with mad rushes to close on time and get domicille established.