Many fla. Owners owe no property taxes as home prices fall

One of the inevitable side-effects of the sharp decline in property values over the past few years is that property tax bases have been significantly eroded. We’ve discussed this phenomenon several times in the past, but it appears that the chickens are coming home to roost.

An article from the Florida Sun Sentinel last week says that a growing number of homeowners in South Florida are not paying property taxes at all. More than 36,000 homeowners in Broward and Palm Beach Counties are paying no property taxes because the value of their homes dipped below the $25,000 homestead exemption. This represents a 135 percent increase from 2008 to 2010 in Broward County, and a 48 percent increase in Palm Beach County during the same time frame. From the article:

In 2008, as a way to give homeowners some tax relief, lawmakers approved increasing homestead exemptions from $25,000 to $50,000 on the non-school portion of the tax bill. It allows the first $25,000 of value to come off the top of a tax bill, but homes must be worth more than $75,000 for the $50,000 exemption to apply. “The legislature felt it necessary to increase the homestead exemption. I don’t think they anticipated the unintended consequence in a down housing market,” said Scott Maxwell, a city commissioner in Lake Worth.

This problem is by no means localized to Florida. With home values down more than 30 percent on average since the housing market peaked, large numbers of homeowners are appealing their property tax assessments. In the United States, property taxes are usually assessed at the county or town level. The revenues are used to fund vital services such as education, police, fire, and emergency services. As property tax revenues fall, other taxes must be raised or services must be cut. Generally speaking, politicians are not in a rush to do either of these things.

Source: TotalMortgage.com