Q&A – What’s Florida’s Biggest Issue Right Now?
Each day I feature a listener question sent by one of these methods.
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Today’s entry: Brian, you’re quite the cheerleader for Florida, which don’t get me wrong I appreciate, but we all know we have problems. I’d like to challenge you with discussing what you feel is the biggest problem our state faces right now and what you think should be done to address it. I’m curious to see what you’ll come up with.
Bottom Line: Challenge accepted. While my first thought moved in the direction of education, Florida’s steadily been making progress in education outcomes – most recently with a graduation rate of 90% from the 2020-2021 school year and with a new B.E.S.T. curriculum adopted by the state replacing Common Core, I feel we’ve made enough progress in the classroom, that another issue looms as a bigger concern. In fact, in US News & World Report’s most recent Best State Rankings, Florida’s 3rd best in education nationally. The issue which sticks out like a sore thumb to me and only continues to get worse...property taxes and insurance.
Affordable housing, or the lack thereof, is a common topic discussed by public officials and often addressed in local news reporting but what rarely is, are the carrying costs of homes in our state. I’ll throw a couple of numbers at you that are telling. Florida’s unemployment rate, at 5%, is below the national average of 5.2% yet Florida’s current foreclosure rate is currently 7th highest nationally. Those numbers don’t really compute and speak to a bigger issue. Foreclosure rates are almost always tied to employment rates. That holds true with the six states in front of us as Illinois, Nevada, New Jersey, Delaware, Ohio and California all have well above average unemployment rates. This also isn’t a case of what happened during the housing crisis of over a decade ago when people were placed in mortgages they couldn’t afford. Those types of mortgages aren’t legal and aren’t available anymore. So, what’s going on? A one-two punch of ever-increasing property taxes and property insurance along with the country’s largest population of retirees living on fixed income. And South Florida’s front and center in the conversation.
If you check Florida’s overall property tax burden it looks decent enough as we rank 24th in total tax burden. That’s because much of the state has exceedingly low tax burdens to accompany the overall other tax friendliness of our state. South Florida does not. Consider where South Florida’s counties rank nationally in property taxes:
This means Broward and Palm Beach County’s property taxes are more expensive than 95% of the country and Miami-Dade's are only outdone by 3.5% of counties across the country. There’s nothing tax friendly about South Florida. Our local governments have burdened us with property tax burdens that are nearly as punitive as any in the country. What’s more is the ever-increasing costs. This year alone the average increase in proposed property taxes is about 5% higher in Broward and Palm Beach County while Miami-Dade's increase averaged about 4%. Here’s the breakout of the average current property tax assessment in South Florida.
- Broward: $5,664
- Miami-Dade: $5,292
- Palm Beach County: $6,423
We’re talking about property taxes consuming about 10% of a household’s gross income. Yes, there’s homesteading which helps considerably for those who can use it, however 3% year over year on already big numbers is insignificant – especially for those on fixed income. What’s more is special assessments and voter referendums, such as additional taxes for teachers, schools, etc. can exceed the 3% annual threshold. Then you add in the ever-increasing property insurance costs.
Florida’s property insurance costs, already the highest in the nation, have risen 35% over the past five years. A rate that’s greater than three times the national average. And that’s before the additional hit Floridians are taking for flood insurance. Much of that can’t be helped. We live where we live, and the risk of storms and flooding is truly part of the cost of paradise. It is however, along with property taxes, creating a carrying cost burden that’s increasingly unsustainable. Add in the record high inflation of everyday life all around us and that’s a recipe for real challenges. Now you also asked me what I’d do about it.
Starting with insurance, hopefully the important work has been done. Floridians hold 7% of the property insurance policies in the country yet we’ve accounted for greater than 60% of the property insurance lawsuits in the country. It’s insane. We all end up paying much more than we should for scam artists that come in the form of homeowners, contractors and attorneys alike. The good news is the Assignment of Benefits Reform has been passed into law. It just hasn’t fully kicked in yet and will be phased in through 2023. That should help. While we wait to see how the reform works my best advice is to attempt to pay your home off and have the option to only carry as much or as little insurance as you’d like as opposed to carrying the coverage a mortgage company mandates. Regarding property taxes...
I’ll start by saying I don’t believe in them. If you’re forced to pay taxes for the property you own or the government takes away your property, do you really ever own it? Aside from that philosophical argument, I believe property tax increases should be tied to inflation as opposed to property assessed values. The cost of operating a city, a county, our schools doesn’t change based on property values. They change based on inflation. Prior to this year (and our property taxes are based on last year’s assessments), the total five-year inflation rate was 8.9%. During that same five-year period South Florida’s property taxes rates increased about 35%. And that's just the past five years. That should never happen, but it does. Now we do play a role in this. Our local governments could cut our mileage rates and return the excess funds to us, but they almost never do. I’d like to see reform passed tying property tax rates to inflation as opposed to the increase in property values. We should always error on the side of homeowners over government.