Q&A – Migration Trends if Florida Eliminates Property Taxes
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Today’s entry: Hey Brian, great analysis on the property tax issue. How many more people do you think would want to move to Florida and then consequently other states that adopt the same, policy of removing those property taxes. If we were to do that, I think that would be huge.
Bottom Line: You’ve posed an excellent question that leads to several important points related to the what ifs, if Florida were to eliminate homesteaded property taxes this year. I believe the impact would be felt in multiple ways, but ultimately, the biggest migration related impact, at least initially, I don’t believe would be with a massive influx of new residents (above and beyond what would already happen anyway) to the property tax issue, but rather with a massive move by many of Florida’s part-time residents to establish full-time residency.
Florida’s homestead protections, as they currently exist, do provide a significant incentive for part-time residents who could choose to become full-time residents to do so. With that said, there’s a massive difference in consideration in facing a 3% cap on annual property tax increases with homestead protections compared to the 10% cap among non-homesteaded properties vs. not having to pay property taxes at all.
Florida has the highest number of second, or vacation homes, in the country with an estimated 850,000 properties that are used by seasonal non-fulltime residents (in other words aren’t used as rentals) with approximately 1.45 million people (typically snowbirds) who use those properties seasonally. The average time spent in Florida by those part-time residents is 3.5 months per year. There’s no data on how many of those part timers would become full-timers, however, it’s likely that a meaningful double-digit percentage would (for drill I ran various prompts through AI tools and commonly came back with estimates ranging from between 30% to 45%).
In other words, without a single property transaction taking place we could likely see an increase in Florida’s population of between 435,000 to 653,000 people very quickly. This dynamic, the potential for wealthy homeowners to avoid property taxes by homesteading in Florida, has been used as a common argument in opposition to eliminating property taxes (suggesting that the tax burden would be shifted from the wealthy to everyone else). However, that argument is devoid of comprehensive economy understanding and economic realities.
In a related analysis conducted last November, I illustrated that the economic benefit provided by seasonal residents staying longer, far exceeds the revenue benefit of property taxes collected. Without getting into the nitty gritty details once again, the average snowbird has a greater local economic impact through spending habits, in two months than the average full-time resident does in one year. The benefit of having the additional spending taking place locally over a longer period of time would have the effect of producing more tax revenue to the state and local governments than is collected currently through their property taxes.
The second biggest migration impact near term would come in the form of less out-bound migration. Currently there are many new retirees or even some existing retirees who are leaving the state due to the rising cost of living (some of which are the result of being taxed out of their homes). The elimination of property taxes would change the calculous for these individuals, creating an additional incentive to stay and likely leading to fewer current Florida residents leaving for cheaper places. This would lead to less inventory on the market and would contribute to higher property values, and it’s for that reason that I do think you would see an uptick of some sort in net inbound migration – but that it would likely only be the third biggest migration impact.
If Florida eliminates homesteaded property taxes, those who benefit most are those who either already are homesteaded property owners and those who already own property that could become homesteaded. Those who would seek to relocate here after the policy impact would see less inventory available, and higher prices they’d have to pay for homes impacting the affordability dynamic for many.