More paying zero taxes
Article Courtesy of The Tampa Tribune
By Shannon Behnken
Published May 23, 2011
TAMPA -- Florida's turbulent housing market has had an unintended consequence: Thousands of homeowners don't pay a dollar in property tax.
No, this isn't a real estate scam. Blame higher homestead exemptions and falling home prices that essentially removed houses from the tax rolls.
"It's a basic fundamental in American society and tax policy that everybody should pay something," said Warren Weathers, chief deputy for the Hillsborough County property appraiser's office. "Some of these (exemptions) were created for people who barely have anything, and that's not bad. But there are people … that have the ability to pay that don't pay some of their fair share."
It couldn't have come at a worse time for budget-conscious municipalities. The exemptions cost the county millions in property tax revenue, and that's on top of millions lost because of falling values. Hillsborough County saw property taxes owed go from $1.9 billion in 2008 to $1.7 billion in 2009 to $1.5 billion in 2010.
For many of those with tax bills of zero, their properties are valued less by county property appraisers than their qualified homestead exemption, usually $25,000. For properties worth more, a $50,000 exemption brings the tax bill down to almost nothing.
In Hillsborough, more than 7,000 homeowners didn't pay property taxes last year, according to data from the property appraiser's office. That's up from 4,920 in 2008.
An additional 5,700 pay some tax, such as to the school board, but they don't contribute anything toward the county's general fund. And that's where the money comes from to pay public services such as roads, sewer service and libraries. That number is up from 1,238 in 2007.
The homes range from modest to middle-class to extravagant. Most owners who don't owe property taxes live in poor neighborhoods where home values have plummeted.
For example, a shotgun-style home at 2809 N. 10th St., in the Ybor City area north of Interstate 4, is valued at $23,569 by the county property appraiser. The owner has a $25,000 homestead exemption. Taxable value: zero.
Sybil Faulker, 86, has owned the 10th Street home for 50 years and has never paid property taxes. Faulker, who lives on Social Security, said the lower tax bill is critical for the poor, especially in a deep recession.
"It's a huge help, and I live in a 91-year-old home," Faulker said. "When people have a brand-new home worth $200,000 to $300,000, that's different. They have the income to pay."
Even the housing boom wasn't enough to push up the value of Faulker's home enough to cause her to owe property taxes, county records show. But for many, rising values caused property taxes to increase beyond what they could afford. Exemptions were provided to help alleviate the burden, but now that values have plummeted, the exemptions allow more people to pay little or no tax.
During the housing boom, the homestead exemption was raised from $25,000 to $50,000. The Legislature mandated that the second $25,000 could not bring the taxable value to zero. Instead, the property would have to be worth more than $75,000 to get the full $50,000 exemption.
Still, the extra savings is big for some.
Consider a home at 2810 N. 10th St., which sold in 2004 for $145,000. It's now valued at $67,287 by the property appraiser. The owner has a homestead exemption of $42,287, bringing the taxable value to $25,000.
Few homes in this neighborhood sold, even during the housing boom. Many of the owners are elderly and have stayed put. So these homes weren't affected by investors who flooded other neighborhoods, artificially driving up prices during the housing bubble.
Hillsborough has always had low-valued homes, especially in the inner city and some rural areas, Weathers said. But other changes to real estate, such as apartment-to-condominium conversions and toxic drywall made in China, have sent taxable values plummeting.
Consider this condo conversion at the Towers at Carrollwood Village. One condo unit sold for $90,000 in 2005 and is now valued at $19,657. The homestead exemption is $17,250, bringing the taxable value to zero.
The rest of the 114 condos in the complex have a similar tax situation, said Chris Weiss of the Hillsborough County property appraiser's office.
A condominium complex in New Tampa is in the same boat. The Villas Condominiums has 282 units, Weiss said, and was also saturated with investor-owners. Both complexes have been hit hard by foreclosures, he said.
A condo at the New Tampa development sold for $106,900 in 2005 and is now worth just $16,230. The homestead exemption brings the taxable value to nothing.
Toxic drywall costs the county about $1 million in property taxes, Weathers said.
"That's because Florida gives owners of houses with the tainted drywall a break on their taxes. As long as the drywall is in the house, it isn't worth anything, say state legislators who passed the bill.
"No one wants to buy a home with this drywall problem," Weathers said.
The owners of a million-dollar home on Davis Islands saw their tax bill go from $20,192 in 2009 to $6,310. The home's toxic drywall has made it worthless, according to the county property appraiser. The taxes due for the property are on land only.
Judy Redmiller, a homeowner in South Tampa, says she pays hefty taxes now but didn't when she lived in Ybor City because her home was valued lower. She says she supports some tax breaks for people who need it, but paying nothing is unreasonable.
"I think everyone should pay some amount because the money goes to schools, streets, services that benefit us all," Redmiller said.
Private property appraiser David Teacher said he understands people wanting their neighbors to pay their fair share but, he said, there is an upside. Falling home prices and no — or low — property tax is a big incentive for investors to buy.
"There have been some people that say, 'Oh, that doesn't sound fair.' But I have to say the good thing about this is all the cash purchases and investors who are coming and helping us stabilize this market."
Teacher said he has seen homes in East Tampa selling for as low as $7,000. Sure, he said, they need work, but most still could be good deals.
"What better investment," he said. "Look at the return on your money. Some homes are selling for less than the cost of a car."