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SPECIAL REPORT: Your neighbor's tax bill

When a tax break becomes an anchor

The rise in property values has a downside for many who didn't settle in their dream homes. They're stuck.

By AARON SHAROCKMAN and MICHAEL VAN SICKLER
Published March 26, 2006

SEMINOLE - Adriana and Todd Topel could cover a larger mortgage payment for a newer home in Tarpon Springs. The tax bill was another story.

To move from a three-bedroom, 1,500-square-foot home in Seminole to another in Tarpon Springs, the Topels would have to pay $3,300 more a year in property taxes.

"It's leaving us in Seminole," said Adriana Topel, a 32-year-old librarian and mother of one. "We can afford the asking price. We just can't pay the taxes."

Michael Cheer, another homeowner, decided to make the move.

But now his tax bill is 10 times as high. His next-door neighbor, meanwhile, has a nicer home and pays $1,000 a year less in property taxes.

It's "just because I moved," said a frustrated Cheer, who is 45 and works as a mapper for the Pinellas County property appraiser. "I'm still a resident here in the county. It is not the fairest thing. It's almost like a price you have to pay to move."

In a paradox that is the talk of cocktail parties, family dinners and legislative hearings, many Florida homeowners are discovering that the surge in real estate values has trapped them in their homes. They're finding that they can't afford to give up the tremendous tax savings they accumulated by living in the same home for years.

It's an unintended consequence of the Save Our Homes amendment, which limits the increase on the taxable value of a home to no more than 3 percent a year.

While home values in Florida have tripled in 10 years, the tax cap has shielded homeowners from much of the tax burden.

The result, according to an analysis by the St. Petersburg Times , is that more homestead value in Tampa Bay is off the tax rolls than is on them.

In 2005, the average Pinellas County homeowner paid taxes on only 47.3 percent of the value. In Pasco County, homeowners paid even less - 45.3 percent of their assessed property value.

Yet those savings are of little solace for homeowners like the Topels, who want to buy a home now. That's because when homeowners move, they lose the Save Our Homes cap.

What was a tax break becomes a tax burden.

Legislators have heard from enough people who feel they can't move because of the tax hit they would take that they're considering a dramatic expansion of Save Our Homes.

"You can hear the shock and dismay when we tell them what their taxes will be without their homestead and cap," said Erin Moore, a top deputy in the Pinellas County Property Appraiser's Office.

The home Sheila and Bijan Mohseni bought in New Tampa in 2001 was not their dream choice.

It was on a corner lot Sheila wasn't crazy about. It didn't have a pool or a playroom for their two daughters. But the couple took it because they assumed that they eventually would move to something bigger.

Five years later, they're still there. They've scoured several neighborhoods. They even bought an acre in Lutz to build a new home.

But moving to a pricier home would mean a fivefold tax increase.

"It's either stay in this house and not get the one we would prefer," Sheila Mohseni said, "or it's pay that high tax and cut a lot of other things. It's not much of a choice."

The Mohsenis are staying.

Someone like Sheila Mohseni, "definitely takes it on the chin," when it comes to buying a new home, said Pasco County Property Appraiser Mike Wells.

Eventually, they will "be the old guy on the block," Wells said. The burden will turn around and become a savings. If they move, the Mohsenis and the Topels could one day become the envy of the neighborhood, tax-wise.

Many, however, can't look ahead to "eventually." They can't afford to move, and instead they stay put.

Rhonda and Larry Nuzum bought a home in a Tampa neighborhood 13 years ago when it cost $60,000.

"These homes all around us were dumpy," Rhonda Nuzum said.

But in recent years, the neighborhood's prospects perked up, partly because of robust real estate in nearby Hyde Park. Now, the Nuzums estimate their 1923 bungalow is worth more than $300,000.

Folding those gains into a new home, however, is unthinkable, Rhonda said.

"Our plan was always to move," she said. "But that's all changed. There's no incentive. The taxes will go through the roof."

Despite the anecdotal evidence, experts aren't sure how the Save Our Homes cap is altering the real estate market, which in Hillsborough, for instance, relies on 40 percent of sellers to move to another home in the county.

Marvin Rose, a Tampa Bay area housing analyst, estimates that about 10 percent of homeowners delay moving because they will lose the benefit of Save Our Homes.

But other more important factors in any decision to move, he said, are price, location and quality of schools.

A Florida Association of Realtors study found that Save Our Homes cap creates what amounts to a "mobility tax," which encourages people to stay longer in their homes. How long is unclear.

The group wants state lawmakers to pass a measure allowing people to bring the tax cap savings with them to new homes.

Without such a measure, homeowners who move will feel the pinch.

Rudy Fernandez, a financial adviser who served on the Tampa City Council from 1991 to 1999, pays $16,000 a year in taxes on his Davis Islands home. If he were to buy at the same price his home is valued at now, his taxes would jump to $40,000.

"Property taxes are definitely a deterrent," to moving, he said.

Forced to stay in ill-fitting homes, many residents are spending money to remodel or expand.

In St. Petersburg, there were 91 home-addition permit requests in 2000. Last year, there were 5,796.

Hillsborough County remodeling permits nearly doubled last year and are on a pace to set a record this year. In Tampa, permits for remodeling and additions rose 23 percent in 2005.

"It's huge," said Hal Hrasna, a contractor whose entire business is remodeling. "People don't want to move because of the taxes. So they improve the home they're in."

Maybe one day Rhonda and Larry Nuzum will find that Hyde Park home they always wanted.

For now, though, they'll fix the back yard. Maybe put in a mother-in-law apartment. And enjoy the great tax break they're getting, which has them paying taxes on just 25 percent of their home's value.

"Why go and invest in another house and spend more money?" Rhonda Nuzum said. "We're better off here."

Mike Hughes, a South and Central Tampa Realtor, says the cap doesn't help older homeowners move into smaller, more suitable, homes.

One Culbreath Isles couple lived in their home for about 30 years. They were thrilled to see its value climb to $1.35-million. With the children gone, they were ready to cash out and move to a smaller home. They liked a smaller $800,000 condo along ritzy Bayshore Boulevard that would have been easier to maintain.

But Hughes said they realized their taxes would nearly triple. So last year they packed up and moved - to Alabama.

Staff writer Matthew Waite contributed to this report.

[Last modified March 26, 2006, 00:25:14]