Tax cut impact on housing unclear
Amendment 1 may not be a cure-all for housing's ills, but it has potential to help.
By JAMES THORNER, Times Staff Writer
Published January 31, 2008
John Mulkey wants to live near his job in Tampa but can't sell his house in Orlando.
So for seven months he's commuted 1-1/2 hours to his job at Tampa insurance broker Marsh U.S.A. as buyers nibble but never bite at his Orlando property.
Tuesday's passage of Amendment 1 could be his way out of the housing hole.
It's not just the $240 in tax cuts promised the average home-owner. More important, as part of the tax-relief package's portability clause, Mulkey plans to carry $150,000 in accumulated tax benefits from his Orlando house to his future Tampa house. It would trim his yearly tax bill by a couple of thousand dollars.
"This is all good news to me. I'm very pleased," Mulkey said Wednesday after 64 percent of Florida voters ensured approval of the constitutional amendment. "Passage of this amendment may help to stimulate people within Florida to start moving, all those people who have been holding out."
On the latter point, opinion is decidedly mixed.
For all the hoopla surrounding tax relief -- St. Petersburg Realtor Nancy Riley compared it to the joy of giving birth -- few view Amendment 1 as a magic elixir for a housing market sickened by plunging sales and prices.
Typical of industry opinion was Jim Knetsch, owner of Tampa's RE/MAX Realty Associates. For people locked in to their homes for fear of losing breaks from Save Our Homes, the yearly 3 percent property assessment cap, tax reform could spur them to action.
"It's not perfect, but it's a start," Knetsch said. "Is it going to be a dramatic enough boost to see the benefits through the static of the negative market we're in? The question's still out on that."
Florida economists said the tax cuts will have to work within a fickle real estate market that got an extra boost Wednesday with the Federal Reserve's half-point interest rate cut.
David Denslow, research economist at the University of Florida, predicted a "little kick-up" from tax reform. Based on the experience of Proposition 13, California's own experiment with tax reform, portability modestly improved housing sales. But California limited the benefit to people ages 55 or older. Florida imposes no such age restrictions.
"If they had a $300,000 house that declined in price to $250,000, this may kick it up to $260,000," Denslow said of the potential Florida impact.
Denslow, with a team of other economists, wrote a study last year that addressed the issue of "lock-in" -- people forced to stay in existing homes because of the tax advantages.
The phenomenon seems real. The study said a Pinellas County home with $100,000 in accrued tax-assessment savings was 8.4 percent less likely to sell. In Hillsborough County, such a home was 6.3 percent less likely to sell.
Florida State University economist David MacPherson, an Amendment 1 critic, said the people most likely to benefit from property tax portability -- those with long tenure in their homes -- are least likely to sell.
"It's not going to revitalize the housing market, if that's what people think," said MacPherson, another of the co-authors with Denslow of the 2007 study. "We've got way too much supply out there. It's going to take a while to work through the system."
Such negativity doesn't suit Pat Ivers, broker-manager of Realty Executives in St. Petersburg. For Floridians buying a primary residence, the cuts are immediately applicable to the 2008 tax year. Ivers doesn't expect portability to work its magic until spring.
"Homes generally take 30 to 45 days to sell. It would be a month or two before we see it," Ivers said.
Opponents of Amendment 1 vow to challenge the measure in court, arguing it discriminates against out-of-staters moving to Florida, who can't use portability.
Denslow predicts that a multi-tiered tax system that punishes new Floridians might improve housing in the long run. It will accelerate Florida's transformation from a state for blue-collar retirees to a state for wealthier retirees, Denslow said. Poorer retirees will go to places like Alabama and Tennessee.
"With the baby boomer retiree wave will come the sorting process," he said. "It's part of the structural transformation of Florida into a more affluent state."
James Thorner can be reached at email@example.com or (813) 226-3313. Read his (Un)Real Estate blog on the area housing market at blogs.tampabay.com/real estate.
[Last modified January 31, 2008, 01:15:14]
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