Priced Out Of Paradise

By SHANNON BEHNKEN The Tampa Tribune

Published: Mar 22, 2007

Chris and Barbara Loulousis bought their two-bedroom Clearwater Beach vacation condo 28 years ago for $76,900. Their yearly property tax, they say, was just more than $1,200. Now it tops $8,200.

Without homestead exemption, which shields permanent residents from high tax increases, their taxes are likely to rise further. The Chicago-area couple are second-home owners who say they no longer can afford to keep their seasonal getaway.

"It's not fair to stick it to us just because we don't have homestead," said Chris Loulousis, 73. "Some people who live here full time pay $1,400 a year for the same unit we have."

A recent two-part plan by the Florida House Republican leadership promised the Loulousises relief. One part would cut every homeowner's taxes by an average of 20 percent. The second part, a constitutional amendment on the statewide ballot, would eliminate property taxes, but only for those who claim their home as their primary residence and have a homestead exemption.

For some homeowners, the amendment could mean saving thousands of dollars each year. But owners of second homes - rental property owners, vacation-home owners and snowbirds such as the Loulousises - would continue paying.

If property values go up, as some economists predict will happen under this proposal, second-home owners would pay higher taxes, experts say, drastically altering Florida's historically strong second-home market. It also could become a drag on the rest of the residential real estate market, as competing states such as Tennessee, Georgia and North and South Carolina lure second-home owners with cheaper taxes and home prices.

"Some people will just get out of town," said Elliot Eisenberg, housing policy economist at the National Association of Home Builders. "Florida is nice, but every place has something nice. Other states will probably see this change as a marketing tool."

Lawrence Yun, an economist with the National Association of Realtors, foresees a more drastic scenario.

"Florida is at the top of the second-home market," he said. "But if this passes, that part of the market will never be the same."

Not The Deal It Used To Be

It's unclear how many of Florida's homeowners have second homes because no one collects those specific data. Anecdotally, real estate industry officials say the state is one of the top second-home markets in the nation. Information from local property appraisers offers some perspective. In Pinellas County, 26 percent of single-family homes have no homestead exemption, about the same as in Hillsborough County, where 25 percent have no exemption. In each county, that translates to more than 80,000 homes.

Homestead exemption prevents the taxes on people's primary residences from increasing more than 3 percent a year. It also reduces the taxable value by $25,000. Without the exemption, people such as the Loulousises who own second homes are finding it more difficult to afford the Florida lifestyle because their homes are taxed at higher and higher values.

Historically, people looking to purchase weekend or seasonal getaway homes were lured to Florida by sunshine, beaches and relatively low home prices. But sales prices, taxes and homeowners insurance have gone up, and some people are deciding Florida is no longer the deal it used to be, Yun said.

Chuck Houseman, a real estate agent near Myrtle Beach, S.C., said his state's second-home market is growing. The state has beaches like Florida, and the tax issue could persuade some second-home buyers to give South Carolina a second look.

"People in Ohio and Pennsylvania have a shorter drive to come here than to Florida," Houseman said.

Florida's hot weather and unpredictable hurricane season are helping states such as Tennessee attract more second-home residents, said Ramay Winchester, director of Retire Tennessee, a pilot program of the state's Department of Economic and Community Development.

The property tax issue could help Tennessee lure even more residents, Winchester said, and "a lot of people from Florida have been calling with questions about retiring in Tennessee."

Florida's amendment hasn't made it to the ballot yet, and Barry and Becky Skeens, who own a second home in St. Pete Beach, are looking into relocating.

The Skeens bought their 1,200-square-foot condo three years ago, thinking they were staking a claim on a future retirement home before Florida's home prices rose out of their reach.

Their property taxes have gone from $3,500 to $5,000. The Skeens, who live in St. Louis, plan to retire to Florida and claim homestead in about seven years, but they worry taxes will be too high by then.

"The taxes are absolutely a factor, and we've already started looking at homes in other states," Becky Skeens said. "We're considering Texas."

It's not just the property tax payments that turn her off, Skeens said. It's an issue of fairness. "Here I am paying more property taxes than full-time residents, but I don't get the benefits since I'm not always there."

'What A Dumb Policy'

Eisenberg, the economist from the National Association of Home Builders, said home prices in Florida would probably rise shortly after the amendment passed because homebuyers who would save on property taxes could afford to pay more for houses.

"The price increase would absorb the savings," Eisenberg said. "The only people better off by this law would be people who already have homes and plan to stay put, or people who plan to sell and move to another state where prices are cheaper."

Eisenberg points to Washington, D.C., as an example. In the early 1990s, the government offered a $5,000 break on federal taxes for buyers who purchased in the district.

At first, buyers thought it was a great incentive, "but all that happened was sellers tacked on $5,000 more to the cost of the house."

"What a dumb policy, and your policy is very similar," Eisenberg said.

Florida homeowners give the amendment mixed reviews.

Richard Cope, who lives on Clearwater Beach and used to own a real estate company, said he is partly excited about the possibility of ditching his $31,000-a-year tax bill.

The Pinellas County Property Appraiser's Office values Cope's home at $4 million. Without homestead exemption, Cope's property taxes would be nearly $90,000, according to property appraiser records. Cope said his neighbor pays close to that amount in taxes on his home.

"The two houses are identical," Cope said. "It's not right to have one set of people paying one set of taxes and another set paying more."

Kevin and Dorris Barry, who live in the same Clearwater condominium building as Chris and Barbra Loulousis, paid $6,180 in taxes in 2006, more than $2,000 less than the Loulousises paid.

The Barrys bought their unit in 2004 and have homestead exemption. They think their property taxes are too high but are thankful they locked in when they did.

The prospect of shedding the tax completely brings on a nervous chuckle for Kevin Barry: "I'd have extra cash."

Even so, he said, he feels bad for others in his building, such as the Loulousises, who wouldn't get the relief.

"It almost sounds ridiculous."

Reporter Shannon Behnken can be reached at (813) 259-7804 or sbehnken@tampatrib.com.