Axing Florida Property Taxes Reduces Housing Affordability

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Making Florida primary residences property tax free

When I was taking a macroeconomics class during my sophomore year of college, I will always remember the last question on the final as a gimme:

What are the key rules of macroeconomics?

a) There’s no such thing as a free lunch.

b) Those that have, gets.

c) Look out or they’ll do it to you.

d) All of the above.

I’ve been reading a lot about Florida’s Governor DeSantis kicking around the idea of eliminating property taxes for primary residences. Since 2019, Florida’s population has grown by roughly 3 to 3.5 million people, or about 18 percent to 23.5 million in 2025. As a result, Florida property tax bills have risen sharply over the past five years, as much as 60 percent. Rapid population growth typically requires more schools, roads, utilities, public safety and other services, placing pressure on local budgets, even though many jurisdictions have kept tax rates relatively flat. Florida’s average effective property tax rate is typically cited at about three-quarters of a percent of home value, putting it somewhat below national estimates.

However, the real estate industry is showing some limited enthusiasm for this DeSantis proposal. Let’s explore why.

What is a Florida homestead exemption?

A homestead exemption is a legal tax break that reduces the taxable value of your primary residence, so you pay property tax on a smaller amount than the home’s full assessed value.

In Florida today, the homestead exemption knocks roughly $50,000 off a home’s taxable value, whereas DeSantis’ proposal would eventually exempt the first $250,000, wiping out all property tax for millions of lower‑ and mid‑priced homesteads. He has said he wants to gradually raise the exemption to $500,000. Florida’s Department of Revenue estimates that the current $50,000 exemption typically saves a homeowner about $500–$700 per year.

The DeSantis property tax elimination plan

Practically, his plan calls for the first $250,000 of a homesteaded home’s value to be exempt from local property taxes; homes at or below that value would owe zero local property tax, and more expensive homes would be taxed only on value above $250,000. According to DeSantis, this proposal would eliminate property taxes for 60 percent of Floridians. Interestingly, Florida tax policy is starting to look a lot like NYC’s, with its recently passed pied-à-terre tax that also targets non-resident property owners.

“If some billionaire from Brazil is buying, tax them, good, that’s fine with me,” DeSantis said. “I’m looking out for the Floridians here.”

My broader takeaway on his proposal is that it pulls fiscal power up to Tallahassee and delivers a large, highly targeted benefit to older, long‑tenured, Republican‑leaning homeowners who are central to the DeSantis base.

The amendment strips local governments of a significant portion of their most controllable revenue source (homestead property tax) and then says they may use only the remaining property‑tax dollars for “core services” like public safety, schools, infrastructure, bonds and pensions.
The largest tax savings flow to existing homesteaded owners, especially those in modest‑ to mid‑priced homes who have been in place long enough to benefit from Save Our Homes caps, who are probably very reliable voting residents. The proposal explicitly denies the enhanced exemption to people who move to Florida, forcing them to wait 5 years, which favors existing residents.

How the sausage is made

When a property changes ownership, state law requires the state property appraiser to reset the assessed value to equal just value (market value) as of January 1 following the sale. From that point forward, the Save Our Homes cap kicks in: the assessed value can increase by no more than 3 percent or the CPI change (for 2025 it was 2.9 percent, for 2026 it is 2.7 percent), whichever is lower. Those who follow the price trend growth of the Florida housing market know that prices have been growing far faster than 3 percent coming out of the pandemic era annually. The annual price growth rate of many markets I have reported on is generally well above 3 percent. The caps on assessed value growth, especially for homes that don’t turnover, create a growing gap between market value (just value) and assessed value. Oddly, the incentive created by the increased homestead exemption will likely reduce the turnover of homes, something already responsible for fast-rising home prices.

Housing market ramifications

The elimination of property taxes for many homeowners is being interpreted differently depending on their role in the housing economy, because it will just move taxation to other categories. There have been many discussions about the proposed trust fund, which will be used to fill various local budget gaps. Where will that monthly come from? A higher sales tax? A new creative tax of some kind? As I mentioned above, there’s no such thing as a free lunch.

Buyer‑side agents who live in the sub‑500k world are leaning into the story that a $250,000 (or higher) homestead exemption makes ownership more attainable, because escrow drops and marketing the “Florida tax advantage” gets easier. However, the undercurrent in this market segment is a growing concern: agents who work with first‑timers are starting to ask out loud whether the price appreciation from tax elimination will cancel out the savings for buyers entering at today’s prices.
Luxury real estate brokers are well aware of Realtor.com’s estimate that property tax elimination could push statewide values up by 7–9 percent, which feeds the narrative that Florida is increasingly out of reach for local professional‑class buyers, a politically sensitive issue that can affect long‑term demand composition in their markets. Florida has been aggressively working to make the state a better place to do business, but reducing affordability for business professionals to buy homes would probably not be considered a win for the governor. I contend that the NewYork-ification of the Florida housing market has already eliminated the higher affordability demand driver, and this exemption probably makes it worse. The out-bound migration to Florida from the Northeast has already normalized. The state is also contending with other factors contributing to the drop in affordability, including sharp increases in HOA and insurance costs.
Landlords and investors do not get the headline benefit of an expanded homestead exemption, since the plan’s target is owner-occupied residences. However, I contend that the expected higher housing costs resulting from this proposal will place additional upward pressure on rental values as more consumers are priced out of the sales market.
City mayors and commissioners in Florida are openly skeptical, warning of a dire impact on local budgets if the expanded homestead thresholds are enacted. Property taxes often fund public schools, police and fire departments. How will they pay for those services with the dramatic loss in tax revenue? The quality-of-life aspect of these reduced service levels could slow companies moving to the state. The below-average quality of state public education and the limited availability and high cost of private schools are already major restraints on future state population growth for inbound businesses. Florida public schools received about $15,100 per student in 2022–23, roughly $4,700 less than the national average, putting the state near the bottom nationally on per‑pupil funding. The Florida Education Association says that 8th‑grade reading ranks about 44th and 8th‑grade math about 41st among states, with no real progress in reading since the late 1990s. Oof.

Final thoughts

Florida’s plan to eliminate property taxes on many primary homes doesn’t magically make the expenses they cover disappear. Other revenue sources will cover the gap created by new taxes, and the state will gain more control over local budgets. This last point is likely the reason for this proposal since it will reduce housing affordability by raising home prices, at least in the near term. Long-time homesteaded owners, especially older residents protected by Save Our Homes caps, benefit the most, while new buyers face a waiting period, higher prices and fewer homes for sale. Home values and rents are likely to go up as the tax break is baked into prices, even as schools and public safety, already funded below the national norm, have to plead with Tallahassee for funding.

Florida seems to be shifting its tax base away from what people own (especially homesteaded housing) and toward what people buy (consumption), which makes revenues swing more in recessions and deepens the divide between existing, protected homeowners and newer buyers who face greater risk and costs.

Once again, addressing housing affordability is being skipped over.

The actual final thought — When the sun is out in Florida.

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