Is local government incentivized by increased housing costs?

Our last reader-submitted question in our series about the current housing crisis in Central Florida is about property taxes and how they incentivize local government. 

It comes from Kelsey K. who asked: “Does the city/county have a perverse incentive to allow housing costs to go up? Local governments receive the majority of their funding from property taxes so it stands to reason that they benefit from home values increasing, but it’s these same increases that result in costly rent.

This question came up at our recent town hall on affordable housing. Tere, both Terry Prather, COO of Lift Orlando, and Mark Brewer, CEO of Central Florida Foundation (our sponsor for this series), said Kelsey’s thought would seem to make sense on paper, but increasing property taxes isn’t part of a master plan by a city or county to make more money — instead the increases are usually the result of needs that have to be met in a growing community.

Mark said that the city and county have little control over the market price of housing. Rather, demand drives housing costs. “No matter how much you pay for rent, you also want better schools, libraries, roads, and infrastructure. The more people move to Central Florida (current statistics say 1,500 people move here per week), the more pressure there is on raising property taxes.”

So at its most basic level, this is a story of supply and demand — lots of people want to live here, and there aren’t enough homes to go around. This drives up the cost of rent which in turn drives property taxes.

“When there are fewer people to rent expensive apartments, rents come down. The same goes for homeownership,” said Mark.

However, Kelsey is right that local governments receive most of their funding through property taxes (and sales tax), and that’s because the state of Florida doesn’t have an income tax (hence why a lot of people want to move here). 

By the numbers. In Florida, property taxes rank somewhere in the middle in the country and in Orlando, they rank just above the national average. But that’s also because property values in Orlando are higher than the national average.

Earlier this year, market value in Orange County reached a historic high of $206.1 billion.

The median property tax in Orange County is $2,152 per year. The state average is $1,791.

How are our property taxes calculated? Again looking at Orange County, property taxes here are assessed through a millage rate that is based on the appraised value of the property meaning properties worth more will have a higher property tax bill than properties that are deemed by the Property Appraiser Office to have a lower value.

At the core, this is a policy issue that voters can address with their elected officials.

Here’s a link to find the contact information of your local elected officials.

Have questions or thoughts on your own about our housing crisis in Central Florida? Tell us here

Made possible by Central Florida Foundation