Florida voters approve property tax Amendment 3

Florida voters approved Amendment 3 with 62% of the vote on Tuesday, clearing the 60% threshold needed to amend the state constitution, according to Commercial Observer. The measure halves the annual cap on increases to the assessed value of commercial property and second homes, and it puts the largest breaks on primary residences.

The homestead exemption, which reduces a primary home's taxable assessed value, triples to $150,000 next year and rises to $250,000 the following year, with later increases tied to inflation.

Underwriters who book the amendment's lower assessments without raising their millage assumption will overstate net operating income on a Florida asset. The counties and cities that lose assessed value can raise the rate they apply to what remains, and a model that holds millage flat misses that.

Florida has no state income tax, so most county and city governments rely heavily on property taxes. The Florida Legislature's analysis puts the revenue local governments would lose at $4.6 billion in 2027, $8.4 billion in 2028 and nearly $12 billion in 2032.

Multifamily tax bills could climb nearly 15%, or about $406 per unit, according to a study by Jared Walczak, a senior fellow at the Washington-based Tax Foundation and president of Walczak Policy Consulting.

Some counties and municipalities are expected to raise millage rates, the basis for calculating property taxes, along with fees including permit fees, which could erode the savings the amendment advertises. Because homeowners receive the largest breaks, local governments may also become more reliant on commercial properties for revenue, and landlords could raise rents to pass the higher cost to tenants.

In October, the Tax Foundation said Amendment 3 would cut the local property tax base, as Private Wealth Daily previously reported.

Residency timing decides who qualifies. Property owners must be Florida residents before the end of the year to get the cuts; transplants who arrive afterward wait five years.

The same ballot brought losses for South Florida commercial real estate. Miami Beach voters rejected, by a nearly 63% margin, Robert Rivani's proposal to extend the ground lease on the six-story building at 1691 Michigan Avenue by 20 years and add 47,000 square feet. Rivani retains control of the office asset, where Playboy and H.wood Group have signed leases.

How much of that $4.6 billion reaches a commercial owner's operating statement depends on the millage rates counties and cities set for 2027.

The $406 figure is an average, and a property's own bill will move with the millage rate its county adopts and the assessment it carries into next year.

For an owner weighing a Florida acquisition now, the underwriting question is narrower than the politics: which millage rate is in the model, and whether the seller's trailing tax line reflects the pre-amendment assessment or the new one.