According to Florida Realtors®, the Florida state lawmakers are finally addressing concerns regarding affordable housing, the state’s water policy, commercial rent taxes, and fees for estoppel certificates. All of these issues are set to impact the state’s residential and commercial construction industries.
The first issues regards the tangle caused by Amendment 1, a measure requiring 33% of documentary stamp taxes collected on real estate transactions to go to land and water conservation efforts in Florida. Currently, 20% of the doc stamp taxes go to conservation efforts, and the 13% increase is expected to bring in over $757 million in additional funds for 2015. The passage of Amendment 1 raised concerns that funding for transportation and affordable housing initiatives in the state would face cuts in order to fully fund the measure, but this isn’t necessarily the case.
Florida Realtors President Andres Barbar is very clear in his advocacy of Amendment 1, saying, “A vote for Amendment 1 last November was not a vote against housing … Affordable housing and the conservation of water and land resources are equally crucial goals for our citizens.” Of Floridians’ affordable housing concerns, Barbar goes on to say that, “fully funding the Sadowski Affordable Housing Trust Funds would mean that many of our state’s neediest residents – those who are homeless, low-income families and veterans – would benefit from $267 million going into home buying and rental assistance programs … Not only does a strong housing policy help strengthen and revitalize our communities, housing also creates jobs and helps to drive Florida’s economy forward.”
The revenues needed for Amendment 1 do not need to come from the Sadowski Trust, because the General Fund and the current $1 billion government surplus can be diverted to cover the funding for the measure. Florida’s commercial builders will need to keep an eye on this funding issue to determine how it will affect their bidding on affordable housing projects.
In keeping with the demand for water conservation, the State of Florida is initiating a comprehensive new water policy. Senate Bill 918 and House Bill 7003 address the need to balance water resource restoration and conservation while protecting private property rights. Lobbyists are asking lawmakers to consider using money from the Land Acquisition Trust Fund to maintain state-owned water resources and lands, supporting comprehensive, science-based, anti-pollution programs to keep springs, lakes, and other water clean, expand the use of alternative water supplies, and provide new water storage regulations on agricultural lands. The water rights of property holders may affect lot prices and valuation. Builders may need to factor alternative water acquisition and storage into building infrastructure as a supplement to public water or private wells.
Florida is the only state that taxes commercial rents. Currently, there is a 6% tax on rent and expenses (landscaping, insurance, and property tax) paid by commercial tenants, and local governments might charge a discretionary sales surtax on top of that. New legislation will lower the tax from 6% to 5%, beginning in 2015.
According to Florida Realtors’ vice president of public policy Carrie O’Rourke, a tax decrease will “make Florida more competitive and business-friendly … Since Florida is the only state in the nation that charges this additional tax, it is very anti-competitive and puts our businesses at an economic disadvantage.” O’Rourke goes on to state that “adding sales tax to rent can be the difference in whether a small business can stay in business … We’ve heard from many business owners who say they could expand, hire more workers or raise salaries if this tax were to be eliminated or phased out.” Lowering the tax on commercial rent will also make commercial real estate development that much more profitable for investors and builders.
As master-planned communities and mixed-use condominium projects begin to gather traction in Florida’s construction industry, estoppel certificate fees have become quite an issue. Florida law currently demands that homeowners of properties governed by a condominium or homeowners’ association must provide an estoppel certificate, or statement of financial status, with the association before their home can be refinanced or sold. The law allows community associations to charge reasonable fees for the preparation of an estoppel certificate, but this bureaucratic task has morphed into a miniature revenue stream for many associations, who routinely charge $500 or more to prepare one.
New legislation will cap the fees at $100 for owners who are current in their assessments, with an additional $50 fee to expedite or update the estoppel certificate. The $50 fee will also apply to owners who are delinquent in paying their assessments. Although this alternative mini-stream of revenue will decrease, it is doubtless that estoppel certificate reform will streamline the sale of properties in master-planned communities and condominiums.