Under the measure, Amendment 3, a homeowner’s tax break known as a homestead exemption would go from the current US$51,400 to $150,000 in 2027 and increase again to $250,000 in 2028. By shielding more of a home’s assessed value from taxation, this exemption effectively lowers homeowners’ tax bills. New Florida residents who buy a home would also reportedly be eligible for a property tax break, but on a more phased-in basis.

But the measure comes with a hefty price tag. The Florida Legislature’s research arm estimated the measure would reduce annual revenue from property taxes by $11.8 billion. This translates to a 30% reduction in revenue for Florida counties and a 13% cut for smaller municipal governments.

While homeowners will get some relief, the budget crunch due to the lower tax revenue will affect other Floridians in more adverse ways. As economists who have been following the debates over Amendment 3, we argue that local governments will struggle to fund basic services with less money. And we expect more sweeping economic consequences as well – including less affordable residential housing and a broader shift of the tax burden away from relatively wealthier homeowners to those who are less well off.

How Amendment 3 would work

Much of the political momentum for Amendment 3 came from a rise in the cost of living and frustration over rising property taxes. These now average just over $3,000 annually but can run much higher for Floridians with more expensive homes.

In addition to raising the homestead tax exemption, Amendment 3 lowers the cap on annual assessments on rental and commercial properties from a 10% increase to a 5% increase. Since property taxes are based on an asset’s assessed value, this language effectively limits but doesn’t rule out tax hikes for businesses.

So landlords, for example, could still see meaningful annual tax increases as their properties go up in value – costs that would likely be passed on to renters.

Amendment 3 makes clear that school-related property taxes are exempt from these tax cuts. It also lists some theoretical limits on how local governments should use tax dollars, as a way to ensure continued funding for essential services such as public safety, infrastructure or obligations for employee retirement benefits.

But it also states that funds may be used for “expenditures approved” by local and county governments – ambiguous wording that suggests these stipulations can be breached.

Who pays the bill?

Florida property taxes are levied and collected by some 640 local government entities. There’s no state income tax, so any reductions in property tax revenue directly affect local and county governments.

With tax revenue slashed, businesses, landlords and owners of other non-homestead properties like second homes would almost certainly see their taxes go up. This is a typical pattern: When governments cut property taxes for some groups, taxes shift to other groups.

This dynamic is likely to play out with local governments as they try to keep revenue stable: Amendment 3 would force them to hike taxes in other areas to make up for the shortfall. This could include increases in state and local sales taxes, an expansion of the list of goods subject to sales taxes, or a hike in “documentary stamp taxes,” which are required on documents such as deeds, bonds and mortgages.

State and local governments could also impose higher fees for specific services, such as solid waste treatment and stormwater utilities. Another option is to hike permits and inspection fees, fuel taxes or other service charges such as vehicle registration fees.

Finally, local governments could raise tourism-related taxes, such as on food, beverages and hotels. But this recourse wouldn’t help counties with limited tourism, and such revenues fluctuate in any event.

In the end, though, essential services would still almost certainly be affected. Funding for police, fire and emergency medical services is primarily the responsibility of local governments, and, for most counties, they make up the largest line item in their annual expenditures. Reducing property taxes would amount to a direct hit, especially in smaller, less-populated counties.

And if local governments do raise sales tax rates to the extent they can, lower-income Floridians will bear a disproportionate burden as they spend much more of their income on consumption. They’re also far more likely to rent than own a home, so any increased rents would take a bigger toll.

A looming affordable housing crunch?

Less noticed in the debate over Amendment 3 was how it would affect the state’s affordable housing shortage. We argue that the structure of the property tax cut will likely create more incentives for counties and developers to build commercial structures instead of more residential housing.

When developers build residential homes, they require a basic level of public services to support residents and the local infrastructure. In fact, property taxes in much of Florida effectively subsidize residential home development: For every dollar that a homeowner pays in property taxes, it costs county governments around $1.20 to provide those services. This gap will only grow when property tax revenues fall.

From the standpoint of local and county governments, then, it may make more sense to focus on commercial or industrial construction as a way to keep tax revenues stable. But with fewer homes built at the expense of business construction – from manufacturing to data centers – the supply squeeze will only drive up prices and rents for the workers who are needed for those jobs.

Now that Amendment 3 is on the books, Florida’s county and local governments will confront major trade-offs. We believe that state officials will come to realize how much of a change has been made – and how quickly their priorities may have to shift.

This article has been corrected to note that the current homestead exemption is $51,400 and that new Florida residents who buy a home are eligible for a property tax break on a phased-in basis.

Portions of this article appeared in a prior article published on July 30, 2026.

Abigail Hall, Professor of Economics, University of Tampa and Aaron D. Wood, Associate Professor of Economics, University of Tampa

This article is republished from The Conversation under a Creative Commons license. Read the original article.