Real estate investors and out-of-state homebuyers will pay a special tax under the state senator’s plan designed to address the higher rents pricing renters outside of Orange County.
Senator Randolph Prause, who is running for US Congress, revealed a proposal Tuesday that he intends to present at the upcoming Orange County commission meeting on August 9.
“I would like to impose special taxes on these companies and individuals in order to discourage them from buying, selling and renting real estate,” Prause said. “I think we should keep it in the community, and let’s make it accessible to everyone.”
The Prause plan calls for it Approval of more high-density apartment buildings, converting vacant commercial properties into residences and providing grants and tax breaks to affordable housing developers.
Prause said the tax will be levied at the closing for out-of-state investors and individual buyers who do not own Florida real estate.
He said the amount of the tax had not been determined, but the revenue could be used to build affordable housing and provide assistance to tenants.
Rental prices in Orlando have exploded, forcing renters to move out of the city to find less expensive housing. The average rental demand in Orlando is $1,819, $150 more than it was in January, according to CoStar Group, which tracks rental rates.
Real estate investors have been snapping up more real estate as housing demand surges, buying nearly half of the properties sold last year in the predominantly black zip code of 32805, according to an investigation in the Orlando Sentinel.
Brassey said out-of-state investors were exacerbating the region’s affordable housing crisis.
“I’ve had people who said they were going to move from Orlando…because they couldn’t live,” Brassey said. We have companies out of town that buy and raise real estate [rent] to where it can not be tolerated. I think we have to look into that.”
Discouraging out-of-state investors will reduce home rents, said David Howard, executive director of the National Home Rental Council.
“The county should instead focus on policies and incentives designed to increase the supply of all types of owner-occupied and rental housing,” said Howard, whose group represents homeowners large and small renters.
Taxing out-of-state investors and buyers differently from in-state ones could lead to litigation because of the equal protections and trade clauses of the US Constitution, said Bob Jarvis, a professor of law at Nova Southeastern University.
Jarvis said he believes that Prause’s special tax will likely pass legal muster, but that it may backfire politically by causing real estate agents and businesses to lose out to other Florida counties that do not impose such a tax, he said.
“As a lawyer, I would say, ‘Run off well,’” Jarvis said. “As a PR guy, I would say, ‘Are you crazy?’”
Senator Linda Stewart, Democrat of Orlando, and Representative for the U.S. Representative’s Office Darren Soto joined Bracy at an event unveiling the plan. Brassey said he met with owners, tenants, and developers while drafting it.
Another proposal endorsed by Orange County Commissioner Emily Bonilla, would place a one-year cap on rent increases for many properties. The draft proposal calls for a 5% upper limit or a restriction of rent increases to the CPI, whichever is higher. The consumer price index rose about 9% in the twelve months ended June 30.
Bonilla said she doesn’t think Prause’s proposal would conflict with her efforts, which apply to rental properties with four or more units.
The county commission is due to consider Bonilla’s proposal on August 9, which opponents say could also spark legal challenges..
Commissioners recently approved a separate measure requiring landlords to provide 60 days’ written notice before imposing a rent increase of more than 5%.