Many Florida homeowners cheered on Nov. 3, 2026, when more than 60% of voters approved a constitutional amendment sharply reducing property taxes across the state.

Under the measure, known as Amendment 3, the homestead exemption — a tax break that shields part of a home's assessed value from taxation — is set to rise from the current US$51,400 to $150,000 in 2027, then increase again to $250,000 in 2028. By excluding more of a property's assessed value from taxation, the exemption effectively lowers homeowners' tax bills. Because the increases are phased in over two years, homeowners will not see the full break until 2028, and the revenue losses for local governments will build across successive budget cycles. New Florida residents who buy a home would also reportedly be eligible for a property tax break, though on a more phased-in basis.

The relief, however, carries a hefty price tag. The Florida Legislature's research arm estimated the amendment would reduce annual property tax revenue by $11.8 billion — a 30% reduction in revenue for Florida counties and a 13% cut for smaller municipal governments.

While homeowners receive some relief, the budget crunch from lower tax revenue will affect other Floridians in more adverse ways. Abigail Hall and Aaron D. Wood, economists at the University of Tampa who have followed the debates over Amendment 3, argue that local governments will struggle to fund basic services with less money. They also expect more sweeping economic consequences, including less affordable residential housing and a broader shift of the tax burden away from relatively wealthier homeowners toward those who are less well off.

How Amendment 3 would work

Much of the political momentum for Amendment 3 came from the rising cost of living and frustration over climbing property tax bills, which now average just over $3,000 annually but can run much higher for owners of more expensive homes.

In addition to raising the homestead exemption, Amendment 3 lowers the cap on annual assessments on rental and commercial properties from a 10% increase to a 5% increase. Because property taxes are based on an asset's assessed value, this language effectively limits — but does not rule out — tax hikes for businesses. Landlords, for example, could still see meaningful annual tax increases as their properties rise in value, costs that would likely be passed on to renters.

Amendment 3 makes clear that school-related property taxes are exempt from the cuts. It also lists theoretical limits on how local governments should use tax dollars, intended to ensure continued funding for essential services such as public safety, infrastructure and obligations for employee retirement benefits. Yet the measure also states that funds may be used for "expenditures approved" by local and county governments — ambiguous wording that suggests these stipulations can be breached. Because these rules are now embedded in the state constitution rather than ordinary statute, adjusting them later would itself require another amendment approved by Florida voters.

Who pays the bill?

Florida property taxes are levied and collected by roughly 640 local government entities. Because the state imposes no income tax, reductions in property tax revenue land directly on local and county governments.

With tax revenue slashed, businesses, landlords and owners of other non-homestead properties, such as second homes, would almost certainly see their taxes go up. This is a typical pattern: when governments cut property taxes for some groups, the burden shifts to others.

That dynamic is likely to play out as local governments try to keep revenue stable. Amendment 3 would force them to raise taxes in other areas to make up the shortfall. Options 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. Other options include raising permits and inspection fees, fuel taxes or other service charges such as vehicle registration fees.

Local governments could likewise increase tourism-related taxes on food, beverages and hotels. But that recourse would not help counties with limited tourism, and such revenues fluctuate in any event. The specific mix will be decided locally, entity by entity, since each of Florida's local governments sets its own budget and rates.

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 these agencies make up the largest line item in annual expenditures. Reducing property taxes would amount to a direct hit, especially in smaller, less-populated counties.

If local governments raise sales tax rates to the extent they can, lower-income Floridians would bear a disproportionate burden, since they spend much more of their income on consumption. They are also far more likely to rent than own a home, so any increase in rents would take a bigger toll.

A looming affordable housing crunch?

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

Residential homes require a basic level of public services to support residents and local infrastructure. In much of Florida, property taxes effectively subsidize residential development: for every dollar a homeowner pays in property taxes, it costs county governments around $1.20 to provide those services. That gap will only widen as property tax revenues fall.

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

Now that Amendment 3 is on the books, Florida's county and local governments confront major trade-offs. Hall and Wood believe state officials will come to realize how sweeping the change has been — and how quickly their priorities may have to shift. With the first exemption increase taking effect in 2027, the clearest early signals of how local governments adapt will come from their budget deliberations over taxes, fees and spending.

Editor's note: 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 is Professor of Economics and Aaron D. Wood is Associate Professor of Economics, both at the University of Tampa. This article is republished from The Conversation under a Creative Commons license. Read the original article. This story was originally featured on Fortune.com.