Out-of-state real estate investors and homebuyers would pay a special tax under a state senator’s plan designed to tackle sky-high rents pricing tenants out of Orange County.
Sen. Randolph Bracy, who is running for U.S. Congress, unveiled a proposal Tuesday he intends to submit at the next Orange County Commission meeting on Aug. 9.
“I would like to institute special taxes on these companies and individuals in order to discourage their buying, selling and renting of properties,” Bracy said. “I believe we should be keeping it in the community, and let’s keep it affordable.”
Bracy’s plan also calls for approving more high-density apartment buildings, converting vacant commercial properties into housing and providing grants and tax breaks to developers of affordable housing.
The tax would be levied at closing on out-of-state investors and individual buyers who don’t own property in Florida, Bracy said.
The tax amount hasn’t been determined, he said, but revenue could be used to build more affordable housing and offer assistance to renters.
Orlando’s rental prices have exploded, forcing tenants to move out of the city to find less expensive housing. The average asking rent in Orlando is $1,819, more than $150 above where it was in January, according to CoStar Group, which tracks rental rates.
Real estate investors have been snatching up more properties as housing demand has soared, buying nearly half of the properties sold last year in the predominantly Black ZIP code of 32805, according to an Orlando Sentinel investigation.
Bracy said out-of-state investors are worsening the region’s affordable housing crisis.
“I have had people that have said they’re moving out of Orlando … because they can’t afford to live,” Bracy said. “We have out-of-town companies buying the properties and raising (rent) to where it’s unaffordable. I think we have to look into that.”
David Howard, executive director of the National Rental Home Council, said discouraging out-of-state investors will result in less rental housing.
“The county should instead be focused on policies and incentives designed to increase the supply of all types of housing, owner-occupied and rental,” said Howard, whose group represents rental homeowners large and small.
Taxing out-of-state investors and buyers differently than in-state ones could spark litigation citing the equal protection and commerce clauses of the U.S. Constitution, said Bob Jarvis, a law professor at Nova Southeastern University.
Jarvis said he thinks Bracy’s special tax likely would pass legal muster, but it could backfire politically by causing real estate agents and companies to lose business to other counties in Florida that don’t have such a tax, he said.
“As a lawyer I’d say, ‘Go forth and proper,’” Jarvis said. “As a PR guy, I would say, ‘Are you insane?’”
State Sen. Linda Stewart, D-Orlando, and a representative from U.S. Rep. Darren Soto’s office joined Bracy at an event unveiling the plan. Bracy said he met with landlords, tenants and developers while crafting it.
Another proposal championed by Orange County Commissioner Emily Bonilla would create a one-year cap on rent increases for many properties. Draft proposals have called for a 5% cap or tying it to the consumer price index, which rose about 9% in the 12 months ending June 30.
The County Commission is set to consider that plan on Aug. 9, which opponents say could draw legal challenges, too.
Commissioners recently approved a separate measure requiring landlords to give 60-day written notice before imposing a rent increase of more than 5%.