How has the Tax Abatement in Philadelphia Changed?

Want to know what's going on with the tax abatement? Use our cheat sheet below to learn more.

1. As you heard, the tax abatement has changed. Before the change, the improvements on properties were calculated and the tax amount could be frozen on the property for 10 years (for residential new construction, commercial new construction, and renovations). 

2. New construction owners still pay taxes on land assessments. It’s not tax-free. The land is reassessed almost yearly even with an abatement. Therefore, there is a possibility for the taxes to increase accordingly even on a tax abated home.

3. The Tax Abatement program has been a huge catalyst for development and growth throughout the city. And it has allowed many people to be able to afford a home of which otherwise, they would not have been able to comfortably afford. 

4. Currently, with political pressure, a high poverty rate, and a new incoming City Council, the tax abatement was and still is under a lot of controversies. 

5. GPAR (Greater Philadelphia Association of Realtors), BIA (Builders Industry Association), and many groups lobbied in the latter months of 2019, to keep the abatement intact or improve upon what was being proposed.

6. City Council voted at the end of 2019 to alter the 10-year abatement.

7. The proposal that was accepted is this: For 10 years, the improvements being frozen would be decreased by 10 percent. 

8. Here’s what that will look like: Year 1 would be 100 percent tax abatement. Year 2 would be 90 percent, and so on.

9. This effectively translates into a 5 1/2 Year Tax Abatement over a 10-year time-frame. 

10.  This applies to residential new construction only.

11.  Renovations and commercial new construction can still get the full 10-year abatement.

12.  In speaking to most developers and buyers, they are happy that this is still in place and do not think it will impact the market too much.

13.  The Future remains to be seen. Though for new construction projects where "numbers might be tight" developers may not have the confidence to build. 

14.  We don't know how this will impact renovating properties. Time will tell.

15.  Mayor Kenney, implemented 1 change before it became Law. He changed the date of the commencement of the Law from 6/2020 to 12/2020. A 6-month extension.

16.  What will that do? There could be a rush of Tax Abatement applications this upcoming year. How the City will deal with that remains to be seen.

17.  A question developers and homeowners ask who already has a 10-year abatement approved is: Will our homes and projects increase in value? For that group, having a full 10-year abatement or have many years left on it, may have a “leg over” those with the 5 1/2 year abatement after 12/2020.

18.  The story does not end here. This Law will be re-evaluated every three years. Incoming City Council folks have vowed to kill the abatement and of course, if development slows and revenues to the City go down significantly as a result, there may be push back for it in its prior form.