Author’s Note: Philly’s controversial 10-year property tax abatement is back in the spotlight this week after Councilwoman Cindy Bass proposed a bill that would eliminate it. The abatement, which was implemented in 2000, waives additional taxes on any physical improvement to a property for 10 years. Critics of the abatement feel that it diverts necessary funds from the city and the school district, while disproportionately benefitting wealthier neighborhoods. Supporters claim that the policy is a necessary tool to incentivize growth and development. Earlier this year the Office of the City Controller released a policy analysis of the abatement that dug into the geographical concentration and distribution of abated properties in the city, which clarified who and what neighborhoods have received the biggest tax breaks. Quantifying the impact of the abatement in numbers, rather than theoretical boosterism, can have a serious impact in the future of the policy going forward, which is why it is awesome that software engineer Nat Lownes created a Twitter bot, Philly Tax Abatements. His account is tweeting every tax-abated property in Philly—along with the amount of lost annual tax revenue they represent—at regular intervals until the polls close at 8 pm on Election Day 2019. I caught up with the brains behind the bot to get some of the details.
Starr Herr-Cardillo: What do you do for a living and in your pastime?
Nat Lownes: I work as a software engineer. I’ve worked in construction. I have an interest in housing policy, architecture, and a love of row houses. All that contributed to my interest in answering questions like ‘What’s up with all these garage-fronted row houses? What’s up with all this particle board?’ I was also a candidate for Democratic State Committee back in May.
SHC: How did you come up with the idea to create the bot, and when was it “born”?
NL: The bot is a byproduct of independent research I’ve been doing on the new construction tax abatement. As part of that research I wanted to visually spot check my work, so I grabbed Google Street View images for all the properties I thought were tax-abated. With those pieces it was quick to put together something like an @everylotphilly for the tax abatement. It started tweeting this past weekend, and it will distribute tweets evenly right up to when the polls close at 8pm on Election Day, November 5, 2019. Ideally, by then we’ll have elected a mayor and a city council willing to end the tax abatement.
SHC: Can you share any of the logistics of how it is calculating these numbers? Also, how did you figure out how to do it?
NL: As you know, the new construction tax abatement exempts the assessment of the improved portion of the property. Querying the OPA data for properties that match these parameters seems to yield new construction tax-abated properties. The “lost” amount is the improvement assessment of these properties at the current property tax rate of 1.4 percent. It’s a simplistic calculation, but I feel it accurately reflects the real amount that would’ve been collected.
It should be said that civic tech and research projects like this are made easier because of the Nutter administration’s early commitment to “open data,” the work that Tim Wisniewski and his crew did to make it happen, and Open Data Philly hosting it.
SHC: Is the abatement something you’ve taken issue with for a while?
NL: Yes. I’ve always assumed that it was benefiting mostly well-off homeowners in a few neighborhoods, but only after Mayor Kenney’s budget address in March 2018 did I get more serious about researching those assumptions. I heard he was going to propose raising the property tax rate and I was sure if he was doing that he’d mention reforming the abatement at the very least. I was excited. I tuned into City Council Live at work, and I don’t think he said the word “abatement” once. I couldn’t believe it.
My main issues with the abatement are the uncertainty about its effects, the clustering and type of development, and that the City and School District isn’t as well funded as they should be because of it.
Supporters of the abatement may point to a developed lot, claiming that a developed, tax-producing parcel might not exist if not for the abatement. This uncertainty is my problem with the abatement and similar programs. When policymakers implement “stimulus” programs they rarely explain or legislate in specific terms of how and when the results of these policies will benefit all of us. It’s usually in abstract terms of “growth” or “jobs,” over some undetermined amount of time, with these same abstract benefits threatened when citizens begin to question the effectiveness or true beneficiaries of the policy. Then, when we do try to quantify the effects the reports cited are compiled by building industry associations or commercial real estate investment firms, which should be evaluated carefully within that context, not blindly quoted as truth. The City Controller’s office released what I thought was a very cautious, impartial assessment of hypothetical changes to the abatement earlier this year.
Tax-abated properties are clustered in Graduate Hospital, Rittenhouse Square, Northern Liberties, Point Breeze, and Fishtown. Are these areas that need incentives for development? Why are garage-fronted row houses littering Point Breeze three blocks from a subway stop? Why is the median cost of new construction, tax-abated properties $400k?
The City and the School District need funds and the abatement forfeits money for both. School funding shouldn’t be tied to property values, but that’s what we’re working with right now. The School District is in need of funding in a way that is nothing short of shameful.
SHC: What impact are you hoping the bot will have?
NL: I hope it will drive people to take action. Or at least to clown on political candidates on Twitter through the 2019 election.
SHC: It’s powerful to see the numbers associated with properties in this format. It’s also pretty amazing to see how many properties are benefiting from the abatement in one way or another–even fairly nondescript ones. I’m used to associating the big, new luxury towers with it, but the policy impacts so many more properties! Do you have an end goal in mind that you’re gunning for? Modification to the abatement or would you like to see it gone all together?
NL: No doubt the luxury towers are the biggest, most offensive beneficiaries, but in the aggregate it adds up. And so much parking, so close to Center City and public transit. And it’s wild to see all the new row house architecture and a few outliers will show up.
I want the abatement ended. If Mayor Kenney and City Council believe incentives like the tax abatement legitimately work for the public good, they should end all four abatements and come up with an informed plan with clear expectations in its place. Most importantly, they should explain how and when it will benefit all of us.
SHC: One last thing: how long have you been in Philly?
NL: I’ve been in Philly over a decade, but have lived my entire life within earshot of Vernon Odom.
I have questioned this tax abatement from the beginning.. what I would like to know is, there should have been an increase in tax revenue when the original 10 year abatement ended in 2010.. so why has there been no mention of any increased revenue?
Its simple, the properties that were vacant lots, abandoned houses, and low value homes have been replaced with much higher value homes that will provide a huge revenue gain once the abatement stops. Most of that housing and property value would not have been created without the abatement. It is the city forgoing some tax revenue for a short period (10 years) that it would not have gotten anyway to increase long term revenue by a windfall once abatement ceases.
Tax abatement for an apartment building or rental property is ridiculous (like the properties in pictures above). Does anyone actually believe this is being passed on to renters? It’s just 10 years extra cash for a landlord that likely has zero connection to the city and will dump the property at the end.
I could not agree more about the negatives of garage fronted rowhomes, particle board, and add in those hideous aluminum panels.
Those in favor of the abatement look at them as investments in the future. There must be some way to do a fifty year analysis instead of the ten year analysis to see the gains that go along with the “loss.” Those surface parking lots and vacant rowhome lots that sit for years would seem to be more helpful to the school children as $400000 homes even with the abatement.
I would prefer to see some form of abatement remain that applies only to:
1) the restoration / adaptive reuse of historic structures, and
2) increasing density in rationally located / implemented Transit Oriented Development zoning overlays.
These are both worthy policy goals that could (and should) be supported by forgoing tax revenue.
The methodology is flawed in that it assumes that OPA’s market value of improvements is accurate. I suspect that OPA’s number would face a serious challenge if the abatement were discontinued.
Rittenhouse Square and Center City, for example, certainly do not need a 10-year tax abatement as an incentive to build and develop. This tax abatement made sense for underdeveloped areas to encourage new development, new families, new communities. No incentive is needed or should be offered to build in already heavily developed areas.
There are two sides to the abatement story, and this interview only addresses one. The focus here is the question of what revenue has been lost during the abatement. Equally important but seemingly ignored in recent debates is the question of tax revenue gains from the abatement as it expires. Since it’s a 10-year program, it should be evaluated as an investment, meaning that the return on investment is more important than analyzing its initial cost. Has the city lost money? I don’t know, but I don’t think so, and isn’t that really the crucial question? I’ve lived here long enough to remember when there was no construction activity in Rittenhouse, or anywhere in CC for that matter. Urban economies have improved generally since then, and obviously Philly is having an outstanding 15-year run. Is the abatement responsible? I’m not sure, but I do know that a vacant lot doesn’t generally pay tax or trigger economic activity. If abatement lures construction to that lot by forgiving RE tax for 10 years, though, then the city gets construction activity (i.e., jobs and wage tax) and new residents (i.e., livelier/safer streets, more retail customers, greater economic activity). Can the abatement be made better and more equitable? Probably so. Should it be killed? I don’t think so.
Another poorly informed article that fails to acknowledge the 4% Transfer Tax – a tax that is frequently paid twice when a home is renovated or built new, first by the developer, and then by the new buyer.
The transfer tax alone takes in more revenue upfront than most homes in Philadelphia produce in a 10 year period.
This has been a boon for Philadelphia.
The question you should be asking is where that money went.
Spot on. Very selective “reporting” here in this article.
This is absolutely correct, the abatement was essentially a way to repeal that excessively high (>4x most MSAs) transfer tax that makes a development too expensive to pursue, let alone sell to the next guy who also ends up paying that tax. This occurs for development, or stabilized properties. All liquidity of property is hurt by that tax.
One heck of an interview – the interviewee admits that his main goal is to get rid of the abatement program. Sounds like an unbiased source to me.
Seriously, how can you not even mention the 4% transfer tax that is paid upfront, before anybody moves in, and often paid twice – once by the builder, again by the buyer.
A 4% transfer tax on a $400k property produces $16,000.00 in tax revenue, upfront. That’s way more than most homes in Philadelphia will pay over the next 10 years.
And the city can still reassess the value of your land, or of your home, during the abatement period. They do this fairly frequently.
The net population of Philadelphia is still not growing. Job creation lags in Philadelphia. Many people still don’t want to live here, and are leaving. The tax abatement program has been a huge boon to the city’s finances. Journey back in time to before the program was started, see what neighborhoods looked like then. Not many builders were willing to take a risk without the abatement. It’s a great program. We need less taxes in Philly, and less government, not more of both.
Aside from the transfer tax. The wage tax of 4% of let’s say someone that makes 100k a year is 4k/year. surely there’s a commuter population that lives in philly that would move out if they had to pay a higher property tax and wage tax as well.
I am one of the buyers who is benefiting from the tax abatement program. My block previously had an abandoned warehouse and overgrown weeds. I paid $500K for my home, so I paid $20k in transfer taxes at the time of purchase. The real estate taxes my first year were $250. My real estate taxes last year (year 3) were $1250. The tax abatement does not prevent the city from re-assessing the value of the land. I work in Delaware and pay 4% of my $157K salary, along with any investment income, to the city every year.
Would my home have been built without the abatement? Would I have purchased in Philadelphia without the tax abatement? I don’t know. I can say the abatement program had a positive influence on my decision-making. Any losses associated with the abatement program must take into account current gains from increased land assessments and transfer taxes. The gains associated with the wage tax are more difficult to assess, but I know that I am not the only buyer on my block that moved into the city from elsewhere.
lollll you make $157K a year and I’m supposed to feel bad for you?
You make almost four times the average medium HOUSEHOLD income in Philly.
I object to the use of “Twitter” as it is restricted to those who sign up for it, and any reference to it inadvertently advertises it. I see no point to it, other than promoting “Twitter” itself, which is as unnecessary as ice-cream forks.
What have you got against ice cream forks?!
There are many problems with the central argument, the researcher’s report is more about data collection techniques and less about useful conclusions. The researcher, a software engineer, leveraged a clever set of bot tools to mine public data. Ok, but beyond the bots, there is no real study of the costs and the benefits of the tax abatement extracted from that public data. Comments show many economic benefits that have been ignored
Ok, but beyond the bots, there is no real study of the costs and the benefits of the tax abatement extracted from that public data. Comments show many economic benefits that have been ignored
The new housing is ugly housing and no effort made a to fit into existing housing stock. The new residents do not participate in the community & killing sense of neighborhood. Besides losing needed revenue. End abatement.
And hmmm, what’s the main reason people leave Philly? The schools.
Our schools need funding and removing the tax abatement is a good place to start.
I have renovated row homes in South Philly and qualified for the abatement, so yes I’m naturally biased in its favor. One factor that I’ve observed over time is that as the abatement restores neighborhoods and increases property values, small scale renovators like myself look further out into potential and yes, riskier, areas that are in need of restoration and have perceived market potential. Marketing a restored property with approved abatement is a significant selling tool. One cannot qualify for the abatement unless a major renovation is proposed in the building permit application and certified on completion by the inspector who issues the C of O. This is how Philly gets reborn, one property at a time. Be careful not to ruin that.
While it is a long-term investment for the city, developers benefit tremendously in the short-term. They price new construction higher than they could have without the abatement. I am in one of the wealthiest neighborhoods, Chestnut Hill. Prices for newly constructed houses are through the roof while existing stock has seen little growth in market value. Most abated properties here are >$1million. Houses in that range would still have sold without the abatement, builders would just get a little less profit. I think abatement should be targeted to underdeveloped areas that could actually benefit.