Mr. Fox at NakedPhilly finds a pretty important error in the city’s assessment numbers:
Issue 2) Land in Philadelphia is dramatically underassessed
The first rule of real estate is location, location, location. Sensibly, each assessment is based on the combination of the value of land plus the improvements to the land (in most cases a home). A home in Graduate Hospital is principally worth more than a home in Point Breeze not because the quality of construction is necessarily better, but because the location is closer to the core of the city and the land is therefore more valuable. In Fantasy Land (Philadelphia, 2014), this truth is turned on its head.
For example, take 801 S. 20th St., a new construction home on the corner of 20th & Catharine. OPA has assessed the home at just shy of $500K, and the land at about $31K. Compare that to 1145 S. 20th St., a few blocks south, a vacant lot at the corner of 20th & Annin. Despite the city itself selling the property last year for $40K, OPA has assessed its value at $16K.
The trouble with this is that Actual Value Initiative is supposed to mean taxes are based on selling prices – the “actual value” that people are willing to pay for properties.
A high tax rate on vacant land would tend to push landowners to develop sooner, in order to create a revenue stream to pay the taxes. If land is underassessed, then it’s less costly for land speculators to camp on a vacant lot and wait for longer to build.
This is a crap deal for low-income residents in two ways. It means structures are being overtaxed, and land undertaxed. If the surface parking lot owners in Center City had to pay more, people with modest-sized homes and people who live in apartment buildings could pay a lower share of the taxes.
It’s also a bad deal because gentrification is all about underbuilding on expensive land. If Center City parking lot owners are undertaxed, and they can afford to hold their expensive land off the market for development, then the demand for land is going to keep pushing outward into places like Point Breeze and Kensington. Building up on the most expensive land will take some of the development and rent pressure off the peripheral neighborhoods.