AVI’s silver lining: A bigger tax break for buyers of new and renovated homes

1701 Willington
Whoever buys these new homes now under construction in Sharswood will receive a big thank-you gift from the City of Philadelphia in the form of a larger tax break on property.

Thus far, most of the commentary on the Actual Value Initiative has focused on those hardest hit by the citywide property reassessment – in particular, the residents of neighborhoods that were largely slums or abandoned prior to the 1990s but have experienced significant redevelopment and gentrification since then. Though relatively few in number, the size of the tax hike they will likely experience still has officials trying to figure out how to ease their pain.

But, as we have noted before, there are people who will come out ahead as a result of AVI. One of the largest groups of beneficiaries will be the buyers of new homes. While higher property taxes may dilute the value of existing homes sold, new construction homes will continue to enjoy the full ten-year tax abatement offered by the city for new and improved residential structures. Because that abatement is calculated based on the assessed value of the improvements, buyers of new properties in those same neighborhoods whose current residents may face much higher tax bills will enjoy bigger abatements than their neighbors did when they bought.

This will have the effect of shoring up house values in the affected neighborhoods and possibly even raising them in neighborhoods like Francisville and Old Kensington that are only now experiencing significant waves of new construction. Not to mention that it will continue to encourage the relatively robust pace of residential construction, rehabilitation and conversion within the city. In the long run, that will make it worth the short-term pain.