Philly officials touted tax relief efforts. But some homeowners stand to lose money.

The complex system means residents could miss out on savings

• By Kasturi Pananjady and Max Marin
• Published

Philadelphia officials spent months coming up with a plan to help homeowners whose tax bills are going up. In the end, thousands will still be getting shortchanged — and they may not even know it.

The tax relief package that City Council and Mayor Jim Kenney agreed to last month is aimed at helping vulnerable homeowners – especially in the city’s gentrifying Black and Latino neighborhoods, which saw the largest assessment increases. Council hailed the solution as a “significant legislative achievement for homeowners in Philadelphia.” But some Philly homeowners most in need of support will actually be worse off with the new changes — unless they act fast:

• An Inquirer analysis found at least 2,400 longtime, largely working-class homeowners who are currently enrolled in a tax relief program stand to lose money if they stay in it.

• City officials have boasted that more people will be eligible for that program. But some people will be better off not entering the program at all.

• And if more people do join, that could result in decreased savings for all participants due to a cap on the total benefit.

The resulting confusion homeowners will face this year demonstrates broader issues in Philadelphia’s approach to property taxes, amid backlash over city’s first reassessment in three years. As property values rise, elected officials have relied on adjusting a web of relief programs rather than reducing the city’s overall tax rate. And it’s largely up to homeowners to decipher this matrix of complex, evolving options to figure out which one will lower their tax bill the most.

Terry Buie has been paying a mortgage on her row home in West Philadelphia for three decades. Living on a fixed income while undergoing cancer treatment, for Buie, 64, every dollar counts.

This issue isn’t necessarily new. In 2022, according to data provided by the administration to Council, as many as 3,000 homeowners previously enrolled in LOOP were actually losing money by not switching to the homestead exemption, yet they did not take action to inform them.

Council didn’t perform an analysis of the number of people adversely affected by its latest changes, and Joe Grace, a spokesperson for Council President Darrell L. Clarke, declined to comment on The Inquirer’s estimates. Enrollment in LOOP is protected by city and state privacy laws, so Council “cannot confirm the number,” Grace said in a statement.

The administration did not contest the Inquirer’s analysis of the city’s recent reforms. “We're offering more choice and a wider range of options,” a spokesperson for the Kenney administration said in a statement.

The reforms to the homestead exemption help 70% of the city’s over 300,000 homeowners, Grace said: “The increase in the exemption from $45,000 to $80,000 will now allow enrolled homeowners to reduce their annual property tax bill by $1,119.”

More people are going to be confronted with this complex choice. Determining what’s the best option for them isn’t easy.

More people will be offered the opportunity to participate in LOOP next year — even if it is suboptimal for their savings in the immediate term. Like Buie, they may be better off taking the homestead exemption instead.

Until now, the city checked whether the homestead exemption would save people more money than LOOP. If — and only if — LOOP savings exceeded homestead savings would a resident be allowed to enroll in LOOP.

Not anymore.

The city will no longer compare LOOP savings to homestead savings in its eligibility determination, according to documents provided by the Department of Revenue. That leaves homeowners to calculate the difference between the two themselves.

This is contrary to one of Council’s stated commitments: “One of the goals of the legislation passed (and Council generally) is that residents are maximizing their savings under existing programs,” Grace wrote in a statement.

Figuring out which option is better becomes more complicated when homeowners consider the long-term implications of the decision.

LOOP may still have long-term benefits for some people who would lose out in the short run, especially if they expect large increases in value in the future, such as in neighborhoods with rapid development. Because the tax bill is frozen under LOOP, it provides the most savings during sharp jumps in property valuation — even if a house triples in value in one year, the owner would pay the same fixed tax bill.

But while LOOP enrollees may leave at any time, they can’t re-enter unless they qualify again in the future. In order to re-enroll, their property valuations would have to spike more than 50% in a single assessment or more than 75% over five years.

With the Office of Property Assessment aiming to conduct annual assessments, the likelihood of seeing increases of 50% or more in a single cycle decreases. The reassessment released in May was the first in three years and therefore had large increases for many homeowners as the city attempted to reflect current market values, or the amount for which a home would sell.

That presents a tough cost-benefit decision for homeowners like Buie, weighing the options between significant savings currently offered by the homestead exemption and the long-term protections offered by LOOP.

But for Buie, the answer is obvious. She intends to leave LOOP and enroll in the homestead exemption.

If more people opt in to LOOP, everyone could see a reduction in their savings

The city touts its expansion of LOOP eligibility, estimating that 3,100 more households will qualify under the new criteria. Currently, nearly 15,000 residents are enrolled in LOOP.

But there’s a potential problem with increased enrollment: At some point, having a lot of people in the program means less money for everyone.

The city limits the total amount of money, so if more people apply than the city has budgeted for, everyone’s individual benefit is reduced to stay within the cap.

Council increased the cap to $35 million this year from $25 million, but the new assessments mean that the rising property values eat up most of that increase. The new savings for current LOOP enrollees alone is $32 million.

The cap could be set higher, minimizing the risk of hitting it, and Council originally proposed a new cap of $40 million during budget negotiations with Kenney. Council asked the administration to explain how it calculated its cap, but wasn’t provided with the methodology, Grace said.

City officials don’t expect to exceed the new $35 million cap this year, but they haven’t modeled if or when that limit will be reached in the future.

LOOP remains the only city-operated property tax relief program with a limit on total savings. Council and the Kenney administration referred questions to each other when asked to explain why.

The zero-sum game further complicates the choice between LOOP and homestead. If savings might be reduced in the future, whether LOOP or the homestead exemption is better may depend on how many people are enrolled — and that could change year to year.

And homeowners are largely on their own in figuring that out.

“Who is going to help me understand the math?”

Buie was further frustrated that she only found out that she was losing money when The Inquirer called her about it.

No one told Queen Village resident Linda Peden, either. Leaving LOOP and joining the homestead exemption would save her about $200 next year. Because she paid her tax bill through her mortgage company until recently, the precise calculation of what she owed the city was opaque to her.

“I also thought I was also enrolled in Homestead because I remember being on both websites and seeing both of them and checking ‘go,’” Peden said.

Peden wasn’t alone in her confusion. Buie was also under the false impression that she was enrolled in both programs until reached by The Inquirer.

The onus of navigating tax relief programs should not be placed on individuals, said Mike Suley, former chief assessor in Allegheny County. Such a system is guaranteed to confuse people, he said, which will cause them to lose faith in City Hall.

“There are tens of thousands of people who just don’t know — and they’re the losers,” Suley said. “It’s the government’s job to make it easy for people to understand.”

Both City Council and the Department of Revenue are planning outreach to homeowners in the coming months about tax relief programs.

But ultimately, residents have to do their own calculations to see which program they’re better suited for.

The city has never before informed LOOP enrollees that they could gain more being enrolled in the homestead exemption “as it was not necessary,” according to a spokesperson for Kenney’s administration. But the city’s own data suggest that 3,000 LOOP enrollees — including Buie —are losing money that way this year.

“You can spend millions on all the outreach, and people will still be left behind,” Suley said. “You can’t come up with one or two options, throw it out there at the same time. Who’s going to help me understand the math?”

And time is running out fast for people like Buie who want to switch to the homestead exemption. The deadline is Dec. 1.