Since the city posted new real estate assessments online Monday, many Philadelphia property owners have reacted with shock or skepticism about their valuations.
The reassessment, which will apply to taxes due in March 2023, is the first update to the city’s real estate tax rolls in three years, as well as the first since the city implemented a new appraisal computer system and made other changes to its process.
Overall, residential property values rose 31%, and for many in rapidly gentrifying areas, assessments nearly doubled.
It’s impossible for outsiders to say whether the reassessment of all 580,000 properties in the city is by and large accurate because the Office of Property Assessment has released neither citywide data nor the details of its appraisal methodology, both of which the city says will be made public in the coming weeks.
But James Aros Jr., who has led the office since February 2021, spoke with The Inquirer to help answer some frequently asked questions stemming from the reassessments.
Here’s what we know so far:
How does the city determine property values?
There are several industry-accepted appraisal methods, and for single-family and small multi-unit properties the OPA used the sales comparison approach, in which recent nearby property sales are the primary factor in determining assessed values, Aros said. (Other methods rely on the revenue a property generates or take into account the cost of constructing the building that sits on the property.)
The city takes sales data on similar structures in OPA-determined geographic zones to reach estimated values for the area, and then augments the values for individual properties based on what the city knows about them from inspections, records, and permits, Aros said.
Do city appraisers inspect every house?
No. The city does not visually inspect every property for every reassessment.
But OPA staffers do hit the streets to look at many properties, Aros said. He declined to say how much of the city was inspected as OPA calculated the new assessments.
“We certainly still do work in the field, either driving or walking the street to see what might be changing,” Aros said. “I don’t have a percentage of properties that were looked at as part of this reassessment directly, but there’s still some level of that that goes on every year.”
Why have land values gone down?
Many residents pointed out that the land values listed in their assessments are lower than they were previously, a perplexing finding given the hot real estate market of the last couple of years.
The first thing to understand about the reassessment is that the city started from scratch instead of updating its old valuations. And this time around, the OPA applied an appraisal-industry rule of thumb known as an 80/20 split for determining the value of land under single-family homes and small multi-unit buildings.
That means that the OPA first determined a property’s overall market value, and then applied 20% of it to the land and 80% to the building, or the “improvement,” in appraisal parlance.
For homeowners whose land previously made up more than 20% of their assessed value, the new figures will appear to show that the land value has gone down.
Aros said that the reason for the change to an across-the-board 80/20 split was that the city’s previous approach — a sliding scale based on the building conditions — was confusing for many homeowners.
“That way, if your market value is different than your neighbor’s, you’re going to have a different land allocation, but at least you can see that it’s 20% as opposed to a different land value and a different percentage,” Aros said. “It’s a much more uniform allocation throughout the residential portfolio.”
Why is my neighbor’s house assessed differently than mine?
Property owners often question why apparently similar nearby properties sometimes have significantly different assessments.
Aros said those deviations often have to do with factors that can’t be seen from the outside, such as the internal conditions of a property or permits obtained by its owner. It’s also possible that unlicensed improvements result in inaccurate assessments.
But Aros said that if owners are confident their valuations are too high compared with their neighbors’, they should appeal their assessments with the Board of Revision of Taxes. The deadline to file an appeal is Oct. 3.
Overall, Aros said that the reassessment has passed muster with statistical tests of its accuracy, and that he believes it is an improvement over the values assigned three years ago.
“With this reassessment, we’ve analyzed several new years’ worth of sales from the last reassessment, and we would expect that these reassessments better reflect current market conditions,” he said. “That would be both from changes in the market and corrections from any values that were not as accurate as they could have been at the time, or that have gotten less accurate since the last reassessment.”
What is the CAMA system?
OPA this year implemented for the first time a Computer-Assisted Mass Appraisal, or CAMA, system.
It’s a major step in the right direction for OPA, and won praise in a recent review of the office by the International Association of Assessment Officers.
But implementing the new system has been rocky, and Aros said there still may be problems that need to be worked out. The city has said that the reasons assessments have been frozen for three years are limitations caused by the coronavirus pandemic and delays involved with launching the system.
“It does take a little bit of time for everybody to get familiar and understand how [the software] works,” Aros said. “So that is a multiyear process, and there is additional functionality that we as a city haven’t used before.”