Almost two years ago, Jeff Bates got serious about buying a house, and it took only a week to find the ideal property in Point Breeze.
It was the roof deck that sealed it for him and his roommate, Bates, 35, said of his three-story rowhouse on 20th Street near Wharton.
“You get a really great view of the city,” he said. “That was really the icing on the cake.”
The home is among those built by developer Ori Feibush, and Bates was its first resident when he moved in 18 months ago, and as new construction it came with another nice bonus: significantly reduced property taxes.
Thanks to the city’s controversial 10-year tax abatement on new construction, Bates will pay taxes on only the value of the land underneath his house for the first decade he owns it. He is exempt from taxes on the value of the house itself. Without the tax break, his annual bill would be more than $8,000 for the home, which the city assessed at $590,000. Instead, he pays just $1,650.
That 10-year grace period, put in place to spur development in the city almost 20 years ago, will change a year from now. Starting in 2021, anyone who buys new residential construction will see the tax abatement go down by 10 percentage points each year during the decade it is in effect roughly halving the savings to the homeowner.
There are few neighborhoods in the city that have changed as drastically as Point Breeze in the last decade. The number of new construction permits issued there tripled between 2010 and this year, nearly double the increase across the city. The new construction is easy to spot. They’re the places with three stories instead of two, jutting up among the neighborhood’s once uniform roof lines.
In Point Breeze and in other gentrifying neighborhoods, rapid change and construction have fueled debate over the 10-year abatement. Supporters of the abatement say it has revitalized the city and expanded the tax base over time because the tax breaks eventually expire.
Its opponents, however, say the tax break accelerates gentrification, contributes to tax increases, and deepens inequities because longtime residents struggle to pay full tax bills while their new neighbors benefit from substantial discounts. Some activists and longtime residents have criticized City Council for not making more drastic changes to the abatement.
“Gentrification is chasing a lot of people out of their homes,” said Art Murphy, 77, who lives in Point Breeze and owns a shop down the street from Bates’ house.
Gentrification and rising property taxes were among the reasons City Council members cited this month as they voted to reduce the 10-year tax abatement.
“The extremely strong market tells us that people are moving into the city for a lot of other reasons,” said Council President Darrell L. Clarke, downplaying the idea that the abatement is solely responsible for development and the city’s booming real estate market.
‘Significant impact’ on future development
Feibush, who has been responsible for so much of the new construction, said he wouldn’t have done the same without the abatement.
The abatement encouraged developers to take risks, Feibush said. It spurred them to build farther from the city core and at a greater density than they might have otherwise. Single-family homes are a safer bet financially, he said, and he predicted that the reduced abatement would lead to more of that kind of construction, with less appetite for development away from such already gentrified neighborhoods as Point Breeze, Fishtown, or Brewerytown.
“It’s going to have a very significant impact on the types of products that are being built and the quantity,” he said.
Bates said he might have moved to Point Breeze even without the abatement. He commutes to King of Prussia for his job in merchant acquisition, but had lived in Northern Liberties and wanted to stay in Philadelphia.
But the abatement helped Bates spend more on a home, he said, because his taxes would be so low.
Without a tax break, “I think probably we would have been a little more conservative with the price we were willing to spend," he said.
Longtime residents split on gentrification
For some longtime residents, the development brought by the abatement has coincided with property tax increases that have made it untenable to stay in their homes and businesses.
Murphy, who lives at 15th and Ellsworth Streets, and has operated a shop for 25 years on Wharton Street, paid $12,000 in 1998 for his shop, where he combines notary work, bike repair, and used-appliance sales. The property taxes on the shop have risen from $150 a year, he said, to nearly $4,000.
“They don’t have to pay taxes for 10 years,” he said. “I’m going to be paying their taxes.”
Murphy is resigned to selling his building and closing his shop, he said. He’s just waiting for someone to make a competitive offer.
City Council members have voiced concern about rising property assessments and how they affect residents of gentrifying neighborhoods. At a hearing last month, Councilwoman María Quiñones-Sánchez said that the city’s revaluations in the last two years have hurt long-term residents of neighborhoods, especially where the tax abatement is causing home values to increase.
Even with changes to the abatement, Quiñones-Sánchez said, “we have a broken assessment process, and we’re still going to piss off all of the long-term residents."
Mayor Jim Kenney’s administration has defended the city’s assessment practices, but has committed to making improvements.
But some longtime residents welcome gentrification, saying the neighborhood suffered before the development boom because of crime and poverty.
“You ask me, it’s improved the neighborhood,” said Dorsey Teagle, a retired veteran who has lived on Wharton Street for 30 years and has not been concerned about the increase in his property taxes.
Some residents opt out
When Mindy Isser, 29, bought a rehabbed home at 19th and Tasker Streets in Point Breeze seven years ago, she opted out of the tax abatement. This month, she joined other activists in City Council’s chambers and spoke out against legislation to change the abatement, arguing that the reforms did not go far enough.
“Buying a house means you pay property taxes,” she said. “This is how we fund our schools. It just seems like that is what we should be doing.”
Isser said she was acutely aware that she and other new arrivals to Point Breeze bring a new texture to a neighborhood where the people being displaced are often poor and black.
“Imagine what this city would be like if everyone paid their fare share of taxes,” she said. “They’re subsidizing our lifestyle, and that’s not fair.”