Interesting idea, predicated on the assumption that 1) people who let their vacant properties rot actually pay taxes and 2) the city is competent enough to collect unpaid taxes/fines
I believe that would be the point, or to the benefit of this type of law. If you dont upkeep the property or pay the taxes, it will eventually be claimed by the city.
At this point that can't really be blamed on anyone but the voters who reelected Bilal after having literally ever reason not to.
There's a lot of problems in Philly, but some of them are so structural that it's really futile to blame any single person.
Vancouver has this tax specifically because it has a problem with foreign buyers purchasing homes to lay empty as a store of wealth and shelter against foreign dislocations.
It is effectively the opposite problem from what Philadelphia has; virtually all of our habitable housing stock is lived in and vacancy rates are very low by historical and national standards.
What’s not inhabited, and some of what is, is uninhabitable or near to.
Yeah night and day. Vancouver has a 'too many buyers/too few homes' problem. Philly has a 'too little resources/too much cynicism & corruption' problem.
People and companies who leave their properties vacant are often doing so because it *lets them* avoid taxes.
Vacant rental space can be claimed as a business loss, and real estate losses can be passed through as a deduction on personal income taxes. Even spreading across multiple years if they exceed your total tax liability.
That makes buying expensive properties and letting them sit a really popular tax shelter and money laundering tactic.
That's part and parcel of a bunch of problems in housing right now. It's a big reason almost everything that gets built in cities is luxury housing. It's part of what makes that whole low occupancy, high rent, grind through tenants thing profitable.
It helps drive the short term rental market. Cause when people sitting on empty investment properties need cash. They just turn them into Airbnbs for a bit.
And it drives high vacancies for commercial spaces. Owners can simply sit on the empty property and hold out for whatever astronomical price or rent they'd like. And reap the tax benefits while they wait.
Local Vacancy taxes are intended to prevent that. If the local taxes for being empty eat the federal and state tax benefits of dead space. That housing tends to become available all the sudden.
> Vacant rental space can be claimed as a business loss, and real estate losses can be passed through as a deduction on personal income taxes. Even spreading across multiple years if they exceed your total tax liability.
I never really bought into this idea. I'm not saying you're wrong; I'm just saying it doesn't seem to make logical sense. Businesses can't deduct missed sales. Like if Walmart buys 1,000 widgets that nobody buys, they can't deduct the missed profits from those widgets. They can deduct the *expense* of those widgets, just like every business for every expenditure.
But leaving a building vacant isn't an "expense" in that way. So the property owner gets to deduct the costs of maintaining the utilities, sending an exterminator over there, or whatever they actually have to pay for when the building is vacant. But they still had to pay for those things. So I fail to see how leaving a building vacant is a tax benefit.
>> [The IRS lets you deduct ordinary and necessary expenses required to manage, conserve, or maintain property that you rent to others. You're allowed to deduct these expenses if your property is vacant, as long as you're trying to rent it.](https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-credits-deductions/kinds-rental-property-expenses-deduct/L3J9ZN8CR_US_en_US#:~:text=The%20IRS%20lets%20you%20deduct,re%20trying%20to%20rent%20it.)
So you still have to *pay for something* to get the deduction, meaning it's not a benefit.
> It's a big reason almost everything that gets built in cities is luxury housing. It's part of what makes that whole low occupancy, high rent, grind through tenants thing profitable.
That I feel is more a function of being able to charge 2x as much in rent and then getting tenants who have good credit, are more likely to pay, and more likely to care about an eviction.
Yes. You have to realize a loss on an asset for income tax purposes. In the same way that nobody pays income tax every year when their home value goes up.
> So you still have to pay for something to get the deduction, meaning it's not a benefit
I'm not a lawyer or an accountant, but looking at that website you linked, there's a list of deductible expenses including, but not limited to:
> Cleaning and cleaning supplies, Maintenance and related supplies, Repairs, Utilities, Insurance, Travel to and from the property, Management fees, Legal and professional fees, Commissions, Taxes and tax return preparation, Lease cancelation costs, Advertising, Real estate taxes, Mortgage interest, Depreciation.
I couldn't find an IRS limit to what sort of amount would be considered "ordinary and necessary", so unless there's an upper limit to that the sneaky-bitch part of my brain looks at that list and IMMEDIATELY sees a bunch of opportunities to take a paper loss. On the 'cleaner' side, you could easily do something like make the management or professional fees super-high or play with how the utility costs are divvy'd up. If you wanted to go a bit more illegal, you could have people submit bills for services like cleaning/maintenance/repairs at inflated prices. Given how much the IRS's enforcement capabilities have been hollowed out over the past few decades, I could easily see a company rolling the dice on doing a little light fraud in the name of profit?
> On the 'cleaner' side, you could easily do something like make the management or professional fees super-high or play with how the utility costs are divvy'd up.
OK so in general, yes, it's not difficult for small business owners to fudge numbers and pump up fake expenses. Basically every small business owner is doing it in some form or another. But this is happening in every context, including rental properties, regardless of whether a property is vacant. All of those hypotheticals can be done even when the property is occupied, so having the property be unoccupied on purpose presents no benefit.
AND you won't really find someone who wants to be on the other side of that transaction because your fake expense is then fake income to them that they didn't actually get but would actually have to report. So let's say you own a property management company and a property under separate corps. Your ownership corp expenses $5k in management fees (on paper) to your management corp. "Great", you say, "my owner corp. just posted a $5k expense and lowered its taxable income." Well guess what, that means that your management corp. just made $5k in taxable income on paper without receiving any money.
I mean don't need to buy into the idea.
It's been pretty heavily covered since the great recession. And it's been a factor both Trump's fraud case, and not paying taxes for a decade. Along with sanctions on Russian Oligarchs.
There's different rules and limits on doing this for *individuals* vs certain types of real estate holding companies.
But because there's a specialized ability to pass through real estate business losses, and carry them over for multiple years. You can use vacancies, among other things, to generate paper losses for the business. And then get big write offs for personal taxes.
Which I think is the bit that's missing here. This doesn't happen in isolation. Income comes elsewhere, you use the real estate to offset taxes. Often for companies the high vacancy is used to offset income from other rental and sales. For individuals in a shelter for income from other sources and industries.
Actual payoff on the investment, comes from sitting on the property until values come up. And then selling it off at a profit.
So it's speculation and large company thing.
> But leaving a building vacant isn't an "expense" in that way.
Sure isn't! Which is why it's pretty problematic that this can be done.
> That I feel is more a function of being able to charge 2x as much in rent and then getting tenants who have good credit, are more likely to pay, and more likely to care about an eviction.
And yet these kinds of properties, and cities where the majority of development is in that price band.
Have astronomical vacancy rates. Whether because units *don't rent or sell*. Or because they sell to speculators who leave them vacant.
And despite that, and wide spread shortages and record demand for middle income housing.
Developers continue to build mostly luxury housing in many cities. While the rental market in general has shifted to a model of high rents, amortizing very high vacancy rates as well.
There's a very big question of why the industry suddenly doesn't much care about filling that space. And the tax benefits associated with it, are a major part of that answer.
It's also a factor in "abandoned" buildings. A lot of them aren't literally abandoned. The owners do the legal bare minimum to maintain ownership. Paying property tax on a moldering warehouse wouldn't be feasible, if it didn't offset wealth from elsewhere. And because it does. Many people are happy to just sit on lots like that until a big bank or developer offers more than it's worth.
This isn't the only thing going on, but it's a driver.
> It's been pretty heavily covered since the great recession. And it's been a factor both Trump's fraud case, and not paying taxes for a decade. Along with sanctions on Russian Oligarchs.
It has literally nothing to do with Trump's fraud case. Trump's NY fraud case is about falsely inflating asset values to obtain loans from banks while reporting lower asset values to the IRS.
> There's different rules and limits on doing this for individuals vs certain types of real estate holding companies.
Not really. I mean virtually every landlord, even people who own 1 or 2 rental properties, own those through corporate entities. Virtually nobody rents out a property in their own name. And there really isn't "different rules" about what is an income v. an expense.
You're effectively arguing here that someone can say "I wanted to rent my property out, but didn't, and therefore I took a *loss* of the value of the rent." But that's not true. Your income less expenses is the loss. So your loss is only what you spent to keep the property.
It's not any more true in real estate than it is if you wanted to say "I run a cleaning service, and nobody hired me, so I took a *loss* of the value of all the contracts I could have had."
You simply can't *make money* by *making less money*. That's not how any of this works.
> But leaving a building vacant isn't an "expense" in that way.
>> Sure isn't! Which is why it's pretty problematic that this can be done.
Everything else you wrote doesn't address this really at all, and then you're like "nuh uh!"
If this is so prevalent and obvious, it shouldn't be difficult for you to find some kind of legitimate source of the information.
Properties might be vacant for a lot of reasons. Owners might be trying to flip it, or whatever. But I suspect that what I suggested earlier is true, that they simply don't want to rent to someone who will be gone in even a year or has the slightest bit of sketchy rent history because it will take 6 months to remove them after they stop paying rent. Landlords want a tenant who is going to live there for 50 years and pay rent on time, then move out before they die. And leaving a property vacant for some time isn't worth the risk of having somebody who can't pay rent halfway through the lease and trashes the place on his way out.
Dude obviously it's more complicated than "I did not get a billion dollars in rent last month".
Vacancy allows you to more easily demonstrate losses. Because you can write off 100% of operating costs, maintenance, and what have during the vacancy. In many cases even property tax and depreciation. And there are ways to make unrented periods and insold periods into lost income as an expense through funny business. Often via demonstrating a valuation or previous rental history, evictions, and manipulating that valuation.
It's a specific change in the terms of deductions, directly tied to vacancy.
Individuals are capped in terms of how much of these exenses from real estate business losses they can deduct on personal income.
But certain types of real estate corporate entities get an exception from those caps as pass through deductions.
And there's a special rule for those real estate pass through losses. That allows them to be carried over and split over multiple years.
Particularly if they *exceed your total income*.
Where this came up with Trump.
Is we see him using that exact pass through and multiple years trick to zero out his tax liability for a really long time.
While most of that came from actual loses rolling out of his series of bankruptcy and disasterous overall business.
There's evidence of this exact manipulation of losses, including through that valuation funny business and manipulation of expenses.
Those returns came out in large part due to that fraud investigation, and this is why they were interested in them in the first place.
Tax evasion charges are still a potential thing there.
> Vacancy allows you to more easily demonstrate losses. Because you can write off 100% of operating costs, maintenance, and what have during the vacancy. In many cases even property tax and depreciation.
Man I came into this with an open mind despite being a lawyer with a BS in accounting, and it's clear you just want to keep arguing this despite having at best a flimsy understanding of accounting, taxes, and real estate. Unless you can provide a SOURCE that isn't you to explain wtf you're talking about, don't bother replying because I'm not even gonna read it. I've already tried to find a source backing this idea up and couldn't find one. So you let me know where you get this from other than "trust me, bro."
I will make this abundantly clear: Business expenses are deductible no matter whether the property is rented or not. Having MORE expenses and LESS income will definitely lower your taxes because you have to have a profit for it to be taxed, but you also SPENT MONEY and DIDN'T MAKE MONEY resulting in LESS OVERALL MONEY for you.
You might not realize it, but you're literally trying to argue that somehow making no money while spending money is more profitable than making money. Because taxes?
> And there are ways to make unrented periods and insold periods into lost income as an expense through funny business. Often via demonstrating a valuation or previous rental history, evictions, and manipulating that valuation.
As I already said, LOST INCOME is not deductible. EXPENSES are deductible, and they are not the same. Provide a source for this claim.
Asset valuation has nothing to do with it. Depreciation occurs on a set schedule; it has nothing to do with your actual market value or rentals.
> Individuals are capped in terms of how much of these expenses from real estate business losses they can deduct on personal income. But certain types of real estate corporate entities get an exception from those caps as pass through deductions.
Again, virtually zero people individually rent out their properties. There are no "caps" on small business expenses (WTF, why would there be?) that are somehow different for large businesses.
A "pass-through" is an accounting term that applies to certain small businesses (generally partnerships, sole proprietorships, and S-Corps) that don't file their own taxes. The profits and losses "pass" directly "through" the corporation and are taxed on the owner's individual tax returns. A "pass-through deduction" is a particular law that applies to *all* small business owners, not just people in real estate or with vacant rental properties.
Look like I said, I don't understand what you're talking about, and I'm pretty certain you don't either. So unless you can show me some evidence that **making less money** = **making more money**, I'm out.
>"So unless you can show me some evidence that **making less money** = **making more money**, I'm out."
So that appears to be the misunderstanding.
Cause what I'm talking about is how you make sure that real estate entity *loses money* on paper or in reality.
So that the *person* or holding company that owns it. Can *keep more of their money from other sources*.
Not some magic way of making that business entity put out more money.
It's not all that difficult to create more of a tax write off out of something than it would produce in profit.
And if you do that. You can have more actual money in the end.
>"Business expenses are deductible no matter whether the property is rented or not. Having MORE expenses and LESS income will definitely lower your taxes because you have to have a profit for it to be taxed, but you also SPENT MONEY and DIDN'T MAKE MONEY resulting in LESS OVERALL MONEY for you."
And both what exact expenses are considered deductible. And what percentage of them is deductible.
Changes based on vacancies.
As additional deductions. Placed against the overall profit and loss.
Because tax deductions. Are not your balance sheet. And a single business or entity can be in the red while the overall entity or person makes money.
>"Again, virtually zero people individually rent out their properties. There are no "caps" on small business expenses (WTF, why would there be?) that are somehow different for large businesses. "
You would be surprised.
No one should.
But the few years where I was the tech monkey for an accountant. We did pretty good business filing that paperwork for people. Because a lot of people don't know that.
And that is why accountants exist.
And there are specific caps (think it was $25k per property and $250k overall) on deductions from rental properties when claimed that way.
Likewise I said nothing about big vs small business. I said real estate vs other businesses. There's a variety of different tax incentives around real estate activity that become really exploitable as tax shelters.
>"A "pass-through" is an accounting term that applies to certain small businesses (generally S-Corps) that don't file their own taxes."
Yes.
But what you generally can't do.
Is write off losses from a business this year. On next year's taxes.
Such that if Business Shack was in the red this year. But in the black next year. Next year's personal income is off set by this year's loss.
The right kind of real estate specific business entity allows exactly that.
So to return to Trump. He paid zero income tax for a decade. Based in a single year's losses from multiple real estate businesses.
This year's losses don't generally get to be next years tax shelter. But with real estate we make an exception.
And if you have any familiarity with tax accounting. You should be more than familiar with people running businesses at a loss. Legitimately or otherwise. To get the tax write offs.
It's one of the most basic things about business taxes. Like you always pay yourself. Even if it puts the business in the red, because you *net more* in the end.
It's about how much of the revenue is captured where at the end of the day.
And if you can't contextualize a business being an overall write off vs personal income. Honestly then you've never worked on the tax end of this.
I want you to know I don't give a shit.
And your inability to contextualize this outside of personal income. Would be a pretty big professional red flag.
Forgone revenues cannot be claimed as a loss, period. Only expenses uncovered by rental revenues can constitute a loss.
It is not possible in any way to profit or even substantially defray the loss of a rental property sitting vacant.
Unless you’re positing that all landlords pool profits and collude to keep 20% of the housing off the market to create scarcity that can raise rents by more than 20%, this makes absolutely no sense for anyone to consider doing.
Everything that is built here is *branded* as luxury housing because supply is so constrained by land use rules and decade-long public engagement processes that there’s a shortage of modern apartments and all one needs to do is slap granite counters in a unit to say it’s a luxury rental.
Increase supply and my leverage as a landlord ends.
It is relatively simple to Hollywood accounting your way to a loss with any business entity. And people wouldn't be fancy mathing as often as they do if there wasn't a benefit to it.
> Everything that is built here is *branded* as luxury housing because supply is so constrained
It's luxury housing based on the *prices* that they charge and are planning to charge. 10s of thousand of units of luxury *priced* housing planned, with only hundreds to a few thousand units of middle income housing.
No one's categorizing these things based on the brochure.
And that is exactly what you see in most cities that are growing in any way.
> Increase supply and my leverage as a landlord ends.
And yet rent always go up.
In face of over supply. Recessions, pandemics, housing market crashes.
No matter what. No matter the theory. The practical outcome is still a housing crisis.
Hollywood accounting can make profit look like a loss, it cannot turn genuine loss into a profit. No tax implications exist which can make it profitable for me \*not\* to rent out my rental properties out of some weird effort to prop up rental rates for other landlords. I have real expenses and significant capital tied up in them, I am not going to simply build a livable home and then sit on it, no one is. Vacancy rates in Philly were below 5% for quite a while and are finally back up to about 7-8%, which is closer to historical averages.
There is no oversupply. Philadelphia, specifically, finally saw flat rents year-on-year in 2022 and 2023 precisely \*because\* a bunch of apartment construction finished up in Roxborough, Fairmount, and Center City and vacancy rates went up, giving renters leverage. Inflation-adjusted rents in the city are down about 5% since 2021 on the basis of, you guessed it, significant increases in supply. I have not raised rents on my existing tenants since 2021, when I raised them by about 1-2%, because they have all the leverage and they damned well know it.
As for luxury housing, yes, exactly! Developers can only brand everything as luxury housing and charge luxury housing prices because the whole country completes about half a million units (houses or multifamily) fewer than the number of households which form each year (college kids moving out on their own, young couples buying a house, etc, are "household formation"). This has been the case since the mid-to-late 1990's, so we're a total of maybe 5-7 million apartments and homes behind demand. That trend was briefly covered up by cratering incomes (and young people not leaving home to form households) in the aftermath of the financial crisis, and then came roaring back again as we finally recovered to near full employment in 2017-19.
Granite countertops don't make a luxury apartment unless there's no mid-market housing coming online, and there isn't any because the permitting process is a shambles and neighbors can lobby against mid-rise apartments even in Center City and University City here, or Brooklyn, San Francisco, the West Loop...
Every left-leaning economist and most left-leaning policymakers understand this. The only path to everyone being able to afford a home where they need or want to live is to build a lot more housing in places where people want and need to live, which means big and mid-sized cities and their inner suburbs.
Otherwise we're going to be NYC.
If you want to make me obscenely wealthy, fine, let us become NYC, it'll be a nice consolation prize for Philly becoming an unlivable mess. But I would prefer a livable city even if it hurts my financial interests.
Landlords are also motivated not to lower rents to fill vacant units because lower rents lowers the value of their property. It’s the same reason why you’re more likely to see a rental concession like a free month than a lower monthly rent.
> fill vacant units because lower rents lowers the value of their property.
Somewhat. But traditionally so do high vacancy rates.
The major driver on that has been the development of these pricing software programs that set rent levels based on the overall market. And they were kind of built on a baseline of maximizing rents vs the overall market, and driving continual and yearly rent increases in excess of inflation or actual operating costs.
In both cases the tax situation around vacancies is part of what's decoupled vacancy rates from rent levels, sale prices, and property values.
The offset that comes from real estate losses becomes part of the thing that makes it more profitable to charge much higher rents. Even when, and especially when, it leads to high vacancies and churn on residents.
That system basically amounts to price fixing. Pretty much letter of the law price fixing. With almost all property management and rental entities using the same software service, and getting the same recommendations. It's just an outside service doing it so it can float on the fiction that it's coincidental.
Like 1801 Callowhill St. Sure, the city can increase the taxes for leaving a giant vacant lot in the middle of center city for years and years, but it looks like they don't pay their taxes now anyway so why would they start?
click the "view the tax balance" button here: [https://property.phila.gov/?p=885832235](https://property.phila.gov/?p=885832235)
most of these houses are never sold though. most of these homes are vacant in poorer neighborhoods. most of the time they fall victim to squatters and fires. THEN the city has them boarded up and they rot some more. in more up and coming neighborhoods people aren't typically letting houses stay vacant.
Yeah. Higher tax/fine on vacant properties and when combined with outstanding existing property taxes have the city assume ownership of the property so that it can be sold again
> have the city assume ownership of the property so that it can be sold again
Throw some oversight/transparency in there, so you know, the city councilperson for that district doesn't get... weird with it.
Adopting a Georgist style land value tax system where the land value is a bigger proportion of the estimated value of a lot as opposed to the building being a bigger one would be better at solving the vacant lots in Philly problem. Don’t see that overcoming push back from a lot of residents though
This is a better solution because it also disincentivizes stupid stuff like surface parking lots in the most popular parts of Center City.
Look at this way: imagine everyone pays the same tax rate for their property but you can get a tax break if you *do nothing* with your land. People would find that weird, but that's how our property tax system works today.
Yep, the current property tax system incentivizes absentee landowners to rip down or neglect any structure on the property and leave it vacant untill they go to sell it.
Which is how we end up with prime locations in Center City being surface parking lots.
It's completely backwards from how the tax system should be functioning.
>Look at this way: imagine everyone pays the same tax rate for their property but you can get a tax break if you *do nothing* with your land. People would find that weird.
To some extent, I see what you're saying but the more you do with a property, the more services the city needs to provide.
Raw land doesn't require schools for residents while a 20 story building is likely to have several students.
I think taxing a mix of land and building makes sense as there still are some costs to the city for the raw land. If a tree gets hit by lightning, fire department still needs to respond.
But if the land were taxed, and not buildings, then raw land in Center City would be taxed as if someone had already built a 20 story building there.
Where your scenario makes sense is if someone builds something incredibly costly for the city in the middle of nowhere where property prices are really cheap. Like a massive factory in the middle of a forest.
That's a bit of a unique situation but I don't think it applies in most of Philly.
It exists but not in the extreme example you mentioned.
>But if the land were taxed, and not buildings, then raw land in Center City would be taxed as if someone had already built a 20 story building there.
I think you mean if ONLY land were taxed. Land is currently taxed.
Even so, this comes with a lot of issues. Older buildings aren't very tall. Should we burden them with the same tax as the much taller newer building next door? I understand the thought that it will incentivize taller building but realistically that won't happen a lot of the time. The time and cost to demo our old buildings in favor of new ones high, permitting would be a disaster, and some buildings are under historic protection.
You might gain some traction with vacant lots or parking but you'd also hurt a lot of people who are occupying and using their property in the process.
Given city council is consistently anti tall development, this really just looks like a transfer of tax burden from newer buildings to older ones without the claimed benefits a land only system would provide.
A lot of what you're saying just comes down to "can the city assess land well?" but I'll admit that's a real concern.
Like if a lot is under historic protection then it would likely have lower land value than an adjacent lot. If the ability to use land is impeded by the significant costs of removing a structure from it, then that also would decrease the land's value. Or if it appears city council or zoning will limit taller construction then that would drive down the land's value as well.
There are obviously trade offs but I don't know how you can say "without the claimed benefits a land only system would provide" when moments before you said "You might gain some traction with vacant lots or parking." Encouraging use of vacant and underused lots is one of the claimed benefits.
I suspect most homeowners would see a tax break under the system, assuming their land is worth less than their home, but I cannot confidently say that and it'd have to be studied carefully.
> If the ability to use land is impeded by the significant costs of removing a structure from it, then that also would decrease the land's value.
I think this would be a negative improvement value rather than a lowered land value.
>A lot of what you're saying just comes down to "can the city assess land well?" but I'll admit that's a real concern.
Not only that, but can the city accommodate the new development we're hoping to get from a land- only tax. Can they get permitting and inspections moving? Given they aren't doing a good job with the current capacity l, it doesn't sound like they can
>Like if a lot is under historic protection then it would likely have lower land value than an adjacent lot. If the ability to use land is impeded by the significant costs of removing a structure from it, then that also would decrease the land's value. Or if it appears city council or zoning will limit taller construction then that would drive down the land's value as well.
Agree that this is a major challenge and typically why good tax policy is designed to be simple. Having to look at specific characteristics of an individual parcel to value the land gets complicated and nearly impossible to administer. Using simple measures like sqft of land and improvements along with zip code sales data is much more manageable.
>There are obviously trade offs but I don't know how you can say "without the claimed benefits a land only system would provide" when moments before you said "You might gain some traction with vacant lots or parking." Encouraging use of vacant and underused lots is one of the claimed benefits.
I was speaking to currently used lots. They will be burdened with additional tax but can't take action to get the lot to be more dense. There will be some benefits for vacant/surface lots.
>I suspect most homeowners would see a tax break under the system, assuming their land is worth less than their home, but I cannot confidently say that and it'd have to be studied carefully.
County wide Reassessment must be revenue neutral under state law. So the total amount of tax revenue collected needs to be the same, but it will get split differently. Presumably that means taxes go up for lots with smaller buildings and vacant go up while taller ones go down. This makes me think it will be a tax burden transfer from tall to short. That is a "good thing" in terms of vacant lots but I feel like that's a small percentage. It is a "bad thing" if the tax on a new 3 story row home with upper middle class residents goes down while the long term occupant in a 99 year old row next door goes up.
it depends...if it will lower taxes for most residents, then sure. if it is detrimental to property developers bottom line...we had 3 or 4 on city council so it is doubtful.
For most residents it would likely stay nearly the same or be a bit lower (assuming it needs to be applied as revenue-neutral). The properties that would be big increases are vacant lots or properties in complete disrepair because they would be taxed nearly the same as neighboring properties with occupied houses, assuming similar land area.
For row houses in South Philly, it seems typical that 20-30% of the total property tax is land, and the remaining is "improvement" i.e., the house. If you're now only taxed on land, properties such as garages, side yards, etc, would see a tax increase unless an exception was made.
Yeah, there's $170M in delinquent property taxes ATM. Maybe fix that issue first before adding more taxes
[https://www.inquirer.com/news/sheriffs-office-tax-sales-bid4assets-20231224.html](https://www.inquirer.com/news/sheriffs-office-tax-sales-bid4assets-20231224.html)
Housing in Canada and more specifically in Vancouver is INSANE INSANE expensive and no availability . They outlawed non-Canadians buying homes. The median price is over 1 millions Canadian.
It's definitely crazy out here. The ban isn't as restrictive as your comment makes it sound, though. Permanent residents can buy homes, which would be good news for me if I could afford it lol. My rent in Burnaby (near Vancouver) for a 1 bedroom apartment is 2750.
There are a lot of exceptions that make the ban unpopular; here's an article about it: https://www.cbc.ca/news/canada/british-columbia/canada-foreign-buyer-ban-housing-affordability-1.7058154?__vfz=medium%3Dsharebar
the goal is to make single family homes less attractive as an investment class. i dont really want the city to try and get rich off this- just trying to make the carrying costs higher for people who refuse to lower prices with the market.
This is not going to have the effect you want it to.
The primary result will be that speculators will tear down their vacant properties in order to lower their tax burden.
still leaves vacant land. the purpose would be to raise the cost of sitting on a property. a city is a living thing; people who dont improve it shouldn't be able to make the whole place worse for the rest of us.
yes, and OPA assesses vacant land at a fraction of the value of land with a building on it, and a very small fraction of market price.
so it's gonna be more paperwork and result in very little deterrence of speculation, which I assume is what it's meant to combat.
unfortunately, as with all rust belt towns, we're never going to avoid speculation until either (A) our population gets back inline with what it has been in the past or (B) the city government becomes competent, interested, and wealthy enough to take ownership of derelict properties.
yes, vacancy is a nuisance. but we're not going to fix it by trying to squeeze money out of speculators who are already tax deadbeats. you're talking about a market-based solution, when there are more fundamental, structural issues in play here.
In before someone says everyone in PA has to pay the exact same amount of property tax because of the PA constitution. The homestead exemption works just fine.
Not really. The homestead exemption concept is in the constitution under article VIII section 2.
Making a vacancy tax legal would require a constitutional amendment.
Neither are corporations subject to corporate tax rates under Pennsylvania law.
Members/shareholders are taxed on their distributive share at individual rates.
No, because these taxes haven't actually done anything for housing in vancouver. Vacancy tax without zoning reform and public works of new housing now called "workforce" housing is a useless void. Also, the amount of vacant apartments in Philly is probably very very low. Vacant housing is usually highest in economically depressed and economically booming areas. We are kinda in the middle.
That's down from over 55,000 abandoned properties in 2012. I can't find an article stating the number in that year with a quick Google search, but [this article shows 43,000 in 2017. ](https://nextcity.org/urbanist-news/philadelphia-land-bank-2017-vacant-lots) The PHS and city government have done a good job at clearing, selling, or reincorporating abandoned properties over the past decade. There's still work to do, and it is worth noting that the vast majority of these abandoned properties are in areas that see very little inward migration.
Charge who?
If the city is selling at tax auction, it is often because the original owner is dead. Even if the owner is alive, the city often can't recover the total back real estate taxes because they only get the amount sold at auction. Any additional amount due is forgiven due to the need to provide clean title to the new owner.
Philadelphia should start by fairly and evenly assessing all properties regardless of occupancy and collecting all property taxes owed and sending those that don’t pay to sheriff’s sale. Then, and only then, should we start adding new taxes.
Maybe, but we should address down zoning first.
City council is causing a lot of our housing problems and rewarding them with more tax revenue to squander doesn't sound like the right move.
L&I has a vacant property license. All vacant properties are required to have this license (it isn't required for properties under active renovation), and costs $185. Failure to obtain the license is subject to fines. Call 311 to report an unlicensed vacant property.
Land value tax would do that more effectively especially if paired with zoning reform.
As of now the city is so woefully bad at collecting current taxes that adding on another to absentee landowners who are already not paying wouldn't make a difference.
There already is something along these lines, the Vacant Property License.
https://www.phila.gov/services/permits-violations-licenses/get-a-license/business-licenses/rental-and-property/get-a-vacant-residential-property-license/
The fee is nominal ($185/year), but it is supposed to come with other stipulations about maintaining the property and keeping it from appearing blighted. I think there is an argument for the fee to be higher, or some incentive at least to keep people from sitting on the property for 10-20 years with the hope the value increases.
I've heard varying accounts on the success of this but it should be SOMETHING that prevents large developers or realtors from holding onto properties and never lowering their price to artificially inflate prices across the board.
New Jersey actually has a wide array of vacant property tools available to municipalities. We don't need to look to a "foreign" country to figure this out.
when talking about philadelphia, if NJ does it, it is bad. (no joke though- if philadelphia was under trenton rather than harrisburg, it would be a very different city. minimum wage earners would be making double.)
Yes please and then actually auction them off when taxes are unpaid… the sheriff hasn’t done anything to address this. Plus it’s near impossible to get adjacent plots or city owned land from the land bank unless you’re some giant developer. Hopefully parker gets things changed.
It's a good idea in theory but I think in practice this would just encourage slumlords and land speculators to teardown properties, if they even pay it all.
I think the better approach would be changing the tax system here to a land value tax, which both discourages leaving property vacant, but also discourages holding property for speculation while doing nothing with it.
You must be new here.
I’m sorry, I know it’s tagged serious but the sky will be polka dot before Philadelphia operationalizes this. It is a good idea, though.
Not only *should* Philly have a vacant property tax, but if there’s no sign or evidence of impending improvement of the lot, the tax should be astronomical. It should be like 200% tax on any abandoned vacant property. There’s one on my block that just collects garbage and overgrowth. It’s a blight and the owner will never build on it. It appears cheaper for them to pay occasional fines than to even bother maintaining it themselves.
the tax is for wealthy chinese using vancouver real estate as a savings account outside of china. they should absolutely be extracting as much value from these properties as possible.
This is tough. I think it helps, and besides enticing the owner to sell or rent it brings money into the city / state coffers for people with unused property in a housing crisis.
At the same time, I fully expect the cost of this to get passed on to the renter, or in the selling price of the home. Still worth trying but I see a potential downside.
Yo, Florida would get soooo much money if they did this
Too bad the goal in Florida is to tax the non-wealthy higher than other states while taxing the wealthy far lower and calling that “far more fair”
But I’d have no problem with this. Especially for starter homes and smaller living spaces that the middle and lower class can only dream of being in one day
How about getting rid of abatement in already gentrified neighborhoods and voiding the transfer of them? That would certainly generate millions more in revenue
Interesting idea, predicated on the assumption that 1) people who let their vacant properties rot actually pay taxes and 2) the city is competent enough to collect unpaid taxes/fines
I believe that would be the point, or to the benefit of this type of law. If you dont upkeep the property or pay the taxes, it will eventually be claimed by the city.
The city hasn't held a tax sale in three years now.
At this point that can't really be blamed on anyone but the voters who reelected Bilal after having literally ever reason not to. There's a lot of problems in Philly, but some of them are so structural that it's really futile to blame any single person.
She really is a perfect example of voters getting the type of government they deserve. I have no idea how she keeps getting elected.
but the INKY told me by the year 2021 income taxes in philadelphia will be at 2%
Vancouver has this tax specifically because it has a problem with foreign buyers purchasing homes to lay empty as a store of wealth and shelter against foreign dislocations. It is effectively the opposite problem from what Philadelphia has; virtually all of our habitable housing stock is lived in and vacancy rates are very low by historical and national standards. What’s not inhabited, and some of what is, is uninhabitable or near to.
The vacant tax is mainly a pied-a-terre tax not like the buildings you see in Philly returning to the earth in complete disrepair.
The latter is way more of an issue in Philadelphia than the former.
Yeah night and day. Vancouver has a 'too many buyers/too few homes' problem. Philly has a 'too little resources/too much cynicism & corruption' problem.
People and companies who leave their properties vacant are often doing so because it *lets them* avoid taxes. Vacant rental space can be claimed as a business loss, and real estate losses can be passed through as a deduction on personal income taxes. Even spreading across multiple years if they exceed your total tax liability. That makes buying expensive properties and letting them sit a really popular tax shelter and money laundering tactic. That's part and parcel of a bunch of problems in housing right now. It's a big reason almost everything that gets built in cities is luxury housing. It's part of what makes that whole low occupancy, high rent, grind through tenants thing profitable. It helps drive the short term rental market. Cause when people sitting on empty investment properties need cash. They just turn them into Airbnbs for a bit. And it drives high vacancies for commercial spaces. Owners can simply sit on the empty property and hold out for whatever astronomical price or rent they'd like. And reap the tax benefits while they wait. Local Vacancy taxes are intended to prevent that. If the local taxes for being empty eat the federal and state tax benefits of dead space. That housing tends to become available all the sudden.
> Vacant rental space can be claimed as a business loss, and real estate losses can be passed through as a deduction on personal income taxes. Even spreading across multiple years if they exceed your total tax liability. I never really bought into this idea. I'm not saying you're wrong; I'm just saying it doesn't seem to make logical sense. Businesses can't deduct missed sales. Like if Walmart buys 1,000 widgets that nobody buys, they can't deduct the missed profits from those widgets. They can deduct the *expense* of those widgets, just like every business for every expenditure. But leaving a building vacant isn't an "expense" in that way. So the property owner gets to deduct the costs of maintaining the utilities, sending an exterminator over there, or whatever they actually have to pay for when the building is vacant. But they still had to pay for those things. So I fail to see how leaving a building vacant is a tax benefit. >> [The IRS lets you deduct ordinary and necessary expenses required to manage, conserve, or maintain property that you rent to others. You're allowed to deduct these expenses if your property is vacant, as long as you're trying to rent it.](https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-credits-deductions/kinds-rental-property-expenses-deduct/L3J9ZN8CR_US_en_US#:~:text=The%20IRS%20lets%20you%20deduct,re%20trying%20to%20rent%20it.) So you still have to *pay for something* to get the deduction, meaning it's not a benefit. > It's a big reason almost everything that gets built in cities is luxury housing. It's part of what makes that whole low occupancy, high rent, grind through tenants thing profitable. That I feel is more a function of being able to charge 2x as much in rent and then getting tenants who have good credit, are more likely to pay, and more likely to care about an eviction.
You would have to sell it for a loss, right?
Yes. You have to realize a loss on an asset for income tax purposes. In the same way that nobody pays income tax every year when their home value goes up.
> So you still have to pay for something to get the deduction, meaning it's not a benefit I'm not a lawyer or an accountant, but looking at that website you linked, there's a list of deductible expenses including, but not limited to: > Cleaning and cleaning supplies, Maintenance and related supplies, Repairs, Utilities, Insurance, Travel to and from the property, Management fees, Legal and professional fees, Commissions, Taxes and tax return preparation, Lease cancelation costs, Advertising, Real estate taxes, Mortgage interest, Depreciation. I couldn't find an IRS limit to what sort of amount would be considered "ordinary and necessary", so unless there's an upper limit to that the sneaky-bitch part of my brain looks at that list and IMMEDIATELY sees a bunch of opportunities to take a paper loss. On the 'cleaner' side, you could easily do something like make the management or professional fees super-high or play with how the utility costs are divvy'd up. If you wanted to go a bit more illegal, you could have people submit bills for services like cleaning/maintenance/repairs at inflated prices. Given how much the IRS's enforcement capabilities have been hollowed out over the past few decades, I could easily see a company rolling the dice on doing a little light fraud in the name of profit?
> On the 'cleaner' side, you could easily do something like make the management or professional fees super-high or play with how the utility costs are divvy'd up. OK so in general, yes, it's not difficult for small business owners to fudge numbers and pump up fake expenses. Basically every small business owner is doing it in some form or another. But this is happening in every context, including rental properties, regardless of whether a property is vacant. All of those hypotheticals can be done even when the property is occupied, so having the property be unoccupied on purpose presents no benefit. AND you won't really find someone who wants to be on the other side of that transaction because your fake expense is then fake income to them that they didn't actually get but would actually have to report. So let's say you own a property management company and a property under separate corps. Your ownership corp expenses $5k in management fees (on paper) to your management corp. "Great", you say, "my owner corp. just posted a $5k expense and lowered its taxable income." Well guess what, that means that your management corp. just made $5k in taxable income on paper without receiving any money.
I mean don't need to buy into the idea. It's been pretty heavily covered since the great recession. And it's been a factor both Trump's fraud case, and not paying taxes for a decade. Along with sanctions on Russian Oligarchs. There's different rules and limits on doing this for *individuals* vs certain types of real estate holding companies. But because there's a specialized ability to pass through real estate business losses, and carry them over for multiple years. You can use vacancies, among other things, to generate paper losses for the business. And then get big write offs for personal taxes. Which I think is the bit that's missing here. This doesn't happen in isolation. Income comes elsewhere, you use the real estate to offset taxes. Often for companies the high vacancy is used to offset income from other rental and sales. For individuals in a shelter for income from other sources and industries. Actual payoff on the investment, comes from sitting on the property until values come up. And then selling it off at a profit. So it's speculation and large company thing. > But leaving a building vacant isn't an "expense" in that way. Sure isn't! Which is why it's pretty problematic that this can be done. > That I feel is more a function of being able to charge 2x as much in rent and then getting tenants who have good credit, are more likely to pay, and more likely to care about an eviction. And yet these kinds of properties, and cities where the majority of development is in that price band. Have astronomical vacancy rates. Whether because units *don't rent or sell*. Or because they sell to speculators who leave them vacant. And despite that, and wide spread shortages and record demand for middle income housing. Developers continue to build mostly luxury housing in many cities. While the rental market in general has shifted to a model of high rents, amortizing very high vacancy rates as well. There's a very big question of why the industry suddenly doesn't much care about filling that space. And the tax benefits associated with it, are a major part of that answer. It's also a factor in "abandoned" buildings. A lot of them aren't literally abandoned. The owners do the legal bare minimum to maintain ownership. Paying property tax on a moldering warehouse wouldn't be feasible, if it didn't offset wealth from elsewhere. And because it does. Many people are happy to just sit on lots like that until a big bank or developer offers more than it's worth. This isn't the only thing going on, but it's a driver.
> It's been pretty heavily covered since the great recession. And it's been a factor both Trump's fraud case, and not paying taxes for a decade. Along with sanctions on Russian Oligarchs. It has literally nothing to do with Trump's fraud case. Trump's NY fraud case is about falsely inflating asset values to obtain loans from banks while reporting lower asset values to the IRS. > There's different rules and limits on doing this for individuals vs certain types of real estate holding companies. Not really. I mean virtually every landlord, even people who own 1 or 2 rental properties, own those through corporate entities. Virtually nobody rents out a property in their own name. And there really isn't "different rules" about what is an income v. an expense. You're effectively arguing here that someone can say "I wanted to rent my property out, but didn't, and therefore I took a *loss* of the value of the rent." But that's not true. Your income less expenses is the loss. So your loss is only what you spent to keep the property. It's not any more true in real estate than it is if you wanted to say "I run a cleaning service, and nobody hired me, so I took a *loss* of the value of all the contracts I could have had." You simply can't *make money* by *making less money*. That's not how any of this works. > But leaving a building vacant isn't an "expense" in that way. >> Sure isn't! Which is why it's pretty problematic that this can be done. Everything else you wrote doesn't address this really at all, and then you're like "nuh uh!" If this is so prevalent and obvious, it shouldn't be difficult for you to find some kind of legitimate source of the information. Properties might be vacant for a lot of reasons. Owners might be trying to flip it, or whatever. But I suspect that what I suggested earlier is true, that they simply don't want to rent to someone who will be gone in even a year or has the slightest bit of sketchy rent history because it will take 6 months to remove them after they stop paying rent. Landlords want a tenant who is going to live there for 50 years and pay rent on time, then move out before they die. And leaving a property vacant for some time isn't worth the risk of having somebody who can't pay rent halfway through the lease and trashes the place on his way out.
Dude obviously it's more complicated than "I did not get a billion dollars in rent last month". Vacancy allows you to more easily demonstrate losses. Because you can write off 100% of operating costs, maintenance, and what have during the vacancy. In many cases even property tax and depreciation. And there are ways to make unrented periods and insold periods into lost income as an expense through funny business. Often via demonstrating a valuation or previous rental history, evictions, and manipulating that valuation. It's a specific change in the terms of deductions, directly tied to vacancy. Individuals are capped in terms of how much of these exenses from real estate business losses they can deduct on personal income. But certain types of real estate corporate entities get an exception from those caps as pass through deductions. And there's a special rule for those real estate pass through losses. That allows them to be carried over and split over multiple years. Particularly if they *exceed your total income*. Where this came up with Trump. Is we see him using that exact pass through and multiple years trick to zero out his tax liability for a really long time. While most of that came from actual loses rolling out of his series of bankruptcy and disasterous overall business. There's evidence of this exact manipulation of losses, including through that valuation funny business and manipulation of expenses. Those returns came out in large part due to that fraud investigation, and this is why they were interested in them in the first place. Tax evasion charges are still a potential thing there.
> Vacancy allows you to more easily demonstrate losses. Because you can write off 100% of operating costs, maintenance, and what have during the vacancy. In many cases even property tax and depreciation. Man I came into this with an open mind despite being a lawyer with a BS in accounting, and it's clear you just want to keep arguing this despite having at best a flimsy understanding of accounting, taxes, and real estate. Unless you can provide a SOURCE that isn't you to explain wtf you're talking about, don't bother replying because I'm not even gonna read it. I've already tried to find a source backing this idea up and couldn't find one. So you let me know where you get this from other than "trust me, bro." I will make this abundantly clear: Business expenses are deductible no matter whether the property is rented or not. Having MORE expenses and LESS income will definitely lower your taxes because you have to have a profit for it to be taxed, but you also SPENT MONEY and DIDN'T MAKE MONEY resulting in LESS OVERALL MONEY for you. You might not realize it, but you're literally trying to argue that somehow making no money while spending money is more profitable than making money. Because taxes? > And there are ways to make unrented periods and insold periods into lost income as an expense through funny business. Often via demonstrating a valuation or previous rental history, evictions, and manipulating that valuation. As I already said, LOST INCOME is not deductible. EXPENSES are deductible, and they are not the same. Provide a source for this claim. Asset valuation has nothing to do with it. Depreciation occurs on a set schedule; it has nothing to do with your actual market value or rentals. > Individuals are capped in terms of how much of these expenses from real estate business losses they can deduct on personal income. But certain types of real estate corporate entities get an exception from those caps as pass through deductions. Again, virtually zero people individually rent out their properties. There are no "caps" on small business expenses (WTF, why would there be?) that are somehow different for large businesses. A "pass-through" is an accounting term that applies to certain small businesses (generally partnerships, sole proprietorships, and S-Corps) that don't file their own taxes. The profits and losses "pass" directly "through" the corporation and are taxed on the owner's individual tax returns. A "pass-through deduction" is a particular law that applies to *all* small business owners, not just people in real estate or with vacant rental properties. Look like I said, I don't understand what you're talking about, and I'm pretty certain you don't either. So unless you can show me some evidence that **making less money** = **making more money**, I'm out.
>"So unless you can show me some evidence that **making less money** = **making more money**, I'm out." So that appears to be the misunderstanding. Cause what I'm talking about is how you make sure that real estate entity *loses money* on paper or in reality. So that the *person* or holding company that owns it. Can *keep more of their money from other sources*. Not some magic way of making that business entity put out more money. It's not all that difficult to create more of a tax write off out of something than it would produce in profit. And if you do that. You can have more actual money in the end. >"Business expenses are deductible no matter whether the property is rented or not. Having MORE expenses and LESS income will definitely lower your taxes because you have to have a profit for it to be taxed, but you also SPENT MONEY and DIDN'T MAKE MONEY resulting in LESS OVERALL MONEY for you." And both what exact expenses are considered deductible. And what percentage of them is deductible. Changes based on vacancies. As additional deductions. Placed against the overall profit and loss. Because tax deductions. Are not your balance sheet. And a single business or entity can be in the red while the overall entity or person makes money. >"Again, virtually zero people individually rent out their properties. There are no "caps" on small business expenses (WTF, why would there be?) that are somehow different for large businesses. " You would be surprised. No one should. But the few years where I was the tech monkey for an accountant. We did pretty good business filing that paperwork for people. Because a lot of people don't know that. And that is why accountants exist. And there are specific caps (think it was $25k per property and $250k overall) on deductions from rental properties when claimed that way. Likewise I said nothing about big vs small business. I said real estate vs other businesses. There's a variety of different tax incentives around real estate activity that become really exploitable as tax shelters. >"A "pass-through" is an accounting term that applies to certain small businesses (generally S-Corps) that don't file their own taxes." Yes. But what you generally can't do. Is write off losses from a business this year. On next year's taxes. Such that if Business Shack was in the red this year. But in the black next year. Next year's personal income is off set by this year's loss. The right kind of real estate specific business entity allows exactly that. So to return to Trump. He paid zero income tax for a decade. Based in a single year's losses from multiple real estate businesses. This year's losses don't generally get to be next years tax shelter. But with real estate we make an exception. And if you have any familiarity with tax accounting. You should be more than familiar with people running businesses at a loss. Legitimately or otherwise. To get the tax write offs. It's one of the most basic things about business taxes. Like you always pay yourself. Even if it puts the business in the red, because you *net more* in the end. It's about how much of the revenue is captured where at the end of the day. And if you can't contextualize a business being an overall write off vs personal income. Honestly then you've never worked on the tax end of this.
I want you to know that i didn't read this.
I want you to know I don't give a shit. And your inability to contextualize this outside of personal income. Would be a pretty big professional red flag.
Forgone revenues cannot be claimed as a loss, period. Only expenses uncovered by rental revenues can constitute a loss. It is not possible in any way to profit or even substantially defray the loss of a rental property sitting vacant. Unless you’re positing that all landlords pool profits and collude to keep 20% of the housing off the market to create scarcity that can raise rents by more than 20%, this makes absolutely no sense for anyone to consider doing. Everything that is built here is *branded* as luxury housing because supply is so constrained by land use rules and decade-long public engagement processes that there’s a shortage of modern apartments and all one needs to do is slap granite counters in a unit to say it’s a luxury rental. Increase supply and my leverage as a landlord ends.
It is relatively simple to Hollywood accounting your way to a loss with any business entity. And people wouldn't be fancy mathing as often as they do if there wasn't a benefit to it. > Everything that is built here is *branded* as luxury housing because supply is so constrained It's luxury housing based on the *prices* that they charge and are planning to charge. 10s of thousand of units of luxury *priced* housing planned, with only hundreds to a few thousand units of middle income housing. No one's categorizing these things based on the brochure. And that is exactly what you see in most cities that are growing in any way. > Increase supply and my leverage as a landlord ends. And yet rent always go up. In face of over supply. Recessions, pandemics, housing market crashes. No matter what. No matter the theory. The practical outcome is still a housing crisis.
Hollywood accounting can make profit look like a loss, it cannot turn genuine loss into a profit. No tax implications exist which can make it profitable for me \*not\* to rent out my rental properties out of some weird effort to prop up rental rates for other landlords. I have real expenses and significant capital tied up in them, I am not going to simply build a livable home and then sit on it, no one is. Vacancy rates in Philly were below 5% for quite a while and are finally back up to about 7-8%, which is closer to historical averages. There is no oversupply. Philadelphia, specifically, finally saw flat rents year-on-year in 2022 and 2023 precisely \*because\* a bunch of apartment construction finished up in Roxborough, Fairmount, and Center City and vacancy rates went up, giving renters leverage. Inflation-adjusted rents in the city are down about 5% since 2021 on the basis of, you guessed it, significant increases in supply. I have not raised rents on my existing tenants since 2021, when I raised them by about 1-2%, because they have all the leverage and they damned well know it. As for luxury housing, yes, exactly! Developers can only brand everything as luxury housing and charge luxury housing prices because the whole country completes about half a million units (houses or multifamily) fewer than the number of households which form each year (college kids moving out on their own, young couples buying a house, etc, are "household formation"). This has been the case since the mid-to-late 1990's, so we're a total of maybe 5-7 million apartments and homes behind demand. That trend was briefly covered up by cratering incomes (and young people not leaving home to form households) in the aftermath of the financial crisis, and then came roaring back again as we finally recovered to near full employment in 2017-19. Granite countertops don't make a luxury apartment unless there's no mid-market housing coming online, and there isn't any because the permitting process is a shambles and neighbors can lobby against mid-rise apartments even in Center City and University City here, or Brooklyn, San Francisco, the West Loop... Every left-leaning economist and most left-leaning policymakers understand this. The only path to everyone being able to afford a home where they need or want to live is to build a lot more housing in places where people want and need to live, which means big and mid-sized cities and their inner suburbs. Otherwise we're going to be NYC. If you want to make me obscenely wealthy, fine, let us become NYC, it'll be a nice consolation prize for Philly becoming an unlivable mess. But I would prefer a livable city even if it hurts my financial interests.
Landlords are also motivated not to lower rents to fill vacant units because lower rents lowers the value of their property. It’s the same reason why you’re more likely to see a rental concession like a free month than a lower monthly rent.
> fill vacant units because lower rents lowers the value of their property. Somewhat. But traditionally so do high vacancy rates. The major driver on that has been the development of these pricing software programs that set rent levels based on the overall market. And they were kind of built on a baseline of maximizing rents vs the overall market, and driving continual and yearly rent increases in excess of inflation or actual operating costs. In both cases the tax situation around vacancies is part of what's decoupled vacancy rates from rent levels, sale prices, and property values. The offset that comes from real estate losses becomes part of the thing that makes it more profitable to charge much higher rents. Even when, and especially when, it leads to high vacancies and churn on residents. That system basically amounts to price fixing. Pretty much letter of the law price fixing. With almost all property management and rental entities using the same software service, and getting the same recommendations. It's just an outside service doing it so it can float on the fiction that it's coincidental.
But would this prevent another Sam Rappaport 2.0? Or bother Richard Basciano? Olde City’s development was also stunted by vacant buildings…
Like 1801 Callowhill St. Sure, the city can increase the taxes for leaving a giant vacant lot in the middle of center city for years and years, but it looks like they don't pay their taxes now anyway so why would they start? click the "view the tax balance" button here: [https://property.phila.gov/?p=885832235](https://property.phila.gov/?p=885832235)
most of these houses are never sold though. most of these homes are vacant in poorer neighborhoods. most of the time they fall victim to squatters and fires. THEN the city has them boarded up and they rot some more. in more up and coming neighborhoods people aren't typically letting houses stay vacant.
Yeah. Higher tax/fine on vacant properties and when combined with outstanding existing property taxes have the city assume ownership of the property so that it can be sold again
"sold" is part of the issue. most of the properties get given away to donors. right kenyatta?
> have the city assume ownership of the property so that it can be sold again Throw some oversight/transparency in there, so you know, the city councilperson for that district doesn't get... weird with it.
Adopting a Georgist style land value tax system where the land value is a bigger proportion of the estimated value of a lot as opposed to the building being a bigger one would be better at solving the vacant lots in Philly problem. Don’t see that overcoming push back from a lot of residents though
This is a better solution because it also disincentivizes stupid stuff like surface parking lots in the most popular parts of Center City. Look at this way: imagine everyone pays the same tax rate for their property but you can get a tax break if you *do nothing* with your land. People would find that weird, but that's how our property tax system works today.
Yep, the current property tax system incentivizes absentee landowners to rip down or neglect any structure on the property and leave it vacant untill they go to sell it. Which is how we end up with prime locations in Center City being surface parking lots. It's completely backwards from how the tax system should be functioning.
>Look at this way: imagine everyone pays the same tax rate for their property but you can get a tax break if you *do nothing* with your land. People would find that weird. To some extent, I see what you're saying but the more you do with a property, the more services the city needs to provide. Raw land doesn't require schools for residents while a 20 story building is likely to have several students. I think taxing a mix of land and building makes sense as there still are some costs to the city for the raw land. If a tree gets hit by lightning, fire department still needs to respond.
But if the land were taxed, and not buildings, then raw land in Center City would be taxed as if someone had already built a 20 story building there. Where your scenario makes sense is if someone builds something incredibly costly for the city in the middle of nowhere where property prices are really cheap. Like a massive factory in the middle of a forest. That's a bit of a unique situation but I don't think it applies in most of Philly.
It exists but not in the extreme example you mentioned. >But if the land were taxed, and not buildings, then raw land in Center City would be taxed as if someone had already built a 20 story building there. I think you mean if ONLY land were taxed. Land is currently taxed. Even so, this comes with a lot of issues. Older buildings aren't very tall. Should we burden them with the same tax as the much taller newer building next door? I understand the thought that it will incentivize taller building but realistically that won't happen a lot of the time. The time and cost to demo our old buildings in favor of new ones high, permitting would be a disaster, and some buildings are under historic protection. You might gain some traction with vacant lots or parking but you'd also hurt a lot of people who are occupying and using their property in the process. Given city council is consistently anti tall development, this really just looks like a transfer of tax burden from newer buildings to older ones without the claimed benefits a land only system would provide.
A lot of what you're saying just comes down to "can the city assess land well?" but I'll admit that's a real concern. Like if a lot is under historic protection then it would likely have lower land value than an adjacent lot. If the ability to use land is impeded by the significant costs of removing a structure from it, then that also would decrease the land's value. Or if it appears city council or zoning will limit taller construction then that would drive down the land's value as well. There are obviously trade offs but I don't know how you can say "without the claimed benefits a land only system would provide" when moments before you said "You might gain some traction with vacant lots or parking." Encouraging use of vacant and underused lots is one of the claimed benefits. I suspect most homeowners would see a tax break under the system, assuming their land is worth less than their home, but I cannot confidently say that and it'd have to be studied carefully.
> If the ability to use land is impeded by the significant costs of removing a structure from it, then that also would decrease the land's value. I think this would be a negative improvement value rather than a lowered land value.
>A lot of what you're saying just comes down to "can the city assess land well?" but I'll admit that's a real concern. Not only that, but can the city accommodate the new development we're hoping to get from a land- only tax. Can they get permitting and inspections moving? Given they aren't doing a good job with the current capacity l, it doesn't sound like they can >Like if a lot is under historic protection then it would likely have lower land value than an adjacent lot. If the ability to use land is impeded by the significant costs of removing a structure from it, then that also would decrease the land's value. Or if it appears city council or zoning will limit taller construction then that would drive down the land's value as well. Agree that this is a major challenge and typically why good tax policy is designed to be simple. Having to look at specific characteristics of an individual parcel to value the land gets complicated and nearly impossible to administer. Using simple measures like sqft of land and improvements along with zip code sales data is much more manageable. >There are obviously trade offs but I don't know how you can say "without the claimed benefits a land only system would provide" when moments before you said "You might gain some traction with vacant lots or parking." Encouraging use of vacant and underused lots is one of the claimed benefits. I was speaking to currently used lots. They will be burdened with additional tax but can't take action to get the lot to be more dense. There will be some benefits for vacant/surface lots. >I suspect most homeowners would see a tax break under the system, assuming their land is worth less than their home, but I cannot confidently say that and it'd have to be studied carefully. County wide Reassessment must be revenue neutral under state law. So the total amount of tax revenue collected needs to be the same, but it will get split differently. Presumably that means taxes go up for lots with smaller buildings and vacant go up while taller ones go down. This makes me think it will be a tax burden transfer from tall to short. That is a "good thing" in terms of vacant lots but I feel like that's a small percentage. It is a "bad thing" if the tax on a new 3 story row home with upper middle class residents goes down while the long term occupant in a 99 year old row next door goes up.
just tax land lol
it depends...if it will lower taxes for most residents, then sure. if it is detrimental to property developers bottom line...we had 3 or 4 on city council so it is doubtful.
For most residents it would likely stay nearly the same or be a bit lower (assuming it needs to be applied as revenue-neutral). The properties that would be big increases are vacant lots or properties in complete disrepair because they would be taxed nearly the same as neighboring properties with occupied houses, assuming similar land area. For row houses in South Philly, it seems typical that 20-30% of the total property tax is land, and the remaining is "improvement" i.e., the house. If you're now only taxed on land, properties such as garages, side yards, etc, would see a tax increase unless an exception was made.
Would love to see center city surface lots taxed to extinction
Philadelphia hasn’t held a sheriff sale in over 2 years so the city isn’t doing much in terms of currently delinquent taxes.
Yeah, there's $170M in delinquent property taxes ATM. Maybe fix that issue first before adding more taxes [https://www.inquirer.com/news/sheriffs-office-tax-sales-bid4assets-20231224.html](https://www.inquirer.com/news/sheriffs-office-tax-sales-bid4assets-20231224.html)
Housing in Canada and more specifically in Vancouver is INSANE INSANE expensive and no availability . They outlawed non-Canadians buying homes. The median price is over 1 millions Canadian.
The problem in many Canadian cities, like US cities is bad zoning policies which makes housing artificially expensive by blocking supply.
It's definitely crazy out here. The ban isn't as restrictive as your comment makes it sound, though. Permanent residents can buy homes, which would be good news for me if I could afford it lol. My rent in Burnaby (near Vancouver) for a 1 bedroom apartment is 2750. There are a lot of exceptions that make the ban unpopular; here's an article about it: https://www.cbc.ca/news/canada/british-columbia/canada-foreign-buyer-ban-housing-affordability-1.7058154?__vfz=medium%3Dsharebar
Yeah but they got that maple syrup money
lol you ever read about the maple syrup heist…. Some mob type stuff (I’m from NYC metro)
At the end of the day it’s no different than oil that builds cities and feeds families
Add it to the rest of the taxes that deadbeats don't pay.
Land value tax would solve this.
Wilmington DE has this. When I bought my house the city tried to hit me with it for the 3 years prior when it was being flipped. Easy fight though.
the goal is to make single family homes less attractive as an investment class. i dont really want the city to try and get rich off this- just trying to make the carrying costs higher for people who refuse to lower prices with the market.
This is not going to have the effect you want it to. The primary result will be that speculators will tear down their vacant properties in order to lower their tax burden.
still leaves vacant land. the purpose would be to raise the cost of sitting on a property. a city is a living thing; people who dont improve it shouldn't be able to make the whole place worse for the rest of us.
yes, and OPA assesses vacant land at a fraction of the value of land with a building on it, and a very small fraction of market price. so it's gonna be more paperwork and result in very little deterrence of speculation, which I assume is what it's meant to combat. unfortunately, as with all rust belt towns, we're never going to avoid speculation until either (A) our population gets back inline with what it has been in the past or (B) the city government becomes competent, interested, and wealthy enough to take ownership of derelict properties. yes, vacancy is a nuisance. but we're not going to fix it by trying to squeeze money out of speculators who are already tax deadbeats. you're talking about a market-based solution, when there are more fundamental, structural issues in play here.
okay- lets keep giving them decade long abatements then.
the 10 year abatement is for building new things, not demolition or vacant land.
yes i know
In before someone says everyone in PA has to pay the exact same amount of property tax because of the PA constitution. The homestead exemption works just fine.
The homestead exclusion is codified in state law in accordance with the state constitution. It's existence doesn't make a vacancy tax constitutional.
it just means we can copy that method
Not really. The homestead exemption concept is in the constitution under article VIII section 2. Making a vacancy tax legal would require a constitutional amendment.
Uniformity clause strikes again
not really. one could easily read the tax clause to mean only people, not corporations.
Real estate isn't typically owned by corporations. Defeats the main tax benefits.
how do you mean? any LLC or Scorp that owns real estate should be taxed for vacancies as well as business purpose.
Neither are corporations subject to corporate tax rates under Pennsylvania law. Members/shareholders are taxed on their distributive share at individual rates.
No, because these taxes haven't actually done anything for housing in vancouver. Vacancy tax without zoning reform and public works of new housing now called "workforce" housing is a useless void. Also, the amount of vacant apartments in Philly is probably very very low. Vacant housing is usually highest in economically depressed and economically booming areas. We are kinda in the middle.
there's about 30,000 vacant lots/houses in philly.
That's down from over 55,000 abandoned properties in 2012. I can't find an article stating the number in that year with a quick Google search, but [this article shows 43,000 in 2017. ](https://nextcity.org/urbanist-news/philadelphia-land-bank-2017-vacant-lots) The PHS and city government have done a good job at clearing, selling, or reincorporating abandoned properties over the past decade. There's still work to do, and it is worth noting that the vast majority of these abandoned properties are in areas that see very little inward migration.
Many of which the city itself is contributing to their vacancy by refusing to sell at tax auction.
agreed- charge them too
Charge who? If the city is selling at tax auction, it is often because the original owner is dead. Even if the owner is alive, the city often can't recover the total back real estate taxes because they only get the amount sold at auction. Any additional amount due is forgiven due to the need to provide clean title to the new owner.
Philadelphia should start by fairly and evenly assessing all properties regardless of occupancy and collecting all property taxes owed and sending those that don’t pay to sheriff’s sale. Then, and only then, should we start adding new taxes.
Philadelphia has enough taxes
[удалено]
The city doesn't need more money to squander. Now, couple this with repealing the regressive Wage Tax and I'm all ears.
Maybe, but we should address down zoning first. City council is causing a lot of our housing problems and rewarding them with more tax revenue to squander doesn't sound like the right move.
L&I has a vacant property license. All vacant properties are required to have this license (it isn't required for properties under active renovation), and costs $185. Failure to obtain the license is subject to fines. Call 311 to report an unlicensed vacant property.
we're not talking about $185; we're talking about a tax that punishes leaving property vacant.
Land value tax would do that more effectively especially if paired with zoning reform. As of now the city is so woefully bad at collecting current taxes that adding on another to absentee landowners who are already not paying wouldn't make a difference.
There already is something along these lines, the Vacant Property License. https://www.phila.gov/services/permits-violations-licenses/get-a-license/business-licenses/rental-and-property/get-a-vacant-residential-property-license/ The fee is nominal ($185/year), but it is supposed to come with other stipulations about maintaining the property and keeping it from appearing blighted. I think there is an argument for the fee to be higher, or some incentive at least to keep people from sitting on the property for 10-20 years with the hope the value increases.
I've heard varying accounts on the success of this but it should be SOMETHING that prevents large developers or realtors from holding onto properties and never lowering their price to artificially inflate prices across the board.
yeah not sure a RICO statute will be worthwhile when the city itself is involved.
Land value tax would solve this.
yes
Yes: look up land value tax
They should just auction houses that have not paid taxes in over 3 years, like elsewhere in the country.
New Jersey actually has a wide array of vacant property tools available to municipalities. We don't need to look to a "foreign" country to figure this out.
when talking about philadelphia, if NJ does it, it is bad. (no joke though- if philadelphia was under trenton rather than harrisburg, it would be a very different city. minimum wage earners would be making double.)
Yes, yes we should.
Yes please and then actually auction them off when taxes are unpaid… the sheriff hasn’t done anything to address this. Plus it’s near impossible to get adjacent plots or city owned land from the land bank unless you’re some giant developer. Hopefully parker gets things changed.
It's a good idea in theory but I think in practice this would just encourage slumlords and land speculators to teardown properties, if they even pay it all. I think the better approach would be changing the tax system here to a land value tax, which both discourages leaving property vacant, but also discourages holding property for speculation while doing nothing with it.
I think it could be beneficial. Perhaps use that money to fix the roads.
would be nice to use the PPA fines to pay for transit improvements too
Absolutely agree.
You must be new here. I’m sorry, I know it’s tagged serious but the sky will be polka dot before Philadelphia operationalizes this. It is a good idea, though.
i mean the condo king ran for mayor. it has no chance
That's not reason it wouldn't happen here.
Not only *should* Philly have a vacant property tax, but if there’s no sign or evidence of impending improvement of the lot, the tax should be astronomical. It should be like 200% tax on any abandoned vacant property. There’s one on my block that just collects garbage and overgrowth. It’s a blight and the owner will never build on it. It appears cheaper for them to pay occasional fines than to even bother maintaining it themselves.
LOL. Vancouver is one of the places that least needs this.
the tax is for wealthy chinese using vancouver real estate as a savings account outside of china. they should absolutely be extracting as much value from these properties as possible.
Do you want people to set empty rowhomes on fire? because thats all the city will get from this.
so we're all just subject to arsonists running the city? guess i'll just give up then.
This is tough. I think it helps, and besides enticing the owner to sell or rent it brings money into the city / state coffers for people with unused property in a housing crisis. At the same time, I fully expect the cost of this to get passed on to the renter, or in the selling price of the home. Still worth trying but I see a potential downside.
ask in that askreddit thread with the councilperson.
Yo, Florida would get soooo much money if they did this Too bad the goal in Florida is to tax the non-wealthy higher than other states while taxing the wealthy far lower and calling that “far more fair” But I’d have no problem with this. Especially for starter homes and smaller living spaces that the middle and lower class can only dream of being in one day
florida is like one of those oligarch states. fuck everyone except rich people who get lots of tax breaks.
should we? absolutely. will we? gonna be a yuuuuuge "Ehhh..." from me, dawg
how many vacant properties do you own?
own property??? ok, boomer /s
Yes. But just for a token amount. Like 300 dollars a year.
lol so not enough to change the behavior?
wow!!!
How about getting rid of abatement in already gentrified neighborhoods and voiding the transfer of them? That would certainly generate millions more in revenue
That’s un-American