Skip to content
Business
Link copied to clipboard

Philadelphia real estate agents nervously await the effect of new property assessments

Sharply higher property taxes under Mayor Nutter's Actual Value Initiative reform will force potential home buyers in popular city neighborhoods, such as Queen Village, Fairmount and University City, to redo their math, real estate observers say.

The renovated singing fountain and surrounding nabe at East Passyunk and Tasker TOWN BY TOWN. This week: Passyunk Square, from Washington to Tasker and Sixth to Broad, is a melting pot anchored by a traditional Italian neighborhood but with a big helping of Southeast Asian and Mexican in the mix. At 8th Street, you see Termini's Bakery on one corner and a Mexican bicycle repair shop on the opposite one. We talk to all groups about how this affects real estate values and look at some infill construction.
Please shoot before Friday, Feb. 8, and shoot for both print and photo gallery, please. House for sale 1157 S. Juniper $285,000 House for sale 1536 S. 13th St. $399,000 Others: 700 block of Sears Street is a nice little side street and a pocket park Infill construction 1200 block of S. 12th and Cedars Village at Ninth and Ellsworth The Southeast Asian food markets and business at Sixth and Washington Mexican restaurants along Ninth Street along with Genos and Pat's The renovated singing fountain and surrounding nabe at East Passyunk and Tasker You can get a really great shot of the entire neighborhood including the wonderful decks newcomers have added from the fourth floor deck of Franco Borda at 13th near Tasker cell # (215)534-350602/05/2013  ( MICHAEL BRYANT / Staff Photographer  )   02/05/2013  ( MICHAEL BRYANT / Staff Photographer  )
The renovated singing fountain and surrounding nabe at East Passyunk and Tasker TOWN BY TOWN. This week: Passyunk Square, from Washington to Tasker and Sixth to Broad, is a melting pot anchored by a traditional Italian neighborhood but with a big helping of Southeast Asian and Mexican in the mix. At 8th Street, you see Termini's Bakery on one corner and a Mexican bicycle repair shop on the opposite one. We talk to all groups about how this affects real estate values and look at some infill construction. Please shoot before Friday, Feb. 8, and shoot for both print and photo gallery, please. House for sale 1157 S. Juniper $285,000 House for sale 1536 S. 13th St. $399,000 Others: 700 block of Sears Street is a nice little side street and a pocket park Infill construction 1200 block of S. 12th and Cedars Village at Ninth and Ellsworth The Southeast Asian food markets and business at Sixth and Washington Mexican restaurants along Ninth Street along with Genos and Pat's The renovated singing fountain and surrounding nabe at East Passyunk and Tasker You can get a really great shot of the entire neighborhood including the wonderful decks newcomers have added from the fourth floor deck of Franco Borda at 13th near Tasker cell # (215)534-350602/05/2013 ( MICHAEL BRYANT / Staff Photographer ) 02/05/2013 ( MICHAEL BRYANT / Staff Photographer )Read more

Sharply higher property taxes under Mayor Nutter's Actual Value Initiative reform will force potential home buyers in popular city neighborhoods, such as Queen Village, Fairmount and University City, to redo their math, real estate observers say.

Every additional $1,000 in annual property taxes reduces the amount a buyer can pay for a house by about $18,500 at current interest rates, according to an industry rule of thumb, Noah Ostroff an agent with Coldwell Banker Preferred, said Tuesday.

Ostroff and others in the real estate business hope the property-tax reform, which is designed to base taxes on actual market values, does not push the city's real estate recovery off-track.

"Philadelphia is going through a major resurgence right now, with residential developments as well as the commercial market," Ostroff said. "I want that to keep going for the next 10 years. I don't want to see the tax changes get in the way of this resurgence."

Beyond the home buyers' market, the shift in tax burden from large commercial properties, many of which are in Center City, to residential neighborhoods will have repercussions in the rental market.

"It's going to impact everyone. It's going to shift the whole city. It's going to shift neighborhoods," said Margaret Barnes-DelColle, also of Coldwell Banker Preferred.

Renters used to living in places like Bella Vista or Queen Village might have to move to lower-priced areas, such as Pennsport, as landlords pass on higher taxes to their tenants, said Barnes-DelColle, who has lived in Pennsport for 18 years and owns rental properties there.

It's possible to raise monthly rent $25 or $30, Barnes-DelColle said: "No one is going to move for $30 more a month." But a $100 monthly increase will force people to think about moving, she said: "They are going to have to go to a lesser neighborhood."

Alan Krigman, a landlord with 11 rental properties in University City, said the impact of higher taxes on many of his tenants could be staggering.

He said his cheapest unit is a tiny efficiency for $445 a month. To cover higher property taxes, Krigman said, he expected to increase that rent $25 a month. "For somebody who can only afford a tiny apartment because it's $445, $25 is a lot of money," he said.

In the city's Mayfair section, where incomes are relatively low, landlords have little chance of passing tax increases through to their tenants, said Chris Artur, of Artur Realty in that Lower Northeast Philadelphia neighborhood.

Renters can't afford to pay more, he said, adding, "The landlords are going to take a hit here."

As for prospective home buyers, higher taxes directly cut their purchasing power, which is based on their incomes compared to the amounts they have to pay for mortgages and related costs, Artur said.

A person who qualified for a $150,000 mortgage last week might now be qualified for less, based on substantially higher real estate taxes, he said: "Now I'm only a $125,000 buyer, not a $150,000 buyer."

The Nutter administration has said that more than two-thirds of city homeowners would receive lower property-tax bills or increases of less than $400. But many properties fall outside that range.

Of the city's 452,377 residential properties, 37,045 parcels, 8 percent of the total, would see 2014 property-tax bills increase more than $1,000 under the Actual Value Initiative reform, an Inquirer analysis found.

By contrast, 5,088 parcels, or 1 percent of the total, would see bills reduced by more than $1,000, The Inquirer's analysis found.

City officials say the numbers could change as they continue to refine the data. The mayor and City Council still must agree on the tax rate. The Inquirer analysis was based on a tax rate of 1.25 percent.

In addition to the impact of tax increases on the prices that buyers can afford to pay, house prices also could come under pressure if there were a surge in the number of properties offered for sale because homeowners decide they cannot afford the higher taxes, brokers said.

Higher real estate taxes coming amid expiration of residential tax abatements under a program started in the 1990s to spur development in the city could also wreak havoc.

Homeowners with expiring tax abatements might not be able to afford to remain in their residences under the new assessments based on actual value, Ostroff said.

In addition, the sale of a property with remaining years of tax abatement will likely force down the price of a neighboring house that does not have the abatement.

"That's all speculation, but if you play it out, it makes sense," Ostroff said.

To view an interactive map that shows tax changes by neighborhood, go to philly.com/

taxchangesEndText

Staff writer Dylan Purcell contributed to this article.