On the House: Taxman missing out on Phila.'s real-estate boom

It didn't matter when Philadelphia's median home price was $59,000. Back in 1990, the children of longtime owners of rowhouses in the river wards and West Philadelphia walked away from those properties when the last parent passed away.

The houses weren't worth the taxes, and no one was interested in them except those who broke the locks and stripped the insides of copper and anything else they thought was worth a buck.

Some neighborhoods didn't even have real-estate agents. If someone's son or daughter needed a house and a neighbor had died, the transaction was done off the grid but recorded with the city.

Real-estate agents from the suburbs stayed there. If you saw one in the city, he or she was likely lost.

Today, however, the streets of Center City and its ever-spreading adjacent neighborhoods are paved with gold - when it comes to housing, that is.

"I have always seen suburban agents trying to get a piece of the Center City real estate pie," said Mark Wade, an agent with Berkshire Hathaway Home Services Fox & Roach Realtors in Philadelphia. "As the market heats up, I tend to see more agents take that drive into town - be it with buyers or to take listings."

Economist Kevin Gillen has data showing a much hotter city market than suburban one these days. Thus, suburban agents are shuttling in those downsizing buyers and making big commissions and co-op fees from luxury condo developers.

Most also are evading Philadelphia taxes, according to City Controller Alan Butkovitz. More than half of those tracked by a city study did not have business licenses or tax accounts, he said.

From 2010 to 2014, the noncompliant agents with firms in Bucks, Montgomery and Delaware Counties conducted at least $56 million in transactions. Since commissions were not reported to the city and taxed, Philadelphia lost about $380,000.

Butkovitz wants the city to come up with a way to ensure that the taxes are paid.

I would think that what the city needs to do first is to inform suburban real-estate firms that there are such requirements, maybe through Realtor groups.

Martin Millner, of Coldwell Banker Hearthside in Yardley, said he did a couple city transactions many years ago and never heard of the requirement.

On the other hand, John Duffy, of Duffy Real Estate on the Main Line, does a lot of business in the city and is aware of the rules.

"All of my agents pay the city tax on their portion of the commission, and the office pays on their part," Duffy said. "I also have the privilege of paying a business privilege tax to the Borough of Narberth and the Township of Radnor, since I have offices in each municipality."

Weichert Realtors agent Barbara M. Mastronardo is based in Media, Delaware County, and has occasion to sell houses in the city.

"I usually settle any of my city sales in the nearest surrounding county," Mastronardo said. The Pennsylvania agreement of sale "stipulates that property settlement occur in either the county the property is in, or an adjacent county."

Dranoff Properties' sales and marketing director Marianne Harris says she suspects most have absolutely no idea about city rules, but can't say for certain.

"Of course, we just send their commission checks to their brokerage offices, and they take it from there," Harris said.

Both she and Wade referred to the recently reported fact that baseball players have to file taxes in the cities in which they play away games.

Maybe a baseball analogy will work with suburban agents, or maybe they'll choose to play just the home games.

 


aheavens@phillynews.com

215-854-2472 @alheavens