Due to Mayor Michael Nutter’s new Actual Value Initiative property tax system that City Council put in effect at the end of 2012, both Philadelphia homeowners and tenants could see drastic changes in their taxes and rent in the upcoming year.
“I think the [property tax] reassessment is really going to shake the city up,” said City Controller Alan Butkovitz.
Council approved the AVI tax system in 2012. Issues facing the council now are what the new tax rate will be for taxpayers and whether there will be exemptions for senior citizen homeowners, low-income residents and other qualified individuals, Butkovitz said.
“The Nutter administration is absolutely committed to this new form of taxation,” he said.
According to the city, the purpose of the new tax system]is to “make sure that all values are assessed fairly and in compliance with state laws, statutes and industry standards.”
In other words, the city is ensuring that if homeowners have similar houses or if they differ greatly in “size and condition,” they are taxed appropriately. AVI amends Philadelphia’s old property tax system that has been, Butkovitz said, out of date since 2003.
Butkovitz said more than 298,000 properties were looked over and reassessed to match the new AVI system, but objections arose when the new tax rate was off by 30 percent of the properties’ original market prices.
“I think there’s a very serious question about the accuracy of these new assessments,” he said.
“Under the law, the entire plan is only allowed to be inaccurate up to 15 percent between what the assessed value of what the property is and what the market value is,” Butkovitz added.
The most accurate way to assess properties is to make sure that they are all assessed at market value, but from Butkovitz’s analysis of new assessments under AVI, it is inaccurate by approximately 30 percent to 35 percent.
“If that’s true, then the reassessment is invalid,” Butkovitz said. “It would be no more accurate than the system it replaced.”
Under AVI, popular areas that house young families and homeowners such as Center City and South Philadelphia will be impacted the most, Butkovitz said.
Going from roughly $800 to $1,200 a year in property taxes alone, he said the “positive image” of the city will decrease and could force a large amount of residents to vacate to the suburbs.
“Longtime residents are going to face enormous tax increases and effectively be forced out of their neighborhoods,” he said.
Initial evaluations or the proposed property assessments under AVI were mailed out to homeowners on Feb. 15. These new assessments were only a predictor to what homeowners’ future taxes will be for their property. Homeowners aren’t expected to know their new tax amounts until October or November 2013, Butkovitz said. Those will go into full effect in February or March 2014.
Homeowners and housing businesses won’t be the only ones that could see an increase in their property taxes.
“Not only will this affect homeowners, but it could also increase rent for upcoming renters for these houses that are affected by the act,” said sophomore architecture major Laura Cuconati.
Cuconati lives with eight other roommates near 17th and Berks streets, in a property they rented from Affordable Student Housing. The property is just several blocks off of Main Campus and according to a map of the AVI changes on philly.com, that street, along with several other student-populated streets such as Bouvier, Berks and Willington, could see a median increase of up to $250 in homeowner taxes, some of which could trickle down into an increase in rent.
“I will be moving if the rent goes up,” Cuconati said. “The amount of money I am paying now is too much for a place that doesn’t offer the best living environment.”
One of Cuconati’s roommates, sophomore English major Shaylin Carper, said she feels the same if rent does, in fact, go up.
“Being a student, it is very hard to afford off-campus living as it is, and if my rent goes up, I’ll be forced to commute. I can’t afford it otherwise,” Carper said.
With both Cuconati and Carper having lived in their house for the past seven months, they said that an increase in their rent is the main reason they would be moving to a different residence.
Though these streets are popular for off-campus housing, they are also a permanent home for inner-city homeowners. With Temple being in the 19122 zip code, Butkovitz reiterated that new AVI taxes will most likely double for these said homeowners from $400 to $500 to roughly $1,000 a year. Both landlords and private homeowners could take a hit from this.
“Student housing in that area, off campus, is already extremely expensive. The landlords are certainly not going to absorb the increase, and they will use it as a justification for even more expensive rent,” Butkovitz said. “But with such a demand for off-campus housing, the landlords are able to command those prices and I think they’ll be able to command increased prices to make up for the tax increase.”
Nick Pizzola, owner of Turning Point Realty, said that based on the various properties that are owned by the company, rent for students can range from “as low as $200 to well over $600 a student for off-campus housing.”
Students that aren’t financially able to pay a large amount for rent have a “range of rents that they can pay” and can choose from, Pizzola said.
Basing this claim from other landlords in the area, Pizzola said that, for the time being, “there isn’t a need to have dramatic increases in rent.”
“I don’t have every assessment. But no one has said to me ‘Oh my gosh, I’m going to have to raise rents next year, this year because I’m getting killed.’ No one has said that,” he said.
“Based on the assessments that we’ve received so far, there isn’t a need to have dramatic increases in rent. However, if the rate of tax increases, over time, there could be an impact [in student rent],” Pizzola added.
“Renting prices in the area are already high, which could put some college students in even more debt,” Cuconati said. “I enjoy the location I am living in compared to other streets that surround Temple’s campus, but I will not be living [here] next year.”
Pizzola added that this factor of location and the property’s amenities contribute to an increase in student rent as well.
“If I lose business, it won’t be because I’m raising rates. Most landlords will lose business because they aren’t managing their properties as well as they should,” Pizzola said.
Affordable Student Housing did not respond to inquiries for comment.
With AVI providing up-to-date market values for properties, Butkovitz said there will only be unnecessary “pressures” put on residents that have lived in the same area for years, in order to keep up with these increases.
For those that have already received their new assessments in the mail, there is an element of the AVI plan, called the Homestead Exemption, that, according to phila.gov “can reduce the taxable assessed value of their home” or, in other words, limit the increase of their property taxes.
The current exemption’s proposal suggests exemptions from $15,000 to as high as $30,000 a year off of prevoiusly assessed property values for those that have applied and have been granted it. It is not guaranteed to be implemented to all qualified applicants, however, causing this element of the overall tax plan to be controversial for city residents.
Based on this, Butkovitz said that he won’t be surprised if there are massive amounts of repeals or moves for exemptions to come from homeowners based on the assessments that they received in February.
If these exemptions are granted, then the city will have to pay residents the difference from the old market value price for a property to the newly assessed one.
Addy Peterson can be reached at email@example.com or on Twitter @adlainebraquel.