9.07.2006

Abatements Rising

My company was just involved in a press conference talking about the
good things that have happened in Philadelphia as a result of the
city's ten-year abatement on property taxes on new construction. This
was the first report I worked on that went public in this manner, and
I couldn't be prouder of our end product.

Although I have to admit you don't have to have crunched through the
numbers like we did to see that the abatement program has juiced
construction in Philadelphia. Everywhere you turn downtown, there are
new condos sprouting up. Part of this, of course, is the demographics
of boomers craving the urban lifestyle, and part of this is the
general cycle of real estate markets. But a large part of it is also
the abatement.

A lot of my more left-leaning friends are mixed or even irate about
this, though. Incentive programs like this are often seen as helping
the rich stay rich. The argument usually goes something like this:
why should we let a rich person pay zero on his new $1 million condo
when Joe Middle Class has to pay something for his $100,000 rowhouse?

The reason I feel good about the results of our study is that I truly
believe that the abatement program was a good move for the city and
all of its residents and neighborhoods, not just the upper class and
downtown. For one, rich people moving into downtown condos is a good
thing for the city as a whole: it broadens our tax base, without which
taxes would go up for the middle class in order to keep paying for the
many public services offered by the city.

Secondly, on a related note, lower taxes in general make Philadelphia
a much more competitive and vibrant place to attract workers,
families, and businesses. A city trending up in population, activity,
and tax base, is also a net gainer for all socio-economic classes.

Thirdly, condos represent only 11% of the abatements for new
construction, if measured by market value. Almost all of the
remaining 89% has gone for single-family homes, like the very nice
home in North Philadelphia that served as the backdrop for the press
conference. Being somewhat unfamiliar with this part of North
Philadelphia, I looked around and saw a sea of new construction, all
abatement-induced. This was no the North Philadelphia I remember from
many youth group excursions through bombed-out streets of empty
warehouses and dilapidated rowhomes. So much for the argument that
what the city is foregoing in tax revenues is all ending up in the
pockets of those who can afford $1 million condos downtown.

In fact, as I stood there listening to the various speakers and looked
around on a sunny day to see new houses sprouting up in North
Philadelphia, I couldn't help but be happy that a good thing is
happening in Philadelphia. I'm just fortunate I got a chance to study
it in a little further detail.

Post a Comment