Last week, the city of Philadelphia announced that the assessed value of the average residential property, which is used to calculate real estate tax bills, will increase by an average of 31% in 2023. As attorneys at Community Legal Services, we are very concerned about the impact this dramatic increase will have on low-income homeowners, especially Black and brown homeowners in rapidly gentrifying neighborhoods, who will likely see increases well above the 31% average.
According to an Inquirer analysis, in Nicetown/Tioga, for example, the median property tax assessment is set to increase by more than 80%.
These assessments will hit homeowners hard at a time when people are still reeling from the economic crisis. Their tax bills will increase, often by hundreds of dollars, despite the fact that incomes have dropped or remained fixed during the pandemic. With families and seniors already struggling to pay their mortgages and other necessities, many homeowners are at risk of losing their homes.
No one should lose their home because their assessments have skyrocketed. Property tax assistance programs are one of the strongest tools we have to prevent homelessness and displacement from gentrification, but many homeowners do not know about them. In fact, almost every Philadelphian who lives on the property they own is eligible for some type of relief that can reduce their tax bills, whether it's the Homestead Exemption, the Low-Income Senior Citizen Real Estate Tax Freeze, or the Longtime Owner Occupants Program (LOOP).
If the city is going to move forward with these dramatic tax increases, our leaders owe it to residents to take steps to lessen the financial blow. Here's how they can act now:
Expand outreach and programs
The city should immediately expand its outreach and education efforts so people know about these relief programs right away. Where possible, the city should also use data that it already has to automatically enroll eligible homeowners as well as enhance existing tax relief programs to protect low-income homeowners from property tax increases that they cannot afford.
Increase the Homestead Exemption
In his most recent budget, Mayor Jim Kenney has proposed increasing the Homestead Exemption to $65,000. This proposal is a step in the right direction, but more aggressive action is needed. A more significant increase in the Homestead Exemption will help all homeowners facing increased assessments, and it will be most beneficial to low-income homeowners in modestly valued homes who are less likely to be able to afford a substantial increase in their tax bills.
To help longtime homeowners in neighborhoods most affected by rapid development, the city should not just increase funding for LOOP, but also make more homeowners eligible for the program. LOOP is currently the city's strongest gentrification relief program because it places a cap on a homeowner's assessed value and protects against future increases in value. However, the eligibility criteria are too narrow and don't reflect the way gentrification actually affects property values, which is gradually over a period of years, not all at once, as is currently required to access the program.
If the city completed annual reassessments as required, virtually no homeowners would be eligible for LOOP under the current criteria because real estate values rarely rise by 50% in a single year. The program could be strengthened by creating a look-back period, to extend eligibility to homeowners whose property taxes have increased significantly over a multiyear period.
Additionally, at a time when the city has announced a commitment to assisting homeowners with "tangled titles," heirs who are in the process of obtaining title to their home should also be given access to this important program to ensure that rising taxes do not jeopardize the intergenerational wealth these families have built.
Eliminating the value of the Homestead Exemption from the benefits determination would also provide needed relief to homeowners with modestly valued properties.
Improve the senior tax freeze
The city should also allow senior homeowners to enroll in the senior tax freeze retroactively. This program freezes a low-income senior's property tax bill at the current amount and protects against any future increases. The senior freeze should be amended to allow senior homeowners to enroll retroactively and have their future tax bills frozen at the amount they owed when they first became eligible for the program. This would permit homeowners to receive the benefit of a program they were eligible for but have not been able to access through no fault of their own.
Protect homeowners from gentrification
In addition to these changes to existing programs, more ambitious protections are needed to ensure that Philadelphia remains a city where homeownership is accessible to all, including low-wage workers and families living in generational homes. We urge the city to explore creating a low-income tax freeze program like that proposed in HB 581, which would cap a homeowner's annual property taxes based on income and household size.
Wage tax reductions help businesses and high earners, but leave many of Philadelphia's homeowners without the help they need to keep their homes. As home prices and tax bills rise, relief must be geared toward the people who need it the most.
Increases in property values present an opportunity to both fund essential services and preserve longtime family homes. In a city that values diversity, fairness, and equity, no one should lose their home because their income is outpaced by development and they can't afford their taxes.
Jonathan Sgro, Kate Dugan, and Monty Wilson are attorneys at Community Legal Services.