Philly: Tax Breaks Create Construction Boom
In all areas of Philadelphia, developers are rushing to convert old office buildings and factories and to construct new buildingso all to create luxury apartments, condominiums, and commercial uses that will benefit from Philadelphiais 10-year real estate tax abatements on improvements. Abatements are available in every area of the City. It works this way: Build a new house, renovate a shell, or improve commercial property and you pay no property taxes on the new structure for 10 years -- Tax abatements are limited to the value added due to improvements, and land values remain fully taxable during the abatement period. According to data from the Department of Licenses and Inspections, about 12,000 new residential units have been built since the abatement went fully into effect in 2001. The New York Times reports:
Tax Breaks Drive a Philadelphia Boom - January 9, 2006
AFTER years of losing population, the downtown region, known as Center City, is booming, with developments going up and old buildings being transformed into lofts and condominiums.
The construction, fueled by tax breaks, has succeeded in halting the city's 40-year population decline. Center City, which has the nation's third largest downtown residential population, behind New York and Chicago, is experiencing its fifth straight year of increased housing starts, both new and rehabilitated units. Center City's population grew to 88,000 by the end of 2005 from 78,000 in 2000. Even more striking, the number of households rose by 24 percent, according to figures compiled by the Center City District, a business-improvement group.
That downtown Philadelphia has been experiencing a residential boom is no big surprise. Cities across the country have benefited from the real estate development frenzy of the last few years. But the changes have been accelerated here by the use of tax breaks for residential developments. Philadelphia is one of the only places to offer a citywide 10-year tax-abatement program. The program, which started with residential conversions in 1997 but expanded to new construction in 2000, holds the tax assessment at a property's predevelopment level for 10 years.
It is important to note that Philadelphia is continuing to lose population. Between 1990 and 2000, Philadelphia's population fell from nearly 1.58 million to 1.51 million, a loss of nearly 70,000 residents. In 2004, the cityis population was estimated to have further declined to 1,470,151. Though Philadelphia as a whole is still losing residents, Center City has the third-largest downtown population after New York and Chicago. Since 2000, downtownis population has increased 11.5 percent, from 78,902 to 88,000. Experts say it could reach 96,000 to 105,000 by 2010. In 1998, there were 172 new residential units built in Center City. In 2004 there were 1,753. Since 1998, Center City has added nearly 6,500 residential units - most of them conversions from old office space to condos or apartments. There are 6,000 more residential units in the pipeline due to be completed before 2008. While it is unclear whether Center City is benefiting at the expense of other city neighborhoods, it has created critical mass downtown. Retail occupancy in Center City is now at 90 percent - 3 percent higher than 2004. This year, the Urban Land Institute listed Center City among the nation's top 10 for urban retailing.
Since 1950, the story of Buffalo has been one of decline. Loss of jobs, loss of people, and the physical and financial deterioration that results. The only way to change this story is to reverse the cycle of loss. Increase population, increase the number of jobs, increase the number of taxpayers and businesses. Tax incentives are one such tool. In 2005, the City of Buffalo implemented property tax breaks for increased value generated by residential renovations (up to $80,000) but could be expanded to include all new investment and new construction. It is a program worthy of discussion.
Sources: NYTimes and Philadelphia Enquirer
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Scott E. Krajeski
That's great new for Center City, an area I've always felt deserves a LOT more credit than given. The 10-year tax abatement has also worked wonders in Columbus. After just 5 years, downtown Columbus has seen in excess of 5,000 residential units added. Most of them have been developed in vacant warehouses, on surface parking lots, and even an office tower converted.
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Stan
Buffalo has so much potential for residential, commercial, cultural and technological development.....
Its a lack of unification of will!
The politicians hold back the city with laws and patronage
The teachers unions hold back the schools (making past, present and future generations ignorant and unable to handle change)
Every project in Buffalo gets held up....and adds to the pile of pessimism and cynicism.
Tax Abatements are one aspect
Taking the Casino revenue off Budget so the unions cant get ahold of it is another.
Adding seed money to local college incubators to keep the patents marketed in the Buffalo Niagara area is another
BUT AS I HAVE LONG FEARED THERE IS A FRONTAL ATTACK BY THE SENECAS AGAINST BUFFALOS HOTEL AND CONVENTION INDUSTRY. DIDNT ANYONE READ THE ADDED LAND THE SENECAS ARE BUYING IS FOR A FUTURE 250 ROOM HOTEL WITH BANQUET AND CONVENTION CAPABILITY!
its scary how this city fails to anticipate the future and safeguard its interests for present and future generations.
its scary how few people care but then its hard to have time to care when Buffalo is one of the poorest cities in the country.
Well, enough said.....I support this plan....along with all the other plans that are tabled for implementation
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Perry Fisher
One of the strengths of the central-Philadelphia housing revival has been its attraction to the city of New Yorkers-- including lots of artists and craftsmen-- who can no longer afford to live in New York City, and who, in the case of the artists and craftsmen, cannot afford the kinds and sizes of studio space in New York that they need. Of course, Philadelphia is connected by pretty good, regular train service to New York City, but in terms of living costs and space, Buffalo could compete for this type of resident, if the city government had the will and imagination. Maybe someday, after the departure of the current national mindset, with its excessive promotion of suburban, interstate, gas-guzzling values, this country will again have a passenger rail system worthy of a civilized nation, and an artist's trip between Buffalo and New York will be a convenient pleasure.
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Rust Belt Renewal
Buffalo is far behind in not producing an as-of-right tax abatement for development in targeted areas (if not the city as a whole). This should certainly be pursued. I have an uneasy cynicism that makes me think it has not been because that would make tax breaks one less tool for politicians to hold over the heads of (their favored) developers.
Another aspect of taxing strategy buffalo needs to enact to end land speculation is the use of land-value-taxation. Or how about a vacant building/vacant lot tax, or an asphalt tax?... We need both the carrot and the stick to turn things around.
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bman
This is doable. Wait till the cranes start dotting the skyline this year: Court Street, Health Now, Federal Courthouse, Casino, Bass Pro, waterfront. In the shadow of those structures, mid-size, residential development will continue. An infectious development craze, large and small, will proliferate the area in ways not seen since the early 20th century. I am convinved of this.
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STEEL
These tax abatements make so much sense because without the develop,ment that they attract you would not have been collecting the taxes anyway. So why not forgo the tax you will not collect anyway and attract in the people that can make the whole city more valuable.
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VEGASbuff
tax breaks will never happen...these politicians are too greedy and cant see past the abatements...they feel theyll be missing money...so so sad. Cheers from Las Vegas...
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shopitall
Stupid & greedy!
Such a losing combination! When will these dinosaurs move to Florida & get out of the way?
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