What new Philadelphia tax plan would mean for renters

Posted: June 14, 2012

GREG PASTORE, a landlord with three rental properties in the city's Bella Vista section, says that if Mayor Nutter's property-tax overhaul passes, he'll likely have to raise rents. Even so, he thinks he'll still take a financial hit.

"You can only take it up so high," said Pastore, 45, who makes a modest income from the buildings, which have commercial and residential units. "These are old buildings. Young kids just out of college are the tenants."

Renters as a group haven't been much discussed in the raging debate over Nutter's plan to move the city to a property-tax system based on market values, known as the Actual Value Initiative (AVI). But tenant-advocacy groups say renters in neighborhoods where tax bills are shooting up could see higher rents — and the protections being discussed by City Council wouldn't apply to them.

"Clearly, any tax overhaul is going to affect tenants indirectly," said Phil Lord, executive director of the Tenant Union Representative Network. "The challenge is how to deal with the long-term tenant or low-income tenant. We believe there's a lack of parity between homeowners and tenants."

Council is discussing an exemption that would cap tax bills for longtime homeowners in gentrified neighborhoods. And all owner-occupiers would potentially be eligible for a homestead exemption that would lower their assessment by $30,000.

Councilman Jim Kenney acknowledged that renters would not be covered by those protections. But he said he's looking to introduce legislation in the fall that would limit the amount a landlord could raise rent.

"I have concerns about the renting population," Kenney said. "My staff is looking at some measures. Typically they're done in [Washington] D.C., because of the large number of renters there."

But those protections would likely not cover the landlords renting out the buildings. Some real-estate experts noted that landlords probably couldn't pass on the entirety of a tax hike anyway and said that a rise in taxes may push some to sell their properties.

"A lot of people become landlords because they can't sell their property or they perceive they can't sell their property," said real-estate agent John Featherman. "For these individuals the question will be, ‘Does the fear of the unknown inspire them to sell instead of rent?' "

Still, Pastore wondered if he'd even be able to sell the buildings he bought in the late 1990s, given the uncertainty about taxes.

"Who would I sell them to? Nobody in his right mind would buy any property right now," Pastore said. "I will eat out less, I guess. What else am I going to do? 

Contact Catherine Lucey at 215-854-4172, luceyc@phillynews.com or follow @phillyclout on Twitter. Read her blog “PhillyClout" at phillyclout.com.

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