Changing city's taxes will help Center City housing market, local official says

Paul R. Levy of the Center City District at the news conference on the Center City report.
Paul R. Levy of the Center City District at the news conference on the Center City report. (TOM GRALISH / Staff Photographer)
Posted: November 29, 2012

The continued influx of young adults and empty-nesters has helped much of the Center City housing market with increased sales and prices so far in 2012, but the leader of the downtown business group reporting the results said Philadelphia's tax structure is the single biggest deterrent to even greater growth for the whole city.

"Everything is aligned in our favor except the tax structure," said Paul R. Levy, the president and chief executive officer of the Center City District. Levy argues for the city to reduce wage and business-profit taxes while relying more on property taxes.

Tuesday's CCD report said that homes in an area named Core Center City - bordered by Vine Street (north), Pine Street (south), and the Schuylkill and Delaware Rivers - sold for 13 percent more in the first nine months of 2012 than during the same period in 2011, for an average price of $546,703.

The number of home sales handled by real estate brokers in what it defined as "Greater Center City" during the first three quarters of 2012 increased by 6.7 percent during the same period in 2011, with the average sale price increasing 7.5 percent to $386,599. The largest share of homeowners in that area is between the age of 35 and 54.

Greater Center City's boundaries were defined as Girard Avenue (north), Tasker Avenue (south) and the two rivers - a territory more sprawling than the typical sense of what is Center City.

Levy said the CCD used this geographic area as one classification because 40 percent of people in that area worked downtown, but outside that area only 20 percent did so. Overall, the report's geography attempted to take into account zip codes and census tracts, "neither of which is perfectly aligned with neighborhoods' definitions of their borders," Levy said.

Referring to the mix of rental units, condos, and single-family homes, Levy said, "It is the diversity of housing that characterizes downtown. The world we live in today is a 24-hour, high-density, mixed-use area, which is hugely attractive to people."

Economist Kevin C. Gillen, of the University of Pennsylvania's Fels Institute of Government, supplied data to the CCD but said he was not involved in writing the report. Gillen said he believes that the "days of deep descent" in the housing market are behind us, but that there is a "slow, sloping, bumpy road ahead," including an increase in foreclosures in the Philadelphia area in the last year.

"The performance of the Center City housing market has been nothing short of remarkable," Gillen said.

Gillen said that part of the surprise is the reversal in fortunes between Center City and the city's surrounding suburbs compared with the previous housing slump of 1989 to 1994. In the earlier period, city property sales fell 30 percent to 40 percent and suburban sales fell 1 percent to 3 percent, Gillen said. This time, Center City fell the least, even though "the supply doubled because of the additions of all the condos."

The CCD's report shows that of the nearly 5,500 homes completed from 2006 to 2008, two out of three were condominiums.

Only 19 percent of the 463 housing units completed through September of 2012 were condos. The report said that within the boundaries of the CCD, 403 of 3,871 condo units were still held by the developer of the property. Single-family properties and rental units accounted for much of the rest.

The "overwhelming majority" of unsold units, according to the report, were in the last four buildings to come onto the market before the recession: the Aria, the Murano, Ten Rittenhouse, and the Residences at the Ritz-Carlton. But even with those properties, the report said, the vacancies decreased from 43.2 percent at the start of 2012 to 30.3 percent by the start of November.

Beyond demographic changes, and even with lower natural-gas prices, automotive gas prices between $3 and $4 per gallon influenced real-estate decisions.

"The 6,000-square-foot McMansion and the 90-minute commute in the Lincoln Navigator has become a very expensive lifestyle," Gillen said.

The CCD is a privately directed, municipal authority, created in 1990 under Pennsylvania and Philadelphia laws, to help develop, maintain and promote the district, which includes parts of eight zip codes in the city. CCD's 23-member board has major property owners and prominent business leaders. Its funding comes from property tax assessments within the district.

The city is instituting a new property tax assessment system. Mayor Nutter's plan to revamp the system, called the Actual Value Initiative (AVI), is designed to tax property based on actual market values, but there is fear of increases in parts of the city.

Levy said that sections of Philadelphia away from Center City have declining population, often with workers commuting to jobs in the suburbs. Changing the business tax structure is key to keeping jobs in the city, he said.

"The success of downtown starts with the workplace," Levy said. "Everybody points to the amenities, the live-work environment. But they are here because the jobs are here. We need to create more live-work concentration nodes within the city and the way to do that is a tax policy that generates job growth, not one that pushes jobs out."


View an interactive map of Center City real estate and read the report on Center City's housing-sector recovery at

philly.com/business


Contact staff writer David Sell at dsell@ phillynews.com or 215-854-4506.

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