As taxes rise, so may rents

DAVID MAIALETTI / STAFF PHOTOGRAPHER Victor Pinckney (left) , with Jim Sims, says that most landlords absorbed the last two property-tax hikes, "but this one is really going to be a problem."
DAVID MAIALETTI / STAFF PHOTOGRAPHER Victor Pinckney (left) , with Jim Sims, says that most landlords absorbed the last two property-tax hikes, "but this one is really going to be a problem."
Posted: February 22, 2013

MANY PHILLY LANDLORDS who will see higher bills next year under the city's new property-tax system say they may have to pass at least part of the tab on to their tenants - an all-but-forgotten group in the heated debate over the Actual Value Initiative.

"We ate the last two [property-tax] increases over the last two years - the landlords ate that - but this one is really going to be a problem," said Victor Pinckney, a past president of the Homeowners Association of Philadelphia, which represents many smaller landlords and management companies. "They say the burden goes to the landlord - what do you think we're going to do?"

Since property owners began receiving their new assessments from the city a few days ago, Pinckney said, he's heard a stream of complaints from his group's members about unfair or inconsistent valuations that could cost them hundreds and, in some cases, thousands of dollars per unit in tax increases.

"Right now, it's uproar," he said.

Overall, AVI shifts much of the city's property-tax burden from commercial properties to residential owners. But even among residential owners, the burden is shifted further to rental-property owners because of the homestead exemption, which will provide relief for residents who own their homes but will actually increase tax bills for rental properties by upping the tax rate.

All of which has led many landlords to feel as though they're getting the short end of the AVI stick.

Pinckney's VCVA Management has many low- and moderate-income tenants. He said he hasn't yet determined how much he'll have to raise rents - Council hasn't set a tax rate yet - but he's afraid that he'll push out some of his poorer tenants.

"It's going to really hurt them," he said.

Most landlords interviewed for this story asked not to be identified because they don't want to spook their tenants before making decisions on whether to increase rents and by how much.

Many members of the Apartment Association of Greater Philadelphia, which generally represents larger rental-property owners, believe they will have higher taxes under AVI but are still determining whether they will need to increase rents, said Christine Young-Gertz, the group's government-affairs director.

"Every landlord in the city, large or small, is very concerned and maybe waiting with bated breath," she said. "Nobody likes to raise rents. . . . What they have to take a look at is their net operating income."

About 265,000 rental units and 311,000 owner-occupied units are in the city, according to a 2011 estimate by the Census Bureau.

So why have renters been seemingly overlooked?

One reason, some landlords, said, may be that renters are less politically active than homeowners, who often form powerful community groups with relationships to city officials. Also, homeowners are statistically more likely than renters to vote - especially in local elections.

Another reason could be the perception that landlords are wealthy enough to absorb the tax increases - an image with which many smaller landlords took issue.

Jane Roh, spokeswoman for Council President Darrell Clarke, wrote in an email that "at this time," he "is focused on the impact AVI will have on property owners."

Mayor Nutter's spokesman, Mark McDonald, pointed to the state's Property Tax/Rent Rebate Program, which was described on the back of a brochure sent to property owners along with their new assessments. The state-funded program assists low-income seniors.

"We're not really able to comment on the business decision of a landlord," McDonald said. "In many cases, they may have a decline" in taxes.

City Finance Director Rob Dubow said that relief for renters could come up this spring in budget negotiations with Council.

"There are probably lots of areas we haven't talked about," he said.


On Twitter: @SeanWalshDN

Blog: PhillyClout.com

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