My plan for a tax-free home

Pop Quiz: Is gentrification a good thing or a bad thing?

In this Inquirer story about gentrifcation, it is telling that the headline writer and the author seem to believe that the “conventional wisdom” about gentrification is negative. 

Is that your wisdom? 

Here’s a fairly neutral dictionary definition:

—noun

the buying and renovation of houses and stores in deteriorated urban neighborhoods by upper- or middle-income families or individuals, thus improving property values but often displacing low-income families and small businesses.

I would substitute “developers” for “families,” but that’s minor.

Another word for gentrification is renewal, the rebirth of a neighborhood that is sliding into the storm sewer. Hate to be harsh, but developers look for neighborhoods in decline. Why? Because they are mean? 

No, because property values are low. Healthy neighborhoods don’t have vacant properties and homes that are almost collapsing. 

Is there a downside to neighborhood redevelopment?  There certainly is. 

There is a decades-old line that says, “urban renewal is Negro removal.” (The line is so old, the word “Negro” was used.)

Blacks certainly were not the only low-income people forced to vacate, but they were a major hurters in it.

The Inquirer reports that residents of West Philadelphia’s  Arvilla apartments were forced out when the building owner decided to sell.

So they were victims of developers, the poor people. But so were the well-off people who were ordered out of the luxury, Parkway-situated Windsor when owners decided to sell. 

Was “gentrification” bad when it ended a dive bar at the corner of Broad & Spruce, plus a block of rowhouses, and replaced them with the Kimmel Center? 

Kimmel Center replaced a dive bar

If cities don’t rebuild, they die. Healthy cities have the ability to regenerate — look at South Street from river to river. It has moved from a basket case to a show place. (Absent marauding  teens, of course.)

The Inquirer cites a study that says the more poor and less educated renters did not wind up appreciably worse after they. were forced to move. 

It is harder for owners. If they own a rowhouse in Point Breeze, for example, the scene of furious development, and they stay, they face constantly rising real estate taxes, which might eventually force them out. That’s not fair. 

And that’s why Philadelphia has the LOOP program that holds down the amount taxes can slam long-time owners. 

Even though rates are locked, home owners still have to pay something and that could be challenging. 

I have an idea that mimics reverse mortgage deals that are offered by the private sector. 

How about if the city waives taxes completely on the property, on condition the property transfers to the city upon the death of the owner?

The city then sells the property and reclaims the waived taxes — and much more. 

The homeowner gets to live in the home, but eventually the taxpayers get the property and make a profit on it. 

What’s wrong with that? 

20 thoughts on “My plan for a tax-free home”

  1. “How about if the city waives taxes completely on the property, on condition the property transfers to the city upon the death of the owner? The city then sells the property and reclaims the waived taxes — and much more. The homeowner gets to live in the home, but eventually the taxpayers get the property and make a profit on it. What’s wrong with that? ”

    Well, let’s imagine how this might work out. A sixty-nine year old–let’s call him Terry–who owes $4,000 a year in property taxes on a house valued at $350,000 enters this hypothetical program, and for the next ten years he pays no taxes. So he has reaped a total value of $40,000. At that point he dies, and the city claims the house, for a net gain of $310,000. essentially traded $310K for $40K, which is a great deal for the city but a terrible one for Terry.

    Admittedly, some people might make out like bandits, but others, like the luckless, hypothetical Terry, will have yielded hundreds of thousands of dollars in wealth that might have gone towards the education of his children or grandchildren, or to buy a home for his siblings, etc. I don’t know if the city should be in the business of administering a policy that transfers wealth in that specific way.

    Gentrification is a tough topic, and I don’t have all the answers myself. However, I think your suggestion will create at least as many problems as it solves.

      1. Yes, I understand it is voluntary. However, I suspect that for many, many people, this would be a really bad idea, and the city IMO shouldn’t enact policy that disadvantages people who aren’t up to date on real estate values. I shudder to think of all the wealth that will pass into the public coffers from people who didn’t know any better, or who were desperate not to fall into arrears on their property taxes.

  2. If you would survey Alan Domb, Councilman and Tycoon, Ori Feibush, master of gentrification and Councilman in the Wings, or Kenny Gamble, slumlord who profited with Carl Dranoff in reconfiguring your hood, they might explain the theory and practice of gaining millions in Phila. Real Estate transactions and development while the general population scratches their ass and ponders ridiculous notions.

    1. Well it’s an idea… I would think this idea would benefit a very small minority, and thus would solve very little. As a point of interest, I, having recently returned from working in Israel for 4 months, believe that the Israeli government has a program with some distant similarities. I was told that particularly in Jerusalem the Israeli government will buy your house now, you lives in it until you die, no matter how long that is, and then the real estate becomes government property. This deal is perceived by some there, I learned, as a sinister policy to gain control.

  3. As Mr. McGary points out, there are some large issues with your proposed idea.

    A solution to that objection can be had in the thought that your idea is ok – so far as it goes, but it is incomplete. Amend that thought to include that a competitive appraisal is made at the time of the transfer of the property to the city (allowing for the heirs/family to clean the property of desired possessions, of course), and the estate of the deceased (“Terry” in your example) receives a check in the amount of the difference between the market value (or, in the case of an actual, completed sale, the price paid by a flipper/developer/new-“resident owner”) of the property and any owed tax balance due (plus some nominal interest and processing fees to cover the cost of the transactions/paperwork). So, the estate of the deceased receives the benefit of the (remaining) retained equity in the house to be distributed to the heirs (or through probate). (Of course, L&I has to inspect and issue a fresh CoO as well.)

    Now you have an idea that is complete enough to contemplate the real advantages and disadvantages for all parties concerned. With the city acting as a bonded settlement agency, if likely somewhat slowly, all sides are sufficiently protected and their interests preserved, and the city gets a path to renew older properties that are otherwise unsaleable as it would own them. .

  4. Stu. I don’t like the city putting a lien on my home for taxes. I didn’t spam 30 treats paying a mortgage to have the city flip my house. If you don’t have escrow with a mortgage, you have to pay in full annually. If the city allowed monthly payments (they don’t) for every homeowners $500/mo: not bad $6000/year: impossible in a lump sum for many. They could even charge a monthly fee so they could squeeze taxpayers for a little bit more. That mightmotivate the city to do it lol.

  5. Gentrification is a good thing if you own property or are a taxpayer in a city. It’s probably bad if you are a low income renter. Overall I think it’s a net positive though. A city can’t have too many rich people but too many poor people can make it a terrible place to live and drive it into bankruptcy. If someone can’t afford the increasing property taxes there should be no payment until the property is sold or the owner dies. Interest could be at whatever the average of 10 year T-bill rate is for that given year.

    The rest is off the subject and feel free to delete the unrelated material. I was pissed off when I wrote it.
    ………..
    Saw your retirement party in the Daily Mail. I felt so bad for you. 47 years should have earned you something nice. The woman that slammed you was a pompous social justice witch. I also read the column regarding the Thailand prostitution that she referred to because it was linked. There was nothing about you having a “taste for child prostitutes” written in your article (as if a newspaper would print something like that). It was gross defamation. I retired some years back and had a nice retirement party. I hope you sue that woman because her ugly big mouth deserves a day on the receiving end in court.

    Below is the article.

    https://www.dailymail.co.uk/news/article-7260991/Newspaper-columnist-Stu-Bykofsky-SLAMMED-rival-writer-farewell-party.html
    You are also correct about irresponsible bicyclists.

    About a decade ago I was almost killed in NYC by a bicyclist riding the wrong way about a foot or two from a parked bus. There was no crosswalk nearby because the road was parallel to the water below the Brooklyn bridge and was about to cross the road. I stepped out between two tourist buses parked about 30 feet apart, looked left for cars, was about to look right, and my foot immediately hit something. A bicycle tire. The rider was traveling at 25 mph. Weighed about 200 pounds. Was about 6+ feet in height. White guy probably mid 30’s. Traveling the wrong way and hugging the bus. I looked back at my wife who looked at me in shock. I turned to yell at the bike rider but he was already 100 feet away. The image is frozen in my mind forever. One second earlier and he hits me and probably kills me.

  6. I’ve been in a few too many cities where developers were too friendly with the locals to allow for this to be something I’d trust over a long term.

    Let moi spitball a suggestion. I don’t exactly trust local politicians to not turn this into a set of fiefdoms. I haven’t forgotten how long it took to get cable into Philadelphia and why. The recent council scandals with developers makes me tend to not trust these guys.

    I see where the Cluppies[1] in Kensington, Fishtowne[2] and other similar areas get a tax abatement for 10 years. Why not something similar for the homeowners already there before the gentrification set in? Agree to defer the additional taxes until the home is sold. After 10 years, have them reapply. If the owner of the property changes hands a certain number of months before the law is enacted, it’s not eligible.

    [1] Cluppies is a term I use for clueless people
    [2] I busted up the first time I saw some real estate wonk flogging homes in “Fishtowne”

  7. I forgot about the renters. They’re probably screwed anyway but going “rent control” isn’t the answer. I’m sure someone knows a lot more about this that could come up with a solution. One that allows the city to get their taxes and still allows landlords to raise the rents by a fixed percentage,

  8. Stu, City Council and the Mayor’s Office have proven time and again that they can’t be trusted to deal honestly with real estate, so unless something can be done to prevent houses being funneled to preferred buyers via sweetheart deals, we need to look for other alternatives. In line with Kevin’s comments above, one possibility would be to give homeowners who meet income thresholds the option of pausing or freezing their taxes at a given time, with incremental taxes owed due – payable either by the seller or the buyer – upon sale of the house. Tax money would be collected as part of the normal property transaction, without risk that the property itself would collateral in some councilmanic side deal.

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