Busy past couple days for me, so I’m late to the ridiculously awesome PlanPhilly/Inquirer series on Philly’s self-inflicted property tax delinquency epidemic. But you really need to read this! Liberals spend a lot of time worrying about the distributional impact of different taxes, but there are also distributional concerns on the enforcement side.
Philadelphia’s property tax collection policy is a bad joke by design. The prevailing attitude of city politicians has been that aggressive property tax collections would result in some cash-poor homeowners getting foreclosed on, so collections are deliberately lax. In reality though, the big winners from the lax enforcement policy are rich investors, many of whom live outside the city.
The whole series is worth your time, but Jared Brey ably summarizes the whole thing here:
In many ways, and for many years, Philadelphia has failed to implement a practical and effective strategy for collecting delinquent property taxes and putting vacant land and blighted buildings into productive use. The problem is not unique, but other major cities fail to solve it on fewer levels than Philadelphia.
“Speaking from the national perspective, I think there are three key elements of this problem,” says Frank Alexander, co-founder of the Center for Community Progress, a national organization working to resolve the problems of vacancy and blight. “The goal is to have an efficient and effective and equitable system of property tax enforcement.”
Philadelphia’s emphasis on the latter of those three goals—a well-meaning reluctance to foreclose on struggling homeowners—has contributed to a system that is both inefficient and ineffective, as Alexander would put it. As it turns out, though, that emphasis is misplaced: the bulk of our city’s tax debt is owed not by struggling homeowners but by investors.
Other cities have found ways to keep delinquency rates low without putting low-income homeowners on the street. To do so, they use a variety of tools, to varying degrees of success.
Many city leaders are now urging the Nutter administration to support more aggressive tax collection efforts, and that’s right on.
One factor complicating all this is the popular belief that city housing policy should focus on helping more low-income people become homeowners. I think that’s mistaken. What Philly really needs is a much larger stock of quality rental housing, and lower rents. Homeownership is not for everyone, and with mortgage lending standards tightening up, it’s increasingly out of reach for many people. Many Millenials are also just plain not interested in the hassles that come with homeownership. But many Democratic politicians are for some reason uncomfortable with the goal of increasing multi-family’s share of the housing market, and are reluctant to entertain the idea that some of the city’s current homeowners would be better off as renters. But if you can’t afford the property taxes, maybe you shouldn’t be a homeowner.