An Analysis of Tax Abatements

Report Date: April 20, 2018
Controller: Rebecca Rhynhart

Executive Summary

Philadelphia’s Ten-Year Tax Abatement is one of the most all-encompassing property tax incentives in the nation, providing a 100% tax benefit for new construction and the value of improvements or conversions to existing properties. Growing out of a similar 30-month abatement for developers in the 1970s, the abatement was intended to spur development city-wide after decades of disinvestment, population loss and stagnant home-ownership rates.

Today, Philadelphia is a different city from when the current abatement policy was first enacted. Re-evaluating and revisiting tax stimulus programs like the abatement should be a regular practice to determine if the benefits of the incentive outweigh the opportunity cost represented in its associated potential tax revenue. Nearly 20 years after the inception of the Ten-Year Tax Abatement and in light of the city’s positive change, the question remains: does Philadelphia need the tax abatement as it once did?

This analysis of the abatement looks at its geographical concentration, the distribution of benefit and developer profitability. Additionally, this analysis presents and evaluates potential changes, referred to as scenarios, to the current abatement policy.

Ultimately, the decision to end, continue or alter the tax abatement lies with City Council and the Mayor. The goal of this analysis is to inform the discussion with historical data, accurate analysis and a clear presentation of information.