Friday, February 20, 2009

Free Pretzel! (read to the end)

Image: Neighborhood Information System

Last night, PennDesign hosted one of its Conversation Series events, in which a national expert and a local expert on the same topic interview each other. Last night’s event was titled “Gentrification Dangers and Neighborhood Change Opportunities.”

The speakers were John Kromer, Philadelphia’s accomplished, former housing director and professor at the Fels Institute; and George Galster, a professor at Wayne State University, and nationally prominent voice on issues of gentrification and community change.

At one point Kromer asked Galster what policy intervention he would recommend for the situation where a neighborhood gentrifies, property taxes go up, and low-income, long-term residents cannot afford to pay their higher taxes. Often they have to sell out before their houses reach full value, and move out of the neighborhood.

Galster answered: create a program to defer their property taxes until time of sale or transfer.

Interesting… That’s the same policy that I promoted in my op-eds in the Inquirer and Daily News back in 2007 (links here are to my op-eds). Let me explain why this policy intervention would be so important.

Philadelphia currently has the highest poverty rate of the top ten most populous U.S. cities. At the same time, Philadelphia has many low-income neighborhoods with a high homeownership rate.

According to the Neighborhood Information System, the citywide average homeownership rate is 59%, and neighborhoods with the lowest homeownership rates are still over 20%. Yet over 30% of homeowners in many neighborhoods have household incomes of less than $20,000/year (See the map above).

At the same time, Philadelphia is a hot city. A recent Pew Research Center survey reported that Philadelphia is considered as desirable a place to live as New York, Dallas, and Chicago. Numerous neighborhoods in Philadelphia have undergone stunning revitalizations over the past decade, and our housing values have been far less impacted by the economic downturn than in most other cities.

These facts place Philadelphia in a unique position. We are a hot city with lots of low-income homeowners. If we can figure out how to keep low-income, long-term residents in their homes while their neighborhoods gentrify, not only have we improved those residents’ quality of life and contributed toward building a mixed-income community, but we have also given those people some serious equity once their home values increase.

If we can make it affordable for all of these low-income homeowners to stay in their homes while their communities increase in value, we have just taken a major bite out of the city’s poverty rate.

The solution should be to instate a property tax deferment program, marketed by the City to communities that are about to undergo transition (i.e., before property values rise noticeably). Importantly, this is a revenue-neutral policy; the city would eventually receive the back taxes (unlike with the 10-year tax abatement).

However, time is of the essence. With each community that gentrifies without this program in place, we miss a fragile opportunity to rebuild our tax base, reduce our city’s poverty rate, and build stronger neighborhoods. Sadly, we have already missed some key opportunities, but it is certainly not too late to capture the value of this program.

As I explained in my op-eds, this deferment program is just one component of a comprehensive approach that attracts new investment, while protecting existing communities and building equity for low- and moderate-income residents. While the deferment program is just one tool, it is an important one, and this is the right time to do it.

Both speakers last night agreed that the City needs to be proactive in this economic downturn, so as to be properly positioned when the market improves. This is the right time to instate a property tax deferment program, so that it is on the books in a few years when we may need it again. Reminder: it’s revenue neutral.

So, if there are any policy makers out there reading this, the time has come to make this initiative happen! You don’t have to take my word for it, listen to the national experts. Tell you what, I’ll give a free soft pretzel to the first Councilman, legislative aid, or agency head who makes this happen. If the Mayor wants to announce it himself, I’ll give him two pretzels!

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