Residential Development Tax to Fund Affordable Housing Programs

Philadelphia's city council passed the city's first-ever residential development impact tax, a plan that could boost the city budget by $9 million a year.

December 18, 2020, 6:00 AM PST

By Diana Ionescu @aworkoffiction


Rittenhouse Square

Gregory Cohen / Shutterstock

With a new 1% tax on residential development in Philadelphia, city leaders are moving to fund a $400 million bond package that supports building more affordable housing. The tax will be levied on new construction and is accompanied by a 10% reduction in commercial abatement. The reforms, part of a package known as the Neighborhood Preservation Initiative, will fund a variety of community development and affordable housing programs. In a move seen by many as appeasing developers, the city council also voted to push back the commercial abatement reduction by a year.

Building industry groups are split on the new tax. While some admit that the city needs revenue for affordable housing, others maintain that any new taxes threaten the economic development and jobs created by construction. Philadelphia's director of finance, Rob Dubow, argues that the tax could raise $15 million in its first two years, a much-needed injection of cash into the city's coffers. The commercial abatement reduction is projected to eventually raise $5-7 million per year.

With a poverty rate of 25%, the highest of any large U.S. city, Philadelphia desperately needs affordable housing and community development programs that address inequities and support low-income residents.

Thursday, December 10, 2020 in WHYY

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