Happy New Year! We want to review the legislative activity coming out of Philadelphia City Council that affects the housing market. On December 10, 2020, Council passed bills which have a direct impact on real estate development.
- The 10-year tax abatement on residential projects, which was to be phased out on December 31, 2020, was extended until December 31, 2021. All tax abatement applications for residential new construction and renovations will remain eligible under the current 10-year tax abatement program until December 31, 2021.
- To take advantage of the abatement, you must ACT now planning and executing your project(s). Timing is critical for those developers who want to take advantage of the full tax savings to get all the required documentation in place – required plans, permits, abatement filing etc.
- Beginning in 2022, the 10-year tax abatement on new residential construction will be reduced by 10% each year for 10 years.
- City Council also passed a bill impacting commercial properties. Starting January 1, 2022, only 90% of the assessed value of the improvement cost for commercial properties will be exempt from real estate taxes throughout the 10-year tax abatement.
- The Development Impact Tax, known as the 1% construction tax, imposes a 1% tax on new construction of and renovations to residential properties. Commercial construction is exempt from this tax. The new tax takes effect on January 1, 2022.