How do Philly assessors assign a value to the land under your house? And do they get it right?
A recent audit and a report from the controller's office questioned Philadelphia's methods for assessing land values. The issue has the greatest impact on owners of properties with 10-year tax abatements.
When Ken Gold purchased a newly built home in Fishtown in 2016, he expected to pay about $600 a year in property taxes, thanks to Philadelphia’s 10-year tax abatement for new construction.
But his tax bill is now more than three times higher than that estimate, which the city had given to Gold’s builder. The city taxes only the land on such abated properties, not the buildings. In 2017, however, Philadelphia reassessed land values.
The value of the land underneath Gold’s four-story rowhouse is now more than other lots nearby — some larger than his.
“We’re willing to pay what’s fair, but we don’t want to be treated differently than anybody else, and we feel that people with new construction are being treated a lot differently,” Gold said.
For many homeowners, land values are largely immaterial, because they are simply portions of properties’ total market value used to calculate real estate tax bills. But they are very relevant for Gold and the thousands of other property owners who have tax abatements for new or rehabilitated buildings.
Land assessments are influenced by the buildings on a property, officials say. Most of the other lots on Gold’s Master Street block — regardless of whether they have an abatement — are assessed at a level between 26 percent and 30 percent of their property’s total market value. But that means Gold’s property, as well as others with abatements, have higher land values, because their homes are more expensive than older ones.
A recent report from City Controller Rebecca Rhynhart as well as an audit of assessments commissioned by City Council raised questions about Philadelphia’s methods for assessing land and suggested that they do not meet industry standards. Both reports were released this year as the Office of Property Assessment (OPA) faces scrutiny for recent assessment increases that led to tax hikes for many property owners.
While Mayor Jim Kenney’s administration has defended OPA and disputed findings in the audit and controller’s report, the office has committed to making improvements. Last week, Kenney launched a national search for a new head assessor, giving in to Council President Darrell L. Clarke’s calls to replace Michael Piper, who has held the job since 2014.
Land valuation is just one aspect of valuing property, but the criticism speaks generally to transparency issues: The city does not publicly post explanations of how it arrives at values, making it difficult for owners to understand whether their property is assessed fairly — and how best to appeal if they believe it is not. (City officials testified at a Council hearing in January that they will soon post more detailed assessment explanations online, as is required by city code.)
OPA says it values land using a method approved by the International Association of Assessment Officials, and takes into account a lot’s location and size as well as the condition of the building on the land. The most common land values are 15 percent or 30 percent of overall market value, said Mike Dunn, a city spokesperson.
Philadelphia began using that method in 2017, when, assessment officials said, it corrected previously inaccurate land values. The changes brought in an additional $31 million in tax revenue, the city said at the time. A Pew Charitable Trusts analysis found that 23,000 properties received higher tax bills as a result.
The controller’s report said the 2017 reassessment led to “large price discrepancies in land value on a per-square-foot basis” — at times among similar lots on the same block — and made the city’s land values worse overall.
Land Values on a Fishtown Block
Philadelphia assessors must assign values to the land underneath buildings in addition to calculating an overall market value for every property in the city. The city changed its method for assessing land in 2017, increasing land values for many properties.
For most homeowners, the land value has no effect on property tax bills. But the 2017 changes impacted owners of properties with 10-year tax abatements for new construction, because they pay taxes only on their land. Some have said they feel unfairly targeted, but the city says the value of the building on the lot influences the value of the land itself.
This part of East Norris Street in Fishtown has a mix of older homes and new construction. Land values as a percentage of market value range from 18.1 percent to 28.7 percent, while the price per square foot of land value ranges from $21.77 to $110.73.
View facing south
Year built
1875
2012-13
2015
Land value
as a pct. of
market value
House
number
Market
value
Price per square foot
for land value
Built in 1875
2160
$210,000
18.1%
2166
$205,200
28.7%
2168
$204,800
28.7%
Built in 2012-13
2141
$435,600
18.4%
2143
$409,100
18.4%
2145
$409,100
18.4%
2147
$409,100
18.4%
2149
$409,100
18.0%
2151
$409,100
18.4%
2153
$409,100
18.4%
2155
$409,100
18.4%
2158
$473,800
27.3%
Built in 2015
2170
$445,500
27.3%
2172
$445,500
27.3%
2174
$446,200
27.0%
SOURCES: Office of Property Assessment; aerial photo from April 2018 by Pictometry Intl.
JOHN DUCHNESKIE / Staff Artist
Land Values
On a Fishtown Block
Philadelphia assessors must assign values to the land underneath buildings in addition to calculating an overall market value for every property in the city. The city changed its method for assessing land in 2017, increasing land values for many properties.
For most homeowners, the land value has no effect on property tax bills. But the 2017 changes impacted owners of properties with 10-year tax abatements for new construction, because they pay taxes only on their land. Some have said they feel unfairly targeted, but the city says the value of the building on the lot influences the value of the land itself.
This part of East Norris Street in Fishtown has a mix of older homes and new construction. Land values as a percentage of market value range from 18.1 percent to 28.7 percent, while the price per square foot of land value ranges from $21.77 to $110.73.
View facing south
Year built
1875
2012-13
2015
Land
value as
a pct. of
market
value
Price per
square foot
for land value
House
number
Market
value
Built in 1875
2160
$210,000
18.1%
2166
$205,200
28.7%
2168
$204,800
28.7%
Built in 2012-13
2141
$435,600
18.4%
2143
$409,100
18.4%
2145
$409,100
18.4%
2147
$409,100
18.4%
2149
$409,100
18.0%
2151
$409,100
18.4%
2153
$409,100
18.4%
2155
$409,100
18.4%
2158
$473,800
27.3%
Built in 2015
2170
$445,500
27.3%
2172
$445,500
27.3%
2174
$446,200
27.0%
SOURCES: Office of Property Assessment; aerial photo
from April 2018 by Pictometry International
JOHN DUCHNESKIE / Staff Artist
Assessment officials disagreed, calling the 2017 changes “a great improvement," and said OPA is still refining its approach.
“The value of residual land — land that is encumbered by a building — is influenced by the value of the structure that sits upon it," Dunn said. "Developing the best structure to the highest permitted density on that land generally maximizes the value of that land.”
After the 2017 reassessment, Ruokai Chen of Fishtown disputed his land assessment, arguing that it was higher than his neighbors’ along East Norris Street. A judge sided with Chen and assigned a lower figure to the land. This year, however, its value increased again.
“It’s definitely very frustrating,” Chen said. “The system that they have right now is, the assessment isn’t being recalibrated based on successful appeals. That really places the burden on the property owner to do this every single year.”
Mike Suley, a former head assessor in Allegheny County, said calculating land value as a percentage of total market value is an accepted practice. The percentages, he said, should be nearly the same for similar parcels or those on the same block.
“Residual [land] value is somewhat abstract,” he said. “This is not a science.”
Suley said appeals of land value should succeed only if property owners can prove that their land is assessed at a different percentage of overall value than similar properties.
Gold and some of his neighbors, meanwhile, had appeals turned down by the Board of Revision of Taxes just a few weeks after the judge ruled in Chen’s case.
Chris Sloane, one of Gold’s neighbors, is challenging that decision in court. He said he’s frustrated that land value changes impact owners of properties with abatements, which were designed as incentives for buyers of new homes. The city increased his land assessment shortly after he bought the home in 2016.
“It’s basically like they watered down our abatement,” Sloane said.