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Department of Licenses and Inspections commissioner Carlton Williams contacted Philadelinquency to let us know a promised computer system meant to block the issuance of licenses, in particular the Housing Inspection License, has resulted in landlords having their rental license permits being thrown in the wastebasket because they owe back property tax.
As you know, this is an issue that PDQ has been pushing hard for years. In 2013 and 2014, Philadelinquency was sending lists of many landlords throughout Philadelphia to L&I with proven tax arrears, inquiring why L&I had renewed the rental licenses when the Philadelphia Code forbids the license to be issued. The reason for that is that L&I has limited visibility into the Revenue Department’s systems and it’s not standard procedure to look into their data. Instead, L&I demands that permit applicants obtain a tax clearance certificate, which isn’t that difficult to forge.
The amount of money that has been collected from deadbeat landlords has skyrocketed since the inception of the new computer checks. Take a look:
The Revenue Department has recovered nearly a million dollars from deadbeat landlords now that their rental applications have been blocked until they pay off the back taxes.
This isn’t the last of it though. There are still more unregistered landlords throughout the city who do not obtain rental permits for their buildings. There is another roadblock for those people: evictions. You cannot evict a tenant using Landlord-Tenant Court without showing the court a valid rental license that is in-force.
So any unlicensed landlord that is renting out property is taking a gamble that they will not ever need to use the eviction process. Should they need to, the only way to get access to the courts is to pay off the real estate taxes before they can get a valid rental license.
In a report published today by the Philadelphia Coalition for Affordable Communities, proponents have put together their first high-gloss policy brochure to combat housing unaffordability in Philadelphia.
The brochure is heavy with emotional appeals and anecdotals, but within it on two pages are the crux of their legislative agenda:
The answer is a 50% increase in the Real Estate Transfer Tax and an additional penalization surcharge placed on land transactions that occur quicker than 24 months apart.
The Transfer Tax
Let’s start with this proposal. The Mayor’s budget for this year has this to say about the money it collects off the Real Estate Transfer Tax:
FY16 of areas in the city where residential properties may have been under or overvalued. Because of only conducting a partial reassessment, tax base growth is anticipated to be only 1.5%. The next citywide reassessment of all properties will occur for FY17. The Realty Transfer Tax base is projected to have strong 20.0% growth in FY15 and 10.0% in FY16.
The City is currently estimating that RTT revenues will be $222 million dollars by next year [Mayor’s budget here]. This is because the 10 year tax abatement for new construction is expiring on a lot of property that was built during 2005 and 2006 and the City swept through neighborhoods with AVI and reassessed a lot of property upwards.
While the RTT is set at 4%, it’s split between 3% for the City and 1% for the state. By raising the City’s portion to 4.5% (bringing the gross tax to 5.5%) and all other things being equal, this represents an increase of revenue of roughly $111MM, or $333 million dollars.
But if you read carefully, the policy statement from PCAC says that they only want the higher surcharge to apply to real estate transactions quicker than 24 months apart. That is: if a developer (or anyone) purchases a piece of real-estate and then it is sold on the open market less than 24 months later, then the homebuyer pays the higher rate.
This type of condition is legally unworkable in Pennsylvania because our constitution will not allow for it. Specifically, in the PA Constitution under Article 8 Section 1:
All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.
This sets up two real estate transfer tax rates. While there have been exceptions carved out to support property tax credits for longtime homeowners, the indigent and veterans, there have been no exceptions carved out like this for the Transfer Tax. Harrisburg would have to get involved here–a very Republican-dominated Harrisburg, where the Pennsylvania House has not been this Republican since World War I.
The only realistic way to use the RTT as a funding vehicle in the short term is to ignore the state constitutional problem and just raise the RTT on everyone.
Is Affordability a Real Problem?
It depends. It certainly is on the minds of many. Even CNBC is running a clickbait article right now commenting on how home sales and prices have picked up pace but overall wages are still flat from the Great Recession.
Let’s use this map that PCAC put in their brochure:
Well, now PCAC has defined with these generic blobs the specific areas of Philadelphia that they’re primarily concerned with. Outer communities like Germantown, East and West Oak Lane, Lawndale, Kingsessing, the entire Northeast, Center City… we don’t really give a shit about these areas.
Those areas outside the gentrification blobs have their own affordability mixtures. There practically is no new construction of homes in Frankford because that’s been a marginal neighborhood for 15 years, so why invest in it? Germantown isn’t even on the radar and there HAS been new housing development up there, plus publicly-funded and tax credit funded housing.
Should these areas of the city see the RTT jacked up while also get zero benefit out of it?
Half of Kensington is not bubbled in on this map and it faces a severe problem with gap-toothed blocks where slumlords have kept their fingers on problem properties while working families have the capacity to purchase the property, but cannot because there’s no mortgages for extremely low house prices.
The median house sales price in Philadelphia is below $140Kaccording to Trulia and home sales have never come close to 4,000 a month:
Of course if you cut out the entire city and just focus on the brown blobs in PCAC’s map, you’ll get a flat sales picture but a steadily increasing home price. Like in Point Breeze:
The median sales price in Point Breeze has yet to crack $200K. If you’re in the mood to buy existing homes and not new construction, and that includes rehabs, Philadelphia is still quite cheap, even in most gentrifying neighborhoods.
For instance, at 3.5% on a 30y mortgage for a $155K home, the mortgage payment comes out to $690.
Jack that interest rate up to 4.5% and the payment skyrockets to $785. Homebuyers pay extremely close attention to the interest rate on their mortgages, including paying a bribe known as “lock-in” to keep the rate from changing while the borrower is in the process of buying the house.
When interest rates go up, house prices start to go down as home sales slow up and those who are selling their homes have to wait longer and longer for a buyer.
While We Talk About Gentrification We Still Keep Our Blinders On
One of the other specie that’s inside PCAC’s brochure is the appeal to emotion. On Page 9 is the short story of a community garden in Mantua that was cultivated on some vacant lots. The volunteers worked very hard to keep it up and they had lobbied their member of City Council, who is no stranger to dispensing property to favorite groups, that they had a very particular interest in the property. From the story:
To try to save the garden, Khenti visited her councilperson’s office. “We overwhelmed them with proof of our 17 years tending the garden. We gave them press releases, mural project receipts, attendance sheets from children’s classes, garden awards, and a petition from the neighbors of approximately 200 signatures.” But it wasn’t enough to save the garden.
In spring 2014, the garden uprooted its perennials to make way for the 6-unit apartment building that stands there today.
Well Jesus-fucking-Christ we all know God-damned well that the councilwoman they’re talking about is Councilwoman Jannie Blackwell.
And it’s not like this isn’t a new pattern with Blackwell… she took a royal dump on James Dupree–even slamming him with eminent domain. Blackwell even feigned ignorance over the property involved in the performance art known as “Funeral For a Home“… that she actually had anything to do with her approval of a redevelopment project which is why the home was demolished in the first place.
Jannie Blackwell doesn’t give a shit if you’re an awesome artist or you’re a great gardener doing good for your community. She’ll flush you down the toilet.
But I guess that’s why PCAC made sure not to mention her by name because they must be terrified of her, or something. Whatever.
I’m really disappointed with PCAC right now. Short of an unimaginative revenue generation scheme, albeit it’s one that will probably be politically possible if the constitutional issues are ignored, there’s very little substance here to show how housing affordability is going to actually be fixed according to the dire scenarios that they have laid out.
Further, some of the real problems with blight in Philaelphia are not addressed at all and they don’t even attempt to go there. For instance, there’s no suggestion that we should direct housing funding to capture shells and rehab these for cheaper than new construction and rebuild broken-blighted communities in Southwest Philadelphia and North Philadelphia.
And lastly this doesn’t really touch at all on the lifetime Philadelphia homeowner who decides to sell their home in the open market, nor there is any data here that attempts to answer who is selling and for what reasons. If for instance seniors are selling their homes to help pay for end-of-life care, which many do–how much of that goes on vs. a homeowner who is forced to sell because the cost of living has climbed too high? What makes a landlord raise their rent and what usually triggers that?
Maybe PCAC will come back later with some better analysis of what’s actually going on within Philadelphia and identify where the need truly is rather than rely on national statistics, glossprint and appeals to emotion.
Until then, I’ll throw this report on the pile of other things I unfortunately wasted my time to read and declare “meh.”
CITY COUNCILMAN Kenyatta Johnson ignored the law by steering the purchase of city-owned lots to political insiders, one of whom was a member of a drug gang who served 15 years for third-degree murder, a lawsuit alleges.
The suit was filed in Common Pleas Court late Monday night by Michael Pollack, owner of a development company named Bag of Holdings, which sought to buy parcels in Point Breeze in Johnson’s 2nd District.
The suit alleges a “pay to play” scheme in which Johnson steered city-owned properties to “insiders” and demanded that purchasers “use his preferred developers.”
The suit attacks the very nature of Councilmanic Privilege, the unwritten gentleman’s agreement where district council members agree not to vote against one another on any land use bills introduced by any other council member, which gives the district council member total control over all land policy decisions in their own districts.
This is amplified by Hope Caldwell, the city’s integrity officer, who tells me a Council member can indeed direct a sale to a particular person, but there’s a proviso – it must be sold at fair market price.
It looks like the case boils down to how much Kenyatta sold the lots for and what he told folks who bought his properties.
Additionally, the properties in the lawsuit were already put up for competitive bidding and advertised by the Philadelphia Redevelopment Authority before Councilman Johnson had decided to hand them to his friends.
Earlier this week the Pennsylvania Legislature passed House Bill 80, an amendment to the PA Uniform Firearms Act. In it, the legislature modified the language in the uniformity section of our state’s firearms code to allow just about anyone to sue any city, township or boro that has passed or attempts to pass firearms laws that overrides state law.
Local media and progressives have spent the last two weeks crying foul, that the NRA gun lobby monster is putting a gun to our heads and deleting all of our gun laws. It’s nonsense bullshit from crybabies who are angry that their plans to stomp on legal gun owners rights are soon to be thwarted.
I myself own several guns that are ‘outlawed’ by the City of Philadelphia. The Phila Code demands I turn these guns over to the Philadelphia Police. But… I bought these guns from dealers IN the City! How can that be?
The law is inert. Not only is it pending waiting for enabling legislation from Harrisburg that will never come, the City would likely never prosecute anyone using §10-821 because any defense lawyer with a brain would immediately raise a constitutional challenge and then the City would suffer an embarrassing defeat in the appellate courts that don’t make DA’s look good.
But the City’s assault weapons ban isn’t the only local gun ordinance that’s ripe for deletion. There’s questions surrounding the legality of Councilman Kenyatta Johnson‘s 3D Printing Gun Ban. In an effort to keep this law intact in a challenge, it was neutered before passage to only ban the manufacture of 3D-printed guns in the City. You can drive outside the City with your 3D printer, stamp out the gun parts outside the City, and then bring it back into the City with no problem. Even still, the Uniform Firearms Act already regulates firearms manufacturing so it remains to be seen if this attempt to save this very-neutered ban would survive a challenge under HB80.
Early this morning I have received indications within City Hall that the City has no intention to clean up the Code to remove these inert grandstanding laws off the City’s books. That makes the City vulnerable to plaintiff suits. Other townships near Philly see the writing on the wall [Inky] and are working on clearing their preemptive legislation off their local codes.
I’m sure in tomorrow’s City Council session we’ll get to hear a LOT of whining about how we’re all going to die in a soup of gun violence because all these unenforceable laws will have to be cleaned off the books. It won’t surprise me in the least if the City assumes a posture that it will be happy to pay out legal fees in defiance. Good for them.
The Uniformity Clause in our state firearms code exists for a very good reason: without it, we are left with a crazy quilt of local firearms codes that conflict with each other. It forces all Pennsylvania towns and cities to broker for change in one venue so that we have one uniform code that is simpler to understand and follow for those folks who legally own firearms.
Entrapment of legal gun owners with crazy quilt local ‘gotcha’ ordinances is juvenile and shows how irascible some people are that they would prefer to bitch than to work with their state lawmakers to solve problems.