Upcoming Hearing on New Regulations That Could Devalue 10-Year Tax Abatement for Some Mixed-Use Properties

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Ballard Spahr LLP

Philadelphia Zoning and Land Use Update

The Philadelphia Office of Property Assessment (OPA) has issued draft regulations for the implementation of the changes in Philadelphia’s 10-year tax abatement in 2022.

Starting on January 1, 2022, the residential abatement decreased in value by roughly 50%, while the commercial abatement decreased by 10%. So it now matters whether a property is categorized as residential or commercial.

OPA’s new regulations establish new rules to determine which abatement will apply to a project. The regulations state that a newly constructed mixed-use property will be eligible for only one of the two abatements (commercial or residential). The regulations provide that a mixed-use property “shall be considered residential property . . . if fifty percent (50%) or more of the newly constructed assessable square footage is dedicated to residential use.” The same is true of commercial uses. This appears to be a reversal of OPA’s long-standing practice of treating rental residential property as commercial property because the owner/landlord needs a business privilege tax license to operate the property.

A public hearing on the draft regulations has been requested to gain clarity on several issues not fully addressed by the regulations, including:

  • How mixed-use condominiums will be treated;
  • When the abatement will begin for multi-unit residential rental properties;
  • Whether Developer’s Abatement will apply to mixed-use properties deemed residential under the regulations; and
  • Whether the regulations affect abatement applications submitted before January 1, 2022 (the date on which the changes to the 10-year abatements became effective).

The hearing is scheduled for Friday, January 14, 2022, at 12:00 p.m. The hearing will be held virtually. Any interested party may register to participate and provide comment by emailing Drew.aldinger@phila.gov by 12:00 p.m. on January 13, 2022. Ballard Spahr already has already submitted written comments, which can be accessed here. The draft regulations can be accessed here.

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