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Philly Council Passes New Construction Tax

Friday, June 29, 2018

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The Philadelphia City Council narrowly voted last week to implement a new tax on construction projects.

What Does This Mean?

The measure, which passed 9-8, would put a 1 percent tax on any new construction or significant improvements, which must be paid when a building permit is issued, and is anticipated to generate about $22 million annually. That money would go into the city’s Housing Trust Fund and help developers build affordable housing.

© iStock.com / peeterv

The Philadelphia City Council narrowly voted last week to implement a new tax on construction projects.

Whether the bill will actually become law, though, likely depends on Mayor Jim Kenney, who has said that while he supports the goal of affordable housing, he doesn’t agree with the tax legislation. He is expected to veto the bill—which would be his first veto in office—and it would take 12 council votes to override that veto.

“I’m committed to increasing Philadelphia’s affordable housing stock and to promoting equitable growth, but I have concerns about this particular piece of legislation,” Kenney said. “Philadelphia is already considered by many to have a pretty onerous tax system, and it is certainly not clear that adding another tax is the best way to address our housing crisis.”

The “affordable housing” threshold is defined as households that collectively make less than $105,000 a year, and if the tax did go into effect, zoning bonuses would come with it.

Those bonuses would allow developers to construct significantly bigger buildings if they voluntarily designate 10 percent of the units as low-cost housing. The opt-in developers would still be required to pay the 1 percent tax, however.

Reaction

While the tax has gotten wide-ranging support, it’s also gotten sharp criticism on both ends. Construction industry officials have gone on record to say that the tax will curb the building boom recently seen in the city. Some officials from Kenney’s camp argued that the tax would actually cost the city money by discouraging projects.

Others have said that the tax isn’t high enough and that the income threshold is too high, arguing that it’s not guaranteed to help low-income families.

   

Tagged categories: Construction; Good Technical Practice; Government; Housing; Laws and litigation; North America; Taxes

Comment from Robert Bullard, (6/29/2018, 2:14 PM)

Sounds like another version of the 'impact fee' concept (if Philly does not already have one) of other jurisdictions. Around here (FL) impact fees are almost draconian, but that is definitely not what killed the construction boom of 2005 -2008.


Comment from john lienert, (7/11/2018, 7:09 AM)

"low-income housing tax" is abbreviated : P.E.R.S.


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