Philadelphia's next big housing fight may be over taxes, and the outcome could decide how much conversion work comes to Center City over the next few years.
Mayor Cherelle L. Parker's administration is preparing a new 20-year tax abatement to encourage turning larger, underused properties, like former schools and empty office buildings, into housing. At a Center City District panel on Wednesday, Oct. 7, developers argued that the break would let otherwise impossible projects move forward and would grow city tax revenue over time, WHYY reported.
The administration hasn't released details of the proposal yet.
Costs are stalling projects
The developers on hand said the problem right now is cost. Connor Burke of Alterra Property Group and others said inflation, high interest rates, tariffs and heavy demand for the materials used to build data centers have driven up construction costs and stalled many projects.
Clint Randall, vice president of economic development at the Center City District, said those pressures have helped cause a drop in planned housing projects downtown. Most older, underused office buildings that could be converted cheaply have already been redone, he said. What's left are newer buildings with floor layouts that make conversion too expensive without subsidies or a change in the overall cost picture.
"The pipeline is definitely slowing," Randall said.
Burke pushed back on the idea that abatements cost the city money.
"There is a misconception out there that tax abatements take assessed value off the tax rolls, and they don't. Full stop," he said. "The values have already fallen. Once the building is reassessed post-construction, the buildings are providing more to the tax base than they were pre-conversion."
Robert Zuritsky, president and CEO of Parkway Corp., said he can't build on parking lots he owns in Center City because construction costs are too high. He argued for a broader abatement that would cover new ground-up construction on lots like his, not just conversions, and suggested single-family homes could be left out to reduce opposition.
Jon Geeting of Build Philly Now said he has identified at least 19, and as many as 42, office buildings losing value because of vacancies that could be conversion candidates if a 20-year abatement were available.
How we got here
Philadelphia's existing 10-year abatement for new construction and improvements has drawn protests for years from critics who say it mostly helps wealthier residents and drains money from schools and city programs. It was amended in 2020 to roughly cut the value of the break in half.
The Parker administration first looked at reviving the old 10-year abatement, possibly only in neighborhoods that most needed a push, but it wasn't clear the state constitution's Uniformity Clause would allow that, according to WHYY. Parker then worked with state lawmakers to change state law. The amended law lets cities offer a 20-year abatement for converting larger, underused properties into housing.
The proposal fits into Parker's broader housing plan, Housing Opportunities Made Easy, or H.O.M.E., which aims to build or preserve 30,000 homes. The city priced the first $400 million of its planned $800 million in H.O.M.E. bonds in March, according to the city's announcement.
Not everyone on City Council is a fan. Councilmember Cindy Bass has called tax abatements "hugely unpopular," WHYY noted, citing another outlet's reporting. Angela Brooks, Parker's chief housing and urban development officer, said it helps when developers share data and stories about what they need.
"Data does help. Hearing the stories does help," Brooks said.
Developers in the audience said supporters need to do a better job explaining the long-term benefits. Developer Jeremy Blatstein said the conversation "is being overtaken by the professional protesters or advocates."
Why it matters for Contractors
Office-to-residential conversions are some of the most complex and labor-heavy jobs in the business: demolition, new plumbing and electrical risers, HVAC, fire protection, windows, framing and finishes, unit after unit. If Center City's conversion pipeline is slowing, that means fewer of those jobs, and the developers on this panel are saying a 20-year abatement could restart them. Whether it passes, and what it covers, matters. A version limited to conversions helps contractors who specialize in old buildings, while a broader version like the one Zuritsky wants could bring ground-up work to empty parking lots. Watch for the administration's actual proposal and the City Council debate that follows. The details will decide how much work comes out of it.