More AVI Analysis: Land is Apparently Worthless in Philadelphia Sunday, February 17
With the release of the 2014 assessed home values by the Office of Property Assessment, we now have an idea of what property taxes will look like next year across the city. And in many neighborhoods, it ain't pretty. You can check on your neighborhood, using the Axis Philly AVI Map, and see how you and your neighbors will be
Looking at a random sampling of data from the new assessments, we've discovered numerous flaws, making us wonder whether AVI will actually be implemented in 2014 or whether this whole process will have to go back to the drawing board. The problem described below is present in every property we've reviewed, calling into question the validity of the entire data set.
Issue 2) Land in Philadelphia is dramatically underassessed
The first rule of real estate is location, location, location. Sensibly, each assessment is based on the combination of the value of land plus the improvements to the land (in most cases a home). A home in Graduate Hospital is principally worth more than a home in Point Breeze not because the quality of construction is necessarily better, but because the location is closer to the core of the city and the land is therefore more valuable. In Fantasy Land (Philadelphia, 2014), this truth is turned on its head.
For example, take 801 S. 20th St., a new construction home on the corner of 20th & Catharine. OPA has assessed the home at just shy of $500K, and the land at about $31K. Compare that to 1145 S. 20th St., a few blocks south, a vacant lot at the corner of 20th & Annin. Despite the city itself selling the property last year for $40K, OPA has assessed its value at $16K.
So great, OPA realizes that land is worth more in Graduate Hospital than in Point Breeze. But really? You can't buy a lot the size of a parking spot in Graduate Hospital for $31K. And they couldn't look at the sale price of the Point Breeze lot from just a few months ago? In reality, the Catharine Street corner land is worth about $250K, and the Annin Street land is worth about $60K. The assessments are off by factors of eight and four, respectively.
From what we can tell, land was dramatically undervalued across the entire city. This is not only counterintuitive on its face, but it also represents the missed opportunity of creating a tax burden of some kind for people with tax abatements. Instead, tax abated properties are mostly seeing their taxes go down, as their assessed land value goes from undervalued to hilariously undervalued. Perhaps more importantly, undervalued land makes land banking ridiculously easy and inexpensive, ostensibly stymieing development and perpetuating blight.
Will City Council seriously vote to implement AVI using such flawed data? Will the Mayor demand it? Will we have to settle for a system where the property values are still out of whack? Or will our political leaders refuse to move forward with AVI until we get these assessments right?