Saturday, May 14, 2011

Paging Henry George

One of those news items I should have noted already.  PBT points out that one of the city of Pittsburgh's property tax abatement is drawing to a close.  The article is talking about the LERTA program which is a state statute that allows municipalities to expempt taxes on commercial real estate in a designated district from taxes on a depreciating scale and in particular the district defined Downtown.  As the article points out, many think the program has had an impact improving the residential demand Downtown.

The LERTA is actually just one tax abatement program impacting some city neighborhoods.  There exists a separate program that abates the tax on investments in residential investment in 28 city of Pittsburgh neighborhoods.  

Want to make a real impact on the future growth of Pittsburgh? There is something we almost have to try at some point. My point a few years ago was to make the city's tax abatement universal!

There is no real reason not to.  The argument against expandng it city-wide is that the city might forgo some new incremental tax revenues on new residential investment going on in the non-tax-abated neighborhoods.  Guess what?  The level of non-subsidized residential construction within the city of Pittsburgh is about as low as it can get.  In fact, most new housing in the City in the last decade have come entirely from Summerset and all the highly subsidized housing stock Downtown. That's it pretty much.  I am not sure we have any more slag heaps needing redevelopment, and there isn't much new money for more condo subsidization, so what does the future hold for the future of housing in Pittsburgh? Without any incremental jumps in property tax in the pipeline the cost of expanding the abatement program across the city are limited.  Yet the benefits could be spurring a new level of investment in residential construction or improvements that really are key to ever get the city of Pittsburgh population decline to itself abate.

To abate, or not to abate?  It all depends what you want to abate.

Philly's tax abatement program has been credited with a revival in residential housing in Philadelphia and the census shows that Philadelphia's population trend has literally reversed over the last decade.  At the same time Pittsburgh's popualtion continues to drop rapidly.  The presence of children is a decent proxy for future household population in the City of Pittsburgh, and the trend there is worse than the overall popualtion trend.  Bottom line, if the city does not build out a housing stock attractive to new families then there is no reason to think the city's population trend will reverse any time soon.

There has never been a place that has less to lose and more to gain from an omnibus tax abatement on new residential real estate investments than Pittsburgh.

OK, maybe we do have some other slag heaps out there to redevelop... but I at least am unaware of any bold initiative out there to repeat any time soon what was done with Summerset.

20 Comments:

Anonymous MH said...

I think that might work very well.

Also, I'd like to suggest curb-homesteading for South Oakland. If you pick-up the trash between the middle of the street and the house, you get to put in a parking meter and keep 1/2 the money.

Saturday, May 14, 2011 8:08:00 PM  
Anonymous The Wiz said...

Chris, you should contact the Builders Association of Metropolitan Pittsburgh with that idea. I am sure that they would love to see such a program. And they work closely with the Pennsylvania Builders Association which has some clout in Harrisburg.

Sunday, May 15, 2011 10:42:00 AM  
Anonymous MH said...

Would probably also work for Wilkinsburg and maybe a few of the other older areas.

Sunday, May 15, 2011 12:20:00 PM  
Anonymous Alex B said...

The number one reason the population of school age children is low is the low average quality of the public schools.

The reasons are never-ending. But the central problem is how to engage more parents in their children's education without having them conclude that private schools or suburban schools is the answer.

New houses will take care of themselves. The housing stock in the east end of the city for example is pretty much what it was 30-40 years ago, yet we have empty schools.

Sunday, May 15, 2011 10:04:00 PM  
Anonymous MH said...

Private schools are the answer as far as I'm concerned.

That is, I suppose a matter of opinion. But it isn't even debatable that housing stock of the east end is not at all what it was 30 years ago. You can only say that because you haven't been to Hazelwood or Larimer or whatever you see up past Trader Joes. In terms of quality, even the best made hunk of Shadyside brick is going to fall down some day.

Sunday, May 15, 2011 10:54:00 PM  
Blogger C. Briem said...

Generally speaking, the east end Alex B. must be thinking of is the area in the city doing the best at retaining families with children. Fascinting how the perception is the opposite. It's as MH gets into.. Homewood and Larimier, but also the Beltzhoover's and the West End that North Side that are all losing kids.

Yet Alex B. is quite correct when he says much of the housing stock is exactly as it was 40 years ago. I think that is the core problem. There just has not been much investment or improvement in the city's housing stock over the last 4 decades. So it migth seem the same.. but there are a few decades of depreciation that has not been offset by improvement/investment.

Sunday, May 15, 2011 11:28:00 PM  
Anonymous MH said...

Local leaders have clearly made the bet the answer to boosting the city’s population is engaging more parents in PPS. That is pretty much the point of Pittsburgh Promise. I think that is the wrong approach for many reasons, not the least of which being that the payoff is uncertain and twelve years down the road. I think the tax abatement idea provides incentives that are better aligned with the priorities of a late 20’s/early 30’s household.

Monday, May 16, 2011 9:32:00 AM  
Anonymous The Wiz said...

One big problem with existing housing....all homebuyers want more than anything a master bedroom suite complete with master bath and walk in closets. None of these older homes have them. And adding them means also having to upgrade the electrical and plumbing systems. That means after you buy the house you have to put in 30 to 40 grand to upgrade the house, more if you upgrade the kitchen.

That means a six month delay to move in plus higher taxes after you do the improvements. And you still have an older home in a neighborhood that will bring down the resale value of the home.

Unless a large % of homes in any given neighborhood undergo major improvements, it will be difficult to get people to invest in a home in an older neighborhoods.

Maybe give new home owners a ten year tax abatement for any improvements made after purchase.

And how would the financials work for a major developer to buy, remodel, and sell large blocks in various neighborhoods? If a hundred homes at a time could upgraded, perhaps a neighborhood could be revitalized. maybe get a consortium of five or ten builders to commit to a project.

Monday, May 16, 2011 10:45:00 AM  
Anonymous MH said...

That means a six month delay to move in plus higher taxes after you do the improvements.

If you do interior improvements after you buy, it doesn't seem like you'll get your valuation raised any time soon. It seems to take a sale at a much higher price for somebody to notice.

Monday, May 16, 2011 10:59:00 AM  
Anonymous MH said...

If a hundred homes at a time could upgraded, perhaps a neighborhood could be revitalized.

Any place in Pittsburgh where you could get that number of houses in the same area, those houses are going to need replaced, not upgraded.

Monday, May 16, 2011 11:04:00 AM  
Anonymous The Wiz said...

MH; do you need a building permit to do structural changes? Does getting a permit with the cost of improvements then change the appraised value of the home? It does so in many communities.

And many homes would require an addition to accommodate a master bath plus a walk in closet.

Monday, May 16, 2011 12:06:00 PM  
Anonymous MH said...

I take your point. You are supposed to get a permit to do even simple, non-structural changes. The push is getting stronger now. I talked to some window replacement guys and they apparently just get a permit by default. They certainly didn't do that years ago.

But, from what I have seen, the assessed value of the house is much more influenced by when it last sold than when it was last updated. This is one of many reasons for the huge fight about a county-wide reassessment. Probably for the same reason, but maybe just because local government doesn't coordinate very well, I've seen plenty of houses that were very recently updated but still carried the assessed value from before those updates.

Monday, May 16, 2011 12:16:00 PM  
Anonymous MH said...

That last clause is poorly written and shouldn't have the word "recently."

Monday, May 16, 2011 12:19:00 PM  
Anonymous kejads said...

I'm a little late to this conversation, but I think the last thing we should be doing is subsidizing new housing supply in Pittsburgh. The city/county should be looking for ways to remove abandoned property and to encourage (as several other posters noted) improvement and renovation of existing properties.

A major reason that Pittsburgh does so well in "quality of life" rankings is the low cost of housing here. What those rankings don't take into account is cost of comparable housing. Any new homeowner needs to invest tens of thousands of dollars to bring the place up to what would be seen as minimal quality standards (number of bathrooms, closet sizes, finishes, insulation, wiring, etc.) for other US cities. A "house" here is cheap, but a "decent house" costs about the same or more than in most of the rest of the country (excepting the expensive outliers like NYC, Boston, DC, and SF).

Wednesday, May 18, 2011 10:52:00 AM  
Anonymous MH said...

I don't think your first paragraph fits with your second paragraph. If you bounce around Highland Park or something, you might think Pittsburgh is full of run-down but nice, fixable houses. That is not the case for the majority of houses (especially not empty houses), especially if you want them up to the quality standards you see in the rest of the country.

Wednesday, May 18, 2011 11:53:00 AM  
Blogger Kevin A. said...

I agree, but subsidies and incentives here should be directed toward renovation and rehab and not to increasing the housing (and commercial) supply. Allegheny County lost 4.6% of its population from 2000 to 2010. The abandoned structures should come down and not be replaced. Remove incentives that perpetuate underutilized space, too. We don't have problems with demand exceeding supply of housing here, yet we continue to encourage new supply.

Wednesday, May 18, 2011 1:13:00 PM  
Anonymous MH said...

If you do that, the city and close in suburbs will continue to decline and the building will continue to happen at a greater and greater distance from current job sites and public transportation networks. The subsidies and incentives for that development are huge, but hidden.

Wednesday, May 18, 2011 1:17:00 PM  
Anonymous MH said...

Speaking of supply and demand, Summerset seems to show that people will pay for more a new house in Pittsburgh (with a tax abatement) than they will for a new house far out in the suburbs. I'm sure part of the attraction is that the location is all new housing, but I would be very surprised if there were not some people who buy a new house in an older neighborhood but who simply won't buy a hundred year old house. Or at least, won't buy a hundred year old house that hasn't been updates so much that the work done cost more than starting over with a new house.

Wednesday, May 18, 2011 1:56:00 PM  
Anonymous The Wiz said...

How about this for an idea for all the abandoned homes. Have the city strip them down to the bare studs and then sell them off to people that will rehab them. And then give ten year tax abatement to the final owner.

One bad thing about buying and rehabbing an old home is the surprises one runs into when they gut it out. Once it is gutted out, you can see everything wrong with it.

The down side is that many have great wood and marble finishes that many would like to keep. But many homes are so bad that there is little inside to save.

Any home beyond saving should be torn down and the land divided up among neighboring properties.

Wednesday, May 18, 2011 2:37:00 PM  
Anonymous noessese said...

They already do some of those things. Right now, when they find the money, they will push over an abandoned house and sell it the lot for almost nothing to the neighbor to use as a yard.

As you noted above, these revitalizations work far better when you can get a whole neighborhood moving at the same time. I think that was right, but I don't think we can find a sufficient concentration of houses that are abandoned and worth renovating. In fact, I don't think we can find a sufficient concentration of houses that are lived in but run-down and worth renovating at the kind of profit you'd need to attract enough capital and builders to make a difference. People do make a living at renovating old houses (I assume since somebody keeps doing it) or get themselves a nice house on the cheap, but that kind of work is expensive compared to new construction.

I don't see how it could be sufficient to slow a population decline. Summerset, Washington's Landing, and the various Southside townhouses have made it pretty clear that if you build something new, it will sell.

Wednesday, May 18, 2011 9:52:00 PM  

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