Sean Walsh has a very good article on how Philly’s Actual Value Initiative will impact rents that gets at a point I’ve been trying to make, but could stand to put more directly: homeowners are richer than renters.
When City Council members argue in favor of a homestead exemption, they like to frame the argument in terms of helping poor people. And it’s true that many homeowners don’t have a lot of money. But you know who has even less money? Renters.
The big difference between low-income homeowners and low-income renters is that low-income homeowners have the option of getting a bunch of money by selling their property, and renters don’t. An increase in the cost of living in gentrifying neighborhoods might force both to move, but the homeowners will move out with a fat wad of cash in hand, and the renters will move out with nothing.
So in reality, the homestead exemption is a pretty bad idea if the goal is to help poor people, since it will raise taxes on rental properties:
Overall, AVI shifts much of the city’s property-tax burden from commercial properties to residential owners. But even among residential owners, the burden is shifted further to rental-property owners because of the homestead exemption, which will provide relief for residents who own their homes but will actually increase tax bills for rental properties by upping the tax rate.
The poor-poor people are going to end up paying higher taxes (via higher rents) to pay for a tax cut for somewhat wealthier folks who are merely cash-poor.
The real reason City Council probably wants to structure the tax relief like this is because the poor-poor people tend not to vote, and the cash-poor homeowners do:
So why have renters been seemingly overlooked?
One reason, some landlords, said, may be that renters are less politically active than homeowners, who often form powerful community groups with relationships to city officials. Also, homeowners are statistically more likely than renters to vote – especially in local elections.