How Philadelphia Fixed Parking Craters Using Tax Policy

Housing is replacing  parking lots in center city Philadelphia. Image:
Housing is replacing parking lots in center city Philadelphia. Image: JVM Studio

Here’s some great news out of Center City Philadelphia: Housing is replacing parking.

The number of off-street parking spaces in downtown Philly and nearby neighborhoods declined 7 percent between 2000 and 2015, from about 50,000 to 46,400. As parking became less abundant, the appetite for it also waned: Parking occupancy rates have fallen almost 2 percent over the same period.

What’s happening in Philadelphia is evidence of the “virtuous cycle” that results from reducing dependence on cars. Making parking less convenient is leading to greater walkability.

It’s also the result of deliberate public policies — mainly tax incentives, with a dash of zoning — which Jonas Maciunas of the Philadelphia-based urban design consultancy JVM Studio described in a presentation at UConn earlier this month. Other cities scarred by excessive parking in central neighborhoods should take note. If, like Philadelphia, there’s demand for growth downtown, these four steps can channel it to create more walkable places.

1. Raising the parking tax

Philadelphia levies a surtax when people pay for off-street parking. Between 2007 and 2015, the city incrementally raised this tax from 15 percent to 22 percent, making parking more expensive for consumers.

2. Reducing parking minimums

When a parcel is developed in central Philadelphia, the zoning code makes it easier to build for walking, not driving. In 2012, the city eliminated parking minimums for commercial buildings in the center city. It also dramatically reduced residential parking requirements. For every 10 residences, the old rules required seven parking spaces, while the new rules require three.

3. Tax abatements for new construction

In 2000, Philadelphia enacted a tax abatement to attract development, which had been flowing mainly to the suburbs. The city granted a 10-year property tax exemption on improvements to residential and commercial properties. New or renovated buildings are tax-exempt, while the land itself is not.

Obviously, the abatement alone would not work without market demand. Nor would it be necessary if the market was already primed to build. But in Philadelphia’s case, it appears to have helped tip the scales, coinciding with a shift in development patterns, according to data from the Building Industry Association of Philadelphia:

philly abatements

4. Reassessing property values

In 2013, Philadelphia changed the way it assesses property values and updated all 579,383 properties on its tax rolls through the “Actual Value Initiative.” Some properties had not been reassessed since the 1980s, according to the Pew Charitable Trust.

The new assessment methodology places greater emphasis on the value of land in relation to structures. Last year, for instance, most properties — 85 percent — saw no change in total value, but 92 percent saw an increase in land value, reported Jon Geeting at Plan Philly. The 14 percent of properties where assessed value increased were concentrated in areas with hot real estate markets.

The effect has been to create incentives for construction. When land is taxed more relative to buildings, that encourages property owners to develop, rather than retain low-value uses like parking lots.

26 thoughts on How Philadelphia Fixed Parking Craters Using Tax Policy

  1. The AVI in Philly didn’t actually assess land. It just transferred part of the improvement value to the land value. Vacant lots are still under assessed compared to land down the block, which has new construction on it. The way philly structured their land reassessment is not the Georgian ideal of land-value taxes where proximity to the core/higher demand dictates value. There is no reason that lots abutting each other should have dissimilar values due to the age or quality of the structure on that particular parcel, particularly when the vast majority of lots in the city are attached housing. AVI’s effect is yet to be seen. Taxes and assessments on vacant lots outside the core are so low that for speculators it doesn’t really matter if they hold/develop lots. In Center City, sure, but there were few vacant parcels to build on to begin with.

  2. Also, the most retrograde members of city council are looking to increase parking minimums. I’m sure you’re aware of this Angie. Philly is not some urbanist paradise with thoughtful progressive leadership. Quite the opposite actually, aside from a few at-large council members.

  3. True. I believe we will see more movement in 2019 around these issues. The urbanist-focused / smart growth coalition is slowly coming together and either this round of council elections, or next, will show them flexing some decent strength I think.

  4. The tax is big. Many developers “sit” on parking as property values go up to cash in on future increases. While understandable this pushes all prices up and is not great for development. Raising the tax increases the opportunity cost of sitting on the parking as a gamble on a higher future return.

  5. I am all for making the city less dependent on cars. Further, government requirements for a minimum number of spaces is an impediment to growth.

  6. Ah, the liberals trying to impose their views upon everyone else again, no matter how misguided they may be!

  7. In what way is reducing parking minimums and taxing something that has large external costs born by all of us “imposing” views on others?

  8. and how is it liberal, are progressive efforts always liberal? It should be human and common sense without labeling.

  9. Actually, it’s not, so why don’t you try to explain it to everyone else? Or maybe the problem is that you can’t actually explain it? It’s just a feeling you have?

  10. Let’s see, reducing the burden on commercial business by repealing mandatory minimum parking requirements? Yeah, definitely liberal. Reducing the burden on residential developers by reducing their minimum parking requirements? Liberal indeed. Improving opportunities for developers with tax abatement? Yup, liberal. Gee, I guess you’re right.

  11. The normal people do live in the country, for the most part. Look up crime statistics per capita and quality of life issues, and tell me where it is better to live.

  12. Not really. Last time I checked, not more than 30% of Americans lived in rural areas; in fact, the estimate I heard was less than 10% of Americans live in rural areas. Additionally, worldwide, 50% of people live in cities, and that is projected to increase to 70% in a short period of time.

  13. This is not what I meant. I meant that the people are more in tune with having rational values in rural areas. Check out the raving lunatics in the cities and compare that to rural people. In cities, things like God, family, country, helping others, and treating people properly are foreign concepts.

  14. Actually, some of the highest crime rates in the country are in rural parts of the deep south and Appalachia. The county I grew up in in central Appalachia has a much higher crime rate than the large city I live in now.

    Contrary to what you seem to believe there are folks of all types in cities. Families too! Or did you think those only existed in the country?

  15. All I can say is that when I see riots and other crazy stuff, I see it in the cities. Agree with them, or else! Try to micromanage peoples’ lives too.

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