Is This the Right Tool for You?
Evaluation of Results, Analysis of Impacts
As a neighborhood revitalization strategy,
split-rate property taxation is a tool that is
most applicable in communities that are
characterized by a large number of run-down or
abandoned buildings and numerous vacant or
underused parcels of land in the older,
centrally-located parts of town, while most new
development happens at the edge of town and
consists primarily of low-density,
land-intensive uses. In other words, if your
community feels like it is getting the wrong
kind of development in the wrong places,
split-rate property taxes can help channel new
growth away from sprawling development at the
edge of town and back towards older
neighborhoods that need revitalized the most.
According to proponents, split rate property
taxation has numerous potential benefits over
conventional property taxes, including:
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Encourages revitalization of older urban
areas and discourages real estate speculation
and absentee landlordism. With
split-rate property taxation, the tax
disincentive to develop or redevelop vacant or
underused land is removed because the value of
building improvements are taxed at a lower rate
than the value of land itself. Deteriorating
buildings and vacant or underutilized land will
be too expensive for property owners to leave
unimproved because of the high land value taxes.
Property owners have a direct economic incentive
to develop their land at the highest and best
use possible, or sell them to someone who will. |
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Promotes infill development, and slows ‘leapfrog’
development, urban sprawl, and the loss of open
space/farmland. With split-rate
property taxation , the value of urban land is
typically assessed according to 1) the value of
its location, as determined by proximity to
transportation networks and other
infrastructure, clusters of economic activity,
cultural institutions, and other urban
amenities, and/or 2) the value of its
development potential, as determined by the
health of the local real estate market and
existing zoning codes regulating allowable
density, parking requirements, and height and
setback restrictions. Thus, split-rate property
taxes encourage infill development of
vacant/underutilized land and rehabilitation of
the buildings in the older, more
centrally-located areas of a city that are
typically closer to existing infrastructure and
have both a higher land value and a higher
development potential than greenfield
development at the suburban periphery. |
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Encourages increased economic activity.
Split-rate property taxes encourage more
commercial development (office and retail) in
older, centrally-located areas of cities,
resulting in lower lease/acquisition costs for
businesses that relocate or expand to downtown
and ultimately creating more jobs that are close
to transit and other existing infrastructure. |
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Increases quantity and quality of
affordable housing. Split-rate property
taxes encourage residential development by
removing the disincentive to develop new housing
or renovate existing housing. Thus, split-rate
property taxes can improve the quality of a
city’s housing stock, attracting middle-class
residents and improving the dilapidated
conditions of buildings for low-income
residents. At the same time, split-rate property
taxes can simultaneously expand the quantity of
the housing stock, and this expanding housing
supply helps counteract the increasing housing
demand, thereby keeping housing affordable by
preventing rapid price increases caused by
caused by housing shortages and gentrification. |
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Improves building architecture and urban
design. With traditional single-rate
property taxes, high-value buildings result in
higher property taxes over the life of the
building, therefore creating an incentive to use
the cheapest possible materials and use
homogenized, industry-standard site-planning
techniques and building prototypes. With
split-rate property taxes, higher value
buildings are not penalized with higher property
taxes but are simply rewarded with higher value
rental. Thus, developers are motivated to use
higher-quality, more durable materials, and to
commission context-specific site plans and
original building designs that can help create
unique urban places. |
For an analysis of the impacts of split-rate
property taxation in the cities of Harrisburg (PA) and Scranton (PA), please see the ‘Who Else
is Doing It?’ section below.
  
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