Tax Abatement and Development Incentives

A tax abatement in Philadelphia is a temporary exemption from real estate tax on the added value of a property, intended to encourage building and renovation. The best-known is the ten-year abatement for improvements, which the city has offered for decades and which became one of its most debated policies. The abatement applies to the increase in assessed value from construction, not to the land value, so owners still pay taxes on the land. This article is a general overview.^[1]

1 How abatements work

Property owners pay city real estate taxes based on assessments set by the Office of Property Assessment and collected by the Revenue Department (see Philadelphia Taxes). Under an abatement, the added value from new construction or rehabilitation is exempted from tax for a set period. The abatement is attached to the property, so it transfers to later owners until it expires. Property tax revenue is shared between the city and the School District of Philadelphia, so a large share of the revenue foregone is revenue that would otherwise support schools, which is central to the debate.

2 The 2019 reform

On December 12, 2019, City Council passed legislation reducing the new-residential-construction abatement. As Hidden City Philadelphia reported, the first year remains fully abated and the exemption then shrinks by 10 percentage points a year (90 percent in year two, and so on) until the full tax is owed in year 11; the full ten-year exemption for improvements to existing residential properties was preserved. The reported effective-date cutoff for building permits was December 31, 2020, a compromise between the mayor's preferred date of July 1, 2021 and an earlier date favored by Council leadership, which is why projects permitted in 2020 and projects permitted from 2021 are treated differently.^[2] Commercial and industrial abatements were not part of the change. Industry groups warned of reduced construction while supporters of the change said the old subsidy was too generous (see Developers and the Real Estate Lobby). Owners should confirm which abatement applies to a given permit with the Department of Revenue.

3 Other incentives

Besides the residential abatement, Philadelphia uses the Local Economic Revitalization Tax Assistance (LERTA) program for commercial and industrial improvements, state Keystone Opportunity Zones, and financing programs run through the Philadelphia Industrial Development Corporation and the Commerce Department. Tax increment financing is also available through redevelopment tools in particular projects, and the Division of Housing and Community Development offers subsidy for affordable housing. Wage-related conditions may attach to some subsidized projects (see Prevailing Wage and Project Labor Agreements).

4 The 20-year conversion proposal

In November 2025 Mayor Cherelle Parker announced an initiative to offer a 20-year abatement to encourage converting deteriorated buildings, such as vacant Center City office towers and empty school buildings, into apartments, after working with state legislators on changes to Pennsylvania law. As of the Philadelphia Inquirer's September 24, 2026 report, the administration had not sent a bill to Council; Chief of Staff Tiffany W. Thurman said the administration was ensuring the legislation would be legally sound. Council President Kenyatta Johnson said Council had not seen any legislation and that the administration should "send the bill over." Several Council members were reported to be hesitant given the school district's funding difficulties and the 2027 municipal elections.^[3] The proposal's status may change.

5 Why it is contested

Supporters argue abatements spur construction and eventually enlarge the tax base. Critics, including some neighborhood advocates, argue that abatements starve the city and schools of revenue and mostly benefit higher-income housing in already-growing areas. Research and analysis from the City Controller, think tanks and academic studies has produced differing conclusions about how much building would occur without the subsidy; readers should consult the original studies rather than rely on summaries. Debates also involve councilmanic politics and school funding.

6 Legal constraints and oversight

Pennsylvania's constitution requires uniformity in taxation, which limits how the city can target relief (for example, by income or by deed restriction), and state enabling laws set what kinds of abatements are allowed. Changes thus require Council action and sometimes state legislation (see Home Rule Limits and State Preemption). Abatement costs appear in the city's tax expenditure reporting (see How to Read the City Budget).

See also: Philadelphia Taxes, Office of Property Assessment, Philadelphia Industrial Development Corporation.

References

1. City of Philadelphia, Office of Property Assessment and Revenue Department guidance on abatements, phila.gov.
2. Hidden City Philadelphia, "10-year Tax Abatement Bill Approved, But a New Battle is Brewing," December 13, 2019; WHYY, "Equitable or not enough? Philly Council just changed the 10-year tax abatement," December 12, 2019; City of Philadelphia, "Get a property tax abatement," phila.gov.
3. Philadelphia Inquirer, report on the 20-year abatement proposal, September 24, 2026.