Feb 01, 1999
By Andrew Cassel

Homeownership may not be everything it’s cracked up to be.

I say that not merely as a homeowner facing larger maintenance bills than I care to think about, but as an observer of the City of Philadelphia , the homeownership capital of urban America.

I’ll bet you didn’t realize this: Philadelphia is dominated by homeowners as is no other large city in the nation. In fact, the city’s motto really ought to be Philadelphia : Home of the Homeowner, or maybe Philadelphia : City of Deeds.

According to numbers I pulled from the Census Bureau’s Web site the other day, 62 percent of Philadelphia ‘s roughly 600,000 dwelling units were owner-occupied as of 1990.

By comparison, New York’s homeownership rate was only 29 percent; Boston’s was 31 percent; Baltimore’s was 49; Washington’s was 39; and Pittsburgh’s was 52.

Midwest and Sun Belt cities aren’t all that different from those in the Northeast, moreover. Chicago came in at 42 percent, Atlanta at 43, Houston at 45.

The city with the next-highest rate to Philadelphia was Phoenix, with 59 percent of its households living in homes they own .

As I said, these numbers date from 1990, which was the last time anyone counted city by city. Since then, homeownership has been on the rise generally, but we have to assume that Philadelphia ‘s relative position at the top of the urban homeownership heap remains unchallenged.

 You might think this would be something for Philadelphians to brag about, at least as much as the Avenue of the Arts or DisneyQuest.

 Homeownership, after all, is the hallmark of the American Dream – the key to economic growth, stable communities, good schools, and a healthy civic environment.

 At least that’s the official view, affirmed just last week in a press release sent out by the office of HUD Secretary Andrew Cuomo.

It said homeownership in the United States hit an all-time high last year, reaching 66.3 percent nationwide – thanks, of course, to the policies of the Clinton administration.

Among minority groups, homeownership is on the rise, the HUD release said. Black and Hispanic homeownership rates were 46 and 45 percent, respectively, up from 42 and 39 percent, respectively, in 1993.

And even in urban core cities, the nationwide homeownership rate hit 50 percent for the first time.

This is almost certainly a good thing. But every silver lining has a cloud, and I would like to offer Philadelphia as Exhibit A for the case that there’s a dark side to everything – even homeownership.

 My reasoning goes like this:

 City governments draw revenue, broadly speaking, from taxes on two kinds of activity: residence and commerce. Philadelphia ‘s taxes on commerce include the wage tax, the business-privilege tax, the sales tax, commercial real-estate taxes, etc.

Residence taxes are just that – real-estate taxes on residential property – along with transfer taxes and so on.

Naturally, renters pay residence taxes as well as homeowners, since landlords simply pass those costs along. But not many rental bills break out taxes as a separate item, and it’s my guess renters don’t tend to gripe as much about rising real-estate taxes when they vote.

So politicians in a high-homeowning city such as Philadelphia are likely to be quite sensitive about raising residence taxes – more than if the mix were tilted towards renters. The pols are more apt to put the tax bite elsewhere – namely, on commerce.

 Indeed, Philadelphia raises far more money taxing commerce – wages, sales, profits, etc. – than it does taxing residence. And in point of fact, living in Philadelphia is a relative bargain, even compared with the suburbs. It’s trying to make a living here that costs so much.

 It is, of course, a public-policy truism that if you want less of something, tax it more, and vice versa. Philadelphia ‘s experience bears this out, in vivid detail.

The city taxes commerce more and residence less; hence, commerce declines. It’s not just the 100,000 jobs lost since the end of the 1980s (made up only fractionally in the last year or so); it’s the flight of department stores, manufacturers and grocery stores, and the failure to attract new businesses in proportion with the wider region.

Aha, you say; there’s a flaw in my reasoning. It’s not just commerce that’s waning; the city’s population has fallen almost in half since 1950. If Philadelphia taxes residence less, why has residence also declined?

Indeed. But that just underscores my original point, which is that homeownership may be overrated – not for individuals, perhaps, but for cities.

While protecting its homeowning citizens against higher taxes, Philadelphia may have driven away the reason many of them chose to live here at all.

Without jobs and businesses, residence isn’t much of a bargain at any price.