Trying to buy a house in Berks County right now feels a lot like trying to find toilet paper felt a year ago. We have a housing shortage, particularly within the $200,000 to $250,000 range, which is what is most households around the median income in Berks can afford. You’ll be hard pressed to find a lot of homes in that price range if you hop onto the MLS, let alone new construction. Housing supply, particularly within this price range, hasn’t kept up.
County officials have taken note of this problem. Progress on restoring passenger rail to Reading has the potential to turn Berks into a bedroom community, with access to millions of jobs opportunities in the City of Philadelphia. Recent economic development trends, like the logistic centers along I-78 or the Drexel University and Tower Health development, have county officials asking themselves: “where are people going to live?”
Over the last year, the Reading-Berks Association of REALTORS ® has been at the forefront of discussions on this topic, trying to nail down the root causes of our housing shortage, and finding solutions through conversations with homebuilders and professional planners.
Some of these problems are harder to solve than others. There’s very little R-BAR can do to bring down the cost of lumber or alleviate the nationwide labor shortage the construction industry. But builders often cite the increased costs of doing business in Berks County compared to other counties, and that’s something we should be able to fix.
Now, R-BAR is proposing the first of several changes which should help to level the playing field, starting with the way in which Berks County assesses subdivisions. Under Pennsylvania tax law, the recording of a subdivision plan alone is not enough to justify a reassessment on the land value of the subdivided property, but there’s plenty of gray area. The choice on when to reassess a subdivision is ultimately left up to the county.In Lehigh and Montgomery County, that reassessment is not conducted until the individual lot is sold, and a new deed is recorded in the name of the buyer. Lancaster and Chester County will wait until construction is completed, and will reassess all the homes in a phase once they start getting sold. Berks, however, does things a little differently, sending an increased property tax bill to the builder as soon as any work starts anywhere within the entire subdivision.
Take a recent 17-acre development in Berks. Prior to subdivision into residential 30 properties, the entire 17-acres of raw land was taxed at an assessed value of $45,000 in land value. Once the plan was approved, the builder was soon hit with a new tax bill of $35,000 in land value – per lot. That’s a 2300% increase in the annual taxes the builder pays. Meanwhile, a builder in Montgomery County would never see that increased tax bill.
It is hard to quantify the amount of development we missed out on due to changes like this, which were made years ago, likely to increase revenues in the short term. But builders frequently talked about the increased risk that comes with assessment increases that come so early into the development process. In most cases, they can finish their development project quickly, only paying the increased rates for a year or two, but that increased
risk is something that must be accounted for when choosing how many projects to take on. Some new construction projects which were subdivided more than a decade ago had racked up more than $20,000 in property taxes before finally being developed and sold last year.
The broken way in which we reassess subdivisions is not the only obstacle to new construction in Berks. It’s just one piece of the puzzle. As we continue to push ways to incentivize housing growth in Berks County, we should remember that every single little cost adds up. Improving this process is a small step towards making Berks County a bit more competitive with our neighbors.