Mayor Parker Floats Borrowing $800M For Housing, Eliminating Construction Tax
Mayor Cherelle Parker only discussed housing for a few of the 90 minutes of remarks she delivered on her 2025-2026 budget proposal on Thursday, but the changes floated in her $6.7B five-year plan could have a big impact on Philadelphia's real estate industry.
The mayor called for borrowing $800M over the next five years to build and preserve 30,000 units of housing across the city, and she wants to eliminate the 1% construction impact tax as a way to spur new development.
“We will not spend years in planning mode,” Parker said. “We will begin by issuing $400M of those bonds in FY '26, and we plan on spending that money as quickly as possible. I want shovels in the ground.”
The mayor will share more details about her long-anticipated Housing Opportunities Made Easy Initiative and her 30,000-unit goal at a special session on March 24. She described the upcoming hearing as “D-Day for housing.”
The $800M Parker proposed borrowing for the HOME Initiative could be funded by several tax increases.
She wants to expand the real estate transfer tax from 3.28% to 3.58% in fiscal year 2026 to offset the costs. The mayor would also like to see a $3 document recording fee increase to fund the HOME plan’s tangled titles initiative.
“In terms of the housing borrowing, that will be backed by all of our revenues,” Finance Director Rob Dubow said during a press conference Wednesday.
The 1% construction impact tax has generated about $3.5M per year, which Dubow said isn’t a significant contribution to the city’s budget.
“We cannot incentivize the construction of new housing with this levy,” Parker said.
The budget proposal didn't include a doubling of the 10-year abatement for conversion projects that was proposed by the Tax Reform Commission last month. The group of business leaders convened by Council President Kenyatta Johnson said it would spur office-to-residential conversions in Center City, which has struggled with high vacancy since the pandemic.
“One of the things we look at is making our tax structure simpler, so actually getting rid of a tax rather than changing the abatement helps do that,” Dubow said.
The five-year proposal also includes $11M in new funding for the Philadelphia Department of Planning and Development, which is slated to add 32 new employees as the mayor ramps up her HOME Initiative.
Parker recently hired former American Planning Association President Angela Brooks, who is starting her new position as Philadelphia’s chief housing and urban development officer this month.
The mayor also plans to convene a Market East revitalization task force. It will be helmed by Brandywine Realty Trust CEO Jerry Sweeney, who was also a member of the Tax Reform Commission.
While the commission’s proposed abatement extension didn’t make it into the mayor’s five-year plan, Parker did heed its calls to shrink the city’s wage tax and business income and receipts tax, commonly known as BIRT.
If the city council approves her proposal, the gross receipts portion of BIRT will shrink from 0.142% to 0.138% by FY 2030, while the net income portion will fall from 5.81% to 5.5% over the same period. The wage tax for residents will shrink from 3.75% to 3.39% by FY 2030.
Officials hope to cut those rates even more after the city repays the $1.3B it borrowed to shore up its pension fund in the 1990s. Philadelphia’s fund balance is expected to shrink consistently until a balloon payment is made on that debt in FY 2029.
Dubow expects the pension fund to be 100% full by 2033. That is when Parker wants the city to begin reducing the net income portion to 2.8% and eliminating the gross receipts element entirely. The process is supposed to wrap up within seven years of the pension fund reaching 100%.
Parker’s address on Thursday kicked off a period of discussion about the city’s finances. The new budget needs to be adopted by the council before the city’s FY 2026 begins on July 1.
