The Ebb and Flow of Realty Transfer Tax Revenue in Philadelphia, 2010-2024
Philadelphia's Realty Transfer Tax is a 4.27% levy on the total value of any transfer of real property in Philadelphia, with 3.27% going towards the city's general fund and 1% to the Commonwealth of Pennsylvania [1]. The tax burden is typically split between the buyer and the seller.
Taxes generated from property sales depend on real estate market activity. With federal interest rates still relatively high, many property owners are holding on to their lower mortgage rates, resulting in fewer sellers and a slow resale market. In Philadelphia, 2024 revenue from the transfer tax is far below the city’s projections. As of February, realty tax revenue was down 26% compared to projections, costing the city an anticipated $110 million for the fiscal year [2]. However, the loss of $110 million makes up less than 2% of the city’s $6 billion annual budget. Given higher-than-expected income from other revenue streams as well as the highest fund balance on record, the city does not appear to be urgently concerned about the resulting revenue shortfall.
What You Need to Know:
- Philadelphia’s realty transfer tax revenue has been rising over time, and revenue in 2021 reached an all-time high over $700 million.
- Indicative of the slowing real estate market, transfer tax revenue fell by 60% from 2022 to 2023.
- As of 2022, 50% of Philadelphia ZIP codes generated between $5-15 million in transfer tax revenue. Only one quarter of ZIP codes brought in more than $15 million annually.
Transfer Tax Revenue Over Time
Figure 1 illustrates the sum of the city’s annual transfer tax revenue from 2010 through 2023. While the tax revenue data lists a variety of categories to represent the type of transfer made, the vast majority are coded as the all-encompassing “Deed” category. However, in some years, “Stock Transfer” and “Sheriff’s Deed” provided significant revenue as well. While there is little information provided with the data, it may be possible that changing norms for data entry are responsible for the frequency of different categories.
Over the past ten years, Philadelphia’s revenue from the realty transfer tax has been trending upwards. After a slight decrease from 2019 to 2020, income from the tax jumped significantly in 2021, increasing by just over 75%. Revenue in 2021 was at an all-time high and fell only slightly in 2022. However, revenue in 2023 fell by more than 60% from the year prior, representing the drastic slowdown in the real estate market.
Figure 1: Source: Open Data Philly Real Estate Transfers
Total Revenue by Neighborhood
Zooming in on 2022 data, we examine transfer tax revenue – a proxy measure for sales activity - across the city’s neighborhoods. Figure 2 indicates the total tax collected from realty transfers in each Philadelphia zip code in 2022. The color gradient represents the four quartiles of the distribution. For example, only one quarter of the ZIP codes generated transfer tax above $15 million, while half of ZIP codes produced $8.5 million or less.
The ZIP codes in the highest quartile of transfer tax revenue are grouped along a corridor running from South Philly, through West Philly, to Northwest Philly. These ZIP codes include some of the neighborhoods with the highest-valued homes in the city, such as Society Hill, Rittenhouse Square, and Chestnut Hill (as shown in our previous analysis). However, these ZIP codes also include neighborhoods with comparatively lower-valued homes, like Lower Moyamensing, West Passyunk, and Mill Creek. This may indicate that despite or even because of their lower prices, these neighborhoods are generating more home sales.
Figure 2:
Source: Open Data Philly Real Estate Transfers
Quantity of Annual Transfers
Lastly, we examine how the quantity of annual transfers has shifted over time. Figure 3 illustrates the volume of transfers within each range of revenue. Since the city’s general fund gets the lion’s share of the RTT, this tells us how transfers of different sizes are contributing to the city’s budget. Table 1 indicates the total transfer amount associated with each transfer tax revenue range.
Table 1
Transfer Tax Revenue | Approximate Property Value |
< $5,000 | < $150,000 |
$5,000 - $10,000 | $150,000 - $300,000 |
$10,000 - $100,000 | $300,000 - $3,000,000 |
$100,000 - $500,000 | $3,000,000 - $15,000,000 |
$500,000 - $1,000,000 | $15,000,000 - $30,000,000 |
$1,000,000 - $5,000,000 | $30,000,000 - $150,000,000 |
$5,000,000 + | $150,000,000 + |
The total volume of transfers increased significantly between 2010 and 2017, then stayed consistently just above 40,000 total annual transfers through 2022. The quantity of transfers bringing in less than $5,000 has been trending downward since 2017, while the quantity of transfers bringing in between $5,000 and $500,000 have been trending upwards, peaking in 2021. This likely represents the changing real estate prices over the last decade, particularly since these prices are not inflation-adjusted.
From 2020 to 2021, there was s a significant increase in transfers bringing in $10,000 to $100,000, and an even larger increase in transfers bringing in $100,000 to $500,000. The quantity of transfers bringing in more than $500,000, while higher than usual, is lower than the quantity of these transfers in 2012. In that sense, 2021 and 2022 don’t appear to be anomalous at the highest ranges. However, 2021 did have a record number of transfers bringing in $1,000,000 to $5,000,000, while 2022 has a record number of transfers bringing in more than $5,000,000. In short, 2021 and 2022 saw an unusually large number of transfers of properties worth $30,000,000 or more.
Figure 3:
Source: Open Data Philly Real Estate Transfers
Conclusion
Declining revenue from the realty transfer tax is indicative of a slowing real estate market. The current federal rates, prohibitively high for many potential buyers, are likely to hold steady in the coming months [3]. Based on the transfer tax data, the value of realty sales in 2023 was less than half of 2022 sales, and the current pace of market activity is likely to last through 2024. However, recent reports suggest that more than a few high-value properties in the central business district are distressed, which could lead to a small number of transfers that bring in substantial revenue. Stay tuned!