This article is adapted from Buy-in for Buyouts: The Case for Managed Retreat from Flood Zones, a Policy Focus Report to be published in September 2016 by the Lincoln Institute of Land Policy in conjunction with Regional Plan Association.

Hurricane Irene and Superstorm Sandy cost the New York metropolitan area an unprecedented number of lives and properties. In the span of 14 months, between August 2011 and October 2012, the storms killed 83 residents and caused $80 billion of damage in New York, New Jersey, and Connecticut. More than $60 billion in recovery funding was allocated to local governments, home owners, and facilitators to repair roads and seawalls; elevate, secure, or acquire buildings; restore dunes and wetlands; and reconstruct communities. 

The hurricanes generated a regional dialogue about how to prepare for and respond to extreme weather events. These conversations led to state-of-the-art, government-sponsored design competitions such as Rebuild by Design. And at the federal level, the U.S. Army Corps of Engineers (USACE) conducted the two-year, $19.5 million North Atlantic Coast Comprehensive Study, which focused on how to protect Northeast residents from hurricanes. 

Yet nearly five years later—after recovery efforts have been completed and appropriate programs implemented—many communities in the region still could not withstand the surge levels of another Sandy or the riverine flooding of another Irene. And by 2050, the number of residents vulnerable to flooding in the region will likely double to 2 million people, due to rising sea levels, the increasing frequency and magnitude of storms, and steady population growth. One third of the victims will be socially vulnerable. 

The Case for Buyouts

Rebuilding and restoring are the most common and popular adaptation tools for strengthening community resilience in the face of climate change, but the strategy that most effectively eliminates risk is managed retreat through the use of buyout programs. Yet, because of the social and political complexity of managed retreat, governments and communities across the United States have largely dismissed it as an adaptation strategy. 

Typically funded by federal or state dollars and managed at the state or county levels, buyout programs are designed to provide a mechanism for residents to sell their homes and move to safer locations if they no longer want to live in high-risk flood zones. New York, New Jersey, and Connecticut all employed buyout programs on a limited scale following Hurricane Irene and Superstorm Sandy, but too often this approach was considered controversial even for the hardest hit areas.

Indeed, managed retreat poses considerable challenges. For home owners, the decision to leave a community can be traumatic, especially if adequate and affordable housing is hard to find nearby. For municipalities, the loss of tax revenue from bought-out properties can have a serious impact on the local budget. On a higher level, urban planning’s dubious history of relocating low-income communities, ostensibly for the greater good, stands as a reminder of how well-intentioned, even necessary measures such as managed retreat can have disproportionate negative impacts if they are not carefully considered in close consultation with residents. 

But if these problems are carefully considered during the design and implementation process, the benefits of buyouts can outweigh the risks. Unlike other adaptation measures, retreat is a one-time investment that requires no further action beyond providing relocation assistance to participants and protecting the natural landscape left behind. Managed retreat also has the potential to create synergies with other resilience and adaptation strategies. Since development is not permitted on acquired land, buyouts can be used to implement projects such as sea wall construction, wetlands restoration, and many other engineered and nature-based resilience measures. Residents can forge new beginnings on safer ground and help create public amenities by allowing for the acquisition of homes in flood-prone areas and restoration of the land to natural floodplain functions.

While the promise of buyouts is great—yielding 100 percent risk reduction, a greater return on public investment, and other benefits to communities and habitats—they have attracted only $750 million of the billions in federal aid allocated for resilience and recovery in the New York metropolitan region. The vast majority of recovery efforts have focused on more popular adaptation measures.

Buyouts in the New York Metropolitan Region

This article highlights the experience of three cities in Connecticut, New York, and New Jersey that adopted buyout programs after suffering major property loss from Hurricane Irene or Superstorm Sandy. The case studies demonstrate that buyout programs are a useful tool for moving residents in flood zones out of harm’s way, but they also illustrate the limitations of current programs. 

Buyout Programs in the New York Region

NY Rising
New York State established the New York Rising Buyout and Acquisition Programs (NY Rising) in order to address the damage caused by hurricanes Irene and Sandy as well as Tropical Storm Lee between 2011 and 2013. In a handful of designated “enhanced buyout areas,” including Oakwood Beach on Staten Island, home owners were offered the pre-storm value of their homes, plus incentives for group participation to prevent the so-called “checkerboarding” of bought-out properties. 

Blue Acres
The Blue Acres program, run by the New Jersey Department of Environmental Protection, predates hurricanes Irene and Sandy, but it has benefited from the funding made available after those storms. In recent years, the program has mainly targeted neighborhoods in Sayreville and Woodbridge, and identified individual properties or clusters of properties that experienced repetitive or severe repetitive losses.

Other Federally Funded Programs
In many cases, buyout programs are administered on the local level and funded largely through federal grant programs such as FEMA’s Hazard Mitigation Grant Program (HMGP) and the USDA’s Emergency Watershed Protection Floodplain Easement Program (EWP-FPE). Typically, federal grants for buyouts require a local funding match of 25 percent.

Oakwood Beach, New York

Oakwood Beach is located on the central part of Staten Island’s South Shore. The lowest-lying portion of the neighborhood is situated next to the marshes of Great Kills Park. The most serious flood risks come from storm surge off the Raritan Bay and Lower New York Harbor. Additionally, sections of the neighborhood experience nuisance flooding following even modest rainfall. Along with the neighboring upland community of Oakwood, Oakwood Beach has a population of 22,000, and nearly 3,000 residents live in current FEMA Special Flood Hazard Zones. The number of people within high-risk flood zones is expected to increase nearly 150 percent, to 7,300 by 2050. 

Oakwood Beach is a middle-class community with a median annual household income of $89,000. The neighborhood is 31 percent low-to-moderate income, 16 percent nonwhite, and 69 percent owner-occupied. The neighborhood was largely developed in the 1960s and 1970s; nearly half its residents have lived in the community for more than 25 years. In general, the homes built closer to the water are smaller and cheaper than those located farther upland. Single-family homes dominate the neighborhood, but there are a handful of apartment buildings inland.

Hurricane Sandy severely impacted Oakwood Beach. The storm surge overtopped the boulevard that runs along the coast and damaged the berm between the neighborhood and the Atlantic Ocean. The surge inundation was exacerbated by the floodwaters trapped within the “bowl” topography of the South Shore (SIRR 2013). In Oakwood Beach, some homes were swept off their foundations; others were flattened. Staten Island as a whole was among the hardest hit areas, with 23 storm-related deaths in the borough (SIRR 2013; Koslov 2014). Prior to Sandy, Oakwood Beach withstood several other historic floods, including intense inundation from a nor’easter in 1992 and flooding from Hurricane Irene in 2011 (Oakwood Beach Buyout Committee 2015; Koslov 2014). After the 1992 storm, residents organized a Flood Victims’ Committee to petition for better flood protection from the state and federal government. Although the USACE somewhat addressed their concerns by constructing a berm, it was not completed until ten years after the nor’easter (Koslov 2014).

Building on their experience organizing for flood protection in the 1990s, Oakwood Beach residents moved quickly to plan their recovery after Hurricane Sandy. At an early community meeting devoted to immediate disaster response and aid, one organizer asked if residents would support a buyout program. Nearly all community members in attendance said yes. Residents then formed the Oakwood Beach Buyout Committee, which began to draft an application for a state buyout. The committee conducted outreach to gauge interest and provided information to residents about what a buyout program might entail. The committee collected signatures from nearly all the neighborhood’s residents to indicate their interest (Lavey 2014). Additionally, committee members surveyed residents about where they felt safe living within the neighborhood, in order to generate maps of priority acquisition areas. 

This mapping effort is a powerful tool for communities organizing to receive buyouts. However, some populations that are considering buyouts are settling in marginal flood-prone areas because they have suffered government-imposed relocations and disinvestments in the past. If buyout program plans are not community-driven, they risk continuing this pattern of marginalization. As we observed in post-Katrina New Orleans, residents understandably opposed buyout programs proposed by outside planners who hadn’t consulted with the local population. By contrast, Oakwood Beach residents collaboratively created their own “green dot” maps to convey their goals for a buyout program and to confirm that they did not want redevelopment in their flood-prone area. 

The NY Rising Program heeded residents’ requests and launched a buyout program for Oakwood Beach. As of June 2015, nearly 99 percent of the neighborhood’s residents have participated. The state plans to purchase 326 properties, an acquisition process that will be completed in 2016. As of February 2015, the state owned 296 properties and had demolished 60 (Rush 2015; Governor’s Office of Storm Recovery 2015). 

The relative success of Oakwood Beach’s buyout program is not surprising considering the fiscal context. Factoring in the projected sea level rise by 2050, a single 100-year flood event could cause $216 million of damage across 1,837 properties, and 830 would have to be demolished. As summarized in table 1 (p. 32), a buyout of only those 830 properties would save community residents $817,000 per year in flood insurance premiums and an annualized average of $5.7 million in damages and dislocation costs. In terms of the potential costs to communities, Oakwood Beach benefits from being only one neighborhood in a very large city. The loss in tax revenue is quite negligible in the context of New York City’s $75 billion budget.

Wayne, New Jersey

Wayne is a township of 55,000 people in the outer ring of northern New Jersey suburbs. Twenty percent of households are low-to-moderate income, 20 percent of residents are nonwhite, and 80 percent are home owners. The town is landlocked but lies within the Passaic River Basin. Approximately 12 miles of Wayne’s western border is formed by the Pompton River, which has a history of flooding. Additionally, the township has several lakes and streams with development encroaching on flood zones. Approximately 5,400 people (nearly 10 percent of the total population) currently live in Special Flood Hazard Areas. Wayne is the wealthiest of the case studies, but the town has experienced the slowest property value growth since 2000. FEMA has provided $6.9 million in individual assistance to Wayne home owners since 2007, and 15 percent of registrants occupy repetitive-loss properties.

Wayne has experienced severe flooding since colonial times. The most severe flood to impact the entire Passaic River Basin occurred in 1903. Since then, several major floods have occurred each decade. Although the USACE began plans to reduce flooding in the Passaic River Basin in 1936, a comprehensive plan for the area has yet to be implemented.

The first buyouts in the Passaic River Basin began in 1995, after the New Jersey Department of Environmental Protection (NJDEP) formed its Blue Acres Program. They have continued through various funding sources, including NJDEP, FEMA, and open space taxes, in the case of municipalities in Morris County. However, Wayne was not included in the first round of buyouts through the Blue Acres Program in the late 1990s. As a result, municipal officials approached the state about funding the town, which led to several other programs. In 2005, the NJDEP and USACE identified the Hoffman Grove neighborhood in Wayne as a priority area for buyout funding (USACE 2005). A series of allocations since 2005, including additional funding after hurricanes Irene and Sandy, allowed for the purchase and removal of 96 homes in the Hoffman Grove neighborhood. FEMA was the primary source of funding for these purchases; the Blue Acres Program provided the nonfederal match. Despite these significant subsidies, news sources reported that “there is no immediate funding to buy and raze the houses that are left standing” (McGrath 2011). Nevertheless, all but 29 homes in this neighborhood have now been purchased and removed.

In May 2015, the USACE, together with NJDEP, released a follow-up to that 2005 study and identified 27 additional properties within Hoffman Grove as priorities for acquisition. Municipal officials in Wayne are now working to identify willing residents in order to move the program forward. Once these buyouts are complete, the entirety of the Hoffman Grove neighborhood will return to a floodplain.

The buyout programs in Wayne more closely resemble the FEMA buyout programs that began in the 1990s in response to the Great Flood of 1993, given Wayne’s vulnerability to seasonal and storm-related riverine flooding. Buyouts have undergone greater testing in riverine settings, leading to simpler program designs. Additionally, lower property values in inland riverine areas make it possible for buyout programs to purchase a greater number of homes. (Following disasters, property values of riverine flood properties are less resilient than coastal property values.)

The fiscal impact analysis for Wayne reveals that, after the acquisition of 96 Hoffman Grove properties, the township has a relatively small number of properties vulnerable to severe flooding compared to the other case studies. Even so, a 100-year flood event could still severely damage 127 homes, costing $25 million, as shown in table 1 (p. 32). It is worth noting that applying Wayne’s buyout program to the remaining most vulnerable properties may lead to an average of $840,000 in lost tax revenues per year. 

Milford, Connecticut

Milford is a coastal city of 52,000 people, midway between Bridgeport and New Haven on Long Island Sound. Milford has the longest coastline of any town in Connecticut (14 miles) plus two significant rivers, the Wepawaug and Housatonic, leaving residents vulnerable to both coastal and riparian flooding. Oceanfront property is one of Milford’s most prized amenities, and the town has more waterfront homes than any other case study in this article. Currently, there are 8,100 Milford residents in the 100-year flood zone, with a 26 percent increase projected by 2050. Milford also has the most repetitive-loss properties of any municipality in Connecticut. Since 2007, Milford residents have made up 20 percent of registrants in FEMA’s individual assistance program; FEMA awarded them $3.5 million. The town is 25 percent low-to-moderate income, 15 percent nonwhite, and overwhelmingly owner-occupied.

Milford’s own analysis confirmed the city’s extreme vulnerability. A Category 2 hurricane has the potential to inundate more than 2,000 properties, including 35 city facilities. More than 1,500 homes were damaged by Irene and Sandy, over 200 severely (Daley 2014). An excess of $60 million in flood insurance claims were paid to Milford residents in 2011 and 2012 (City of Milford 2015). A year after Sandy, entire streets and dozens of homes remained empty, while many others were elevated on piles and rebuilt. As in many areas damaged by Sandy, government funding came slowly, which retarded recovery (Zaretsky 2013). An estimated 4,000 to 5,000 homes in the city may still need to be elevated to satisfy building code requirements (Buffa 2013).

The primary strategies for combating flood risk in Milford have included beach nourishment projects, building retrofits and elevations, revetments, jetties, and groins. The city’s 2013 Hazard Mitigation Plan outlined over $14.4 million in flood mitigation projects, including elevating structures, protecting or upgrading critical infrastructure such as the wastewater treatment plant, and replenishing dunes (City of Milford 2013). The highest-priority projects were neighborhood drainage systems and catch basins. Due to lack of funding, however, many proposed projects either stalled or have not begun. 

The USACE evaluated the coastline of Milford for the North Atlantic Coast Comprehensive Study and found that the implementation of structural measures, like beach fill or dune projects, may be limited due to space constraints even in areas where these approaches might normally be most cost effective. If these measures are not applicable, flood proofing, and even acquisition and relocation, might be the most economical long-term strategies (USACE 2015). These challenges are shared by many highly developed areas along the eastern Atlantic coast. Buyouts can be difficult to secure in the short term, and structural solutions do not effectively reduce risk. 

Yet buyouts have received some attention from the city’s residents. FEMA Hazard Mitigation Grant funds were used to buy several properties. Additionally, Milford has received $1.4 million from the USDA Floodplain Easement Program to buy at-risk properties (USDA n.d.). Despite available funding, however, the programs received only seven applicants in 2013. Furthermore, the city’s official position was “unenthusiastic” (Spiegel 2013). Milford stakeholders interviewed for this report cited concerns over the loss of the municipal tax base as the primary cause of resistance to buyouts, as coastal property owners pay the highest property taxes.

From the state’s perspective, Milford presented a promising case for a buyout program since many of the repetitive-loss properties were adjacent to the Silver Sands State Park, and acquired parcels could be incorporated into the park. Stakeholders indicated that positive alternative models for development are needed to encourage participation in buyout programs. The fiscal analysis performed for this study reveals that, while buyouts would impact property taxes, the effects would not be as severe as perceived by municipal officials. As a percentage of the most recent budget, buyouts of the most vulnerable properties would result in only a 1.36 percent loss in revenue, as indicated in table 1 (p. 32). 

Milford’s vulnerable properties have the highest average value among the case studies. Factoring in 2050 sea level rise projections, Milford’s most vulnerable homes—those that could suffer over 50 percent damage—could face $204 million in damage and dislocation costs over the next 100 years. Relocating home owners from just these properties that are most at risk could save $435,000 in annual flood insurance premiums. 

Conclusion

Buyout programs have long been avoided in public dialogue. Yet when weighed against the magnitude of risk faced by some U.S. coastal and riverine communities, they can be a viable and effective way to enable retreat from flood zones. As tools to preserve communities and strengthen resilience, they deserve serious consideration.

The three case studies highlight both the potential value of buyout programs and the political, social, and economic challenges of implementing them. Many factors contributed to the relative success of buyout participation in Oakwood Beach and Wayne and to the failure in Milford. The timing of the program, the level of program engagement with residents, the attachment to place, and the availability or lack of alternatives all played a role. In order to meet the needs of residents and municipalities, we must rethink the goals, strategies, and time frame of buyout programs, improve the administration of funding, reform the planning process, and design minimally disruptive programs. 

For an in-depth exploration of managed retreat in the New York metropolitan region, see the forthcoming Policy Focus Report, Buy-in for Buyouts: The Case for Managed Retreat from Flood Zones, to be published in September 2016 by the Lincoln Institute of Land Policy in conjunction with Regional Plan Association.

Robert Freudenberg is director of Energy and Environment at Regional Plan Association (RPA), where Ellis Calvin is an associate planner in the same department. Laura Tolkoff is a former senior planner for Energy and Environment, and Dare Brawley is a former research analyst at RPA.

Photograph: Tom Pioppo/FEMA (2011)

References

Buffa, Denise. 2013. “Storm-Battered Shoreline Gets a Lift, One House at a Time.” Hartford Courant. August 3. http://articles.courant.com/2013-08-03/news/hc-houselifter-20130803_1_houses-milford-contractor-coastline.

City of Milford. 2015. “Flood Insurance Claims Paid to Milford Residents by Year.”

Daley, Beth. 2014. “Milford, East Haven Top Connecticut in Costly Flood-Prone Homes.” New Haven Register. March 21. http://www.nhregister.com/general-news/20140321/milfordeast-haven-top-connecticut-in-costly-flood-prone-homes.

Governor’s Office of Storm Recovery. 2015. “Notice of Change of Use of Acquisition Properties by NY Rising.” New York.

Koslov, Liz. 2014. “Fighting for Retreat after Sandy: The Ocean Breeze Buyout Tent on Staten Island.” Metropolitics. April 23. http://www.metropolitiques.eu/Fighting-for-Retreat-afterSandy.html.

Lavey, Nate. 2014. “Retreat from the Water’s Edge.” The New Yorker. http://www.newyorker.com/news/news-desk/hurricane-sandy-retreat-waters-edge.

McGrath, Matthew. 2011. “Hoffman Grove is More Wilderness than Neighborhood.” NorthJersey.com. December 30. http://www.northjersey.com/news/wayne-neighborhood-surrendering-to-the-river-1.276454.

Oakwood Beach Buyout Committee. 2015. “About Us.” http://foxbeach165.com/about-us/.

Rush, Elizabeth. 2015. “Leaving the Sea: Staten Islanders Experiment with Managed Retreat.” Urban Omnibus. http://urbanomnibus.net/2015/02/leaving-the-sea-staten-islanders-experiment-with-managed-retreat/.

Special Initiative for Rebuilding and Resiliency (SIRR). 2013. “A Stronger, More Resilient New York.” City of New York. http://www.nyc.gov/html/sirr/html/report/report.shtml.

Spiegel, Jan Ellen. 2013. “Despite Storms, Few Coastal Homeowners are Open to Buyouts.” Connecticut Mirror. September 16. http://ctmirror.org/2013/09/16/despite-storms-few-coastalhomeowners-are-open-buyouts/.

U.S. Army Corps of Engineers (USACE). 2005. “Passaic River Floodway Buyout Study Limited Update: Final Report and Environmental Assessment.”

U.S. Army Corps of Engineers. 2015b. “North Atlantic Coast Comprehensive Study: Main Report.”

U.S. Department of Agriculture (USDA). n.d. “Emergency Watershed Protection Program — Floodplain Easement Option.” http://www.nrcs.usda.gov/wps/portal/nrcs/detail//?cid=nrcs143_008225.

Zaretsky, Mark. 2013. “1 Year After Superstorm Sandy, Recovery Moves Slowly on Connecticut Shore.” New Haven Register. October 26. http://www.nhregister.com/generalnews/20131026/1-year-after-super-storm-sandy-recovery-moves-slowly-on-connecticut-shore.

Recent news stories routinely feature “hot market” U.S. cities with astronomical housing prices that end up displacing residents with moderate or low incomes. In Portland, Oregon, Mayor Charlie Hales declares a state of emergency, directing a budget cut from the city’s general fund to create more affordable homes. San Francisco’s epic housing battles pit longtime residents against tech workers. In Seattle, 40 people, 35 jobs, but only 12 housing units arrive daily. In Denver, Mayor Michael Hancock pledges $150 million for affordable housing in the next decade. Boston Mayor Martin J. Walsh plans to build 53,000 units by 2030, while neighboring Cambridge adds density in infill areas and near transit. And in Boulder, Colorado, public officials consider a host of housing options in an approach they call “gentle infill.” 

“Hot markets exist for many reasons, but in Portland, Seattle, San Francisco, Boulder, and other cities, housing issues are clearly a result of strong economic development,” says Peter Pollock, FAICP, manager of Western programs for the Lincoln Institute of Land Policy. In these cities, a jobs-housing imbalance leads to inadequate housing options. The “gentle” or “sensitive” infill approach is about “trying to find ways to make infill compatible with surroundings to achieve urban design goals and enable production of more housing,” he says. The term also “puts a positive spin on something that may not be universally accepted”—namely, density—“and suggests that we can do a better job.”

While half of all households nationwide are spending more than 30 percent of their income on housing, many residents in hot market cities are spending more than 50 percent and being forced to leave. Housing activists, such as those at the recent first national YIMBY (“Yes in my backyard”) gathering (see sidebar), are challenging city planners and elected officials to create more diverse infill options to house people, stem displacement, make better transit connections, and create more environmentally sustainable communities.

How Did We Get Here?

Desirable cities are growing rapidly because they’re attracting millennials and cultural creatives for job opportunities and lifestyle amenities, and the newcomers have gravitated in numbers that far exceed places to live. The tech industry, with its influxes of well-paid workers, is often blamed for driving up housing costs and causing displacement. But other factors are also in play. Many cities built little if any housing during the Great Recession. Mortgage credit is tighter. Construction costs are escalating. New housing is priced at market rates that drive up the cost for existing homes. Zoning that favors single-family detached houses or luxury apartments has led to expensive housing monocultures. What’s being viewed as a crisis in many cities is the loss of housing not just for lower-income residents but also for workforce and middle-income residents—teachers, nurses, firefighters, small business owners, young professionals, young families, and others who typically provide a foundation for communities.

Restoring the “Missing Middle”

The good news is that cities across the United States are already working on solutions. Communities are overturning policies that prohibit housing or place tight restrictions on where and how it can be built, to allow for more diverse and affordable places to live. Many urban planners and public officials are focused on developing housing types that restore the “missing middle,” to shelter moderate and middle-income households. 

The missing middle, a concept that grew out of new urbanism, includes row houses, duplexes, apartment courts, and other small to midsize housing designed at a scale and density compatible with single-family residential neighborhoods. Since the 1940s, this type of development has been limited by regulatory constraints, the shift to car-dependent development, and incentives for single-family home ownership. Three- or four-story buildings at densities of 16 to 35 dwelling units per acre used to be a standard part of the mix in urban neighborhoods. Many urban planners say this scale and density of housing is needed again to offer diversity, affordability, and walkable access to services and transit. Cities are using a variety of additional approaches to inject more moderately priced housing into residential neighborhoods, from shrinking or subdividing lots to adding accessory dwelling units (ADUs) to expanding legal occupancy in homes. Some of these gentle infill approaches are showing great potential or in fact adding needed units on a faster track. 

How does gentle infill work? It depends on the city, as demonstrated by the following examples from Portland, Oregon; Boulder, Colorado; and Cambridge, Massachusetts.

Portland, Oregon: More Housing is Better

Portland typically ranks atop lists of “best places” to live but has recently slipped a few notches because of its housing prices, which ballooned 13 percent in 2015. According to a recent study released by Metro, the regional government organization, Portland area rents increased 63 percent since 2006, while the average income of renters rose only 39 percent. The population grew by 12,000 in 2015, to more than 632,000 residents in 250,000-plus households. 

Since 1973, Portland has been living with statewide urban planning that mandates an urban growth boundary to protect farmland and forests from urban sprawl and to ensure efficient use of land, public facilities, and services within the urban boundary. This city has an ambitious agenda to meet its growth projections with several big planning efforts: a new zoning map and the 2035 Comprehensive Plan, its first update in 30 years, adopted by city council in June 2016; a new land use code with regulations that affect a range of growth from multifamily and mixed-use development to transportation corridors and parking; and Central City 2035, a long-range development plan for the city center and its districts. 

The city is relying on policy changes in view of the 142,000 additional jobs, 135,000 extra households, and 260,000 more people that it will need to accommodate by 2035, according to Metro. About 30 percent of new housing will be built in the city center, 50 percent in mixed-use centers and corridors, and 20 percent in Portland’s single-family residential zones, which comprise about 45 percent of the city’s 133 square miles of land. The city has about 12,000 buildable lots, assuming that some current lots can be subdivided to provide more sites.

Since 2010, an estimated 20,000 new residential units have been built or are in the pipeline, and tax increment financing in designated urban renewal areas has invested $107 million in new and preserved affordable housing. In March, the state legislature lifted a 17-year ban on inclusionary zoning, which will allow the city to require builders to set aside units for new workforce housing. The city is focused on funding strategies to provide more affordable homes for households below 80 percent of the area median income (AMI). To increase the number of middle-income units for people earning more than 80 percent of AMI, the city is relying on policy changes, rather than funding strategies.

By the end of 2016, a stakeholder advisory committee for the Residential Infill Project (RIPSAC) will provide advice regarding the size and scale of houses, small-lot development, and alternative housing types. One proposal under consideration is to allow more internal conversions of large historic houses into multiple units, an approach that would provide more housing while avoiding teardowns and preserving the historic fabric of neighborhoods. Building on the legacy of small homes that exist from a century ago, Portland is looking to add little houses on undersized, pre-platted lots. And the city is considering whether to allow the development of more tall “skinny” homes of up to 1,750 square feet on 2,500 square-foot lots, half the square footage of land required under R-5 single-family zoning. 

“Five or ten years ago, people would ask, ‘Why is this house being built on a narrow lot?’” says RIP project manager Morgan Tracy. “Now it’s not so surprising. They’re really becoming popular because they’re at a lower price point for buyers.”

Policy changes regarding accessory dwelling units have helped generate new moderately priced housing and have drawn the attention of public officials from other cities in search of solutions to their own housing crises. ADU construction has exploded since 2010, when the city waived development fees covering sewer, water, and other infrastructure connections, reducing construction costs by $8,000 to $11,000 per unit. The waiver inspired a surge in construction: almost 200 ADUs were permitted in 2013—six times the yearly average from 2000 to 2009. In 2015, the city granted 350 new ADU permits, for a current total of more than 1,500 units. Tracy says ADUs “are a well-accepted means of producing more housing because they’re better integrated into a site and don’t necessitate a home being demolished.”

Any single-family house in the main zoning districts can have an ADU, and a proposal would allow up to two units—an interior apartment plus a separate carriage house or granny flat. The city does not limit the number of ADUs within a neighborhood or require off-street parking. It has also streamlined some ADU standards to allow for improved designs with slightly greater height and setbacks. RIPSAC is considering proposals to allow any house to have two ADUs, both interior and detached, triplexes on corner lots where duplexes are now allowed, and duplexes on interior lots, with a detached ADU. Allowing duplexes on interior lots and triplexes on corners “doesn’t mean everyone will take advantage” of the policy changes, says Tracy, noting that only 3 percent of corners now have duplexes. But “if every property owner took advantage of additional unit potential, we would double the number of housing units in each neighborhood.” 

The next phase of infill housing policy considerations will address how medium-density housing types might fit into small infill and multi-dwelling sites. The city has already been moving in that direction: Portland’s Infill Design Toolkit guide focuses on integrating rowhouses, triplexes and fourplexes, courtyard housing, and low-rise multifamily buildings into neighborhoods. 

“What may be shocking and alarming for some people becomes more acceptable as you see it more,” says Tracy. “We’re seeing that with duplexes and triplexes in single-family neighborhoods. The last time we built them was in the 1930s and ’40s. We’re trying to promote a wider diversity of housing forms, and some folks are supportive because they understand the need to be able to house more people on available land.”

Boulder: More Housing Is Better, But There Are Down Sides

Boulder is studying what other cities are doing to encourage gentle infill, and a recent trip to Portland by city officials, staff, and business leaders offered perspective on what could work at home. Like Portland, Boulder has determined to halve carbon emissions by 2030, provide more infill housing in the developed city core, protect open space, and encourage public transportation use. But with one-sixth of Portland’s population and different challenges and opportunities, Boulder seeks its own consensus on what gentle infill means. 

Located 25 miles northwest of Denver in the foothills of the Rockies, Boulder also ranks high on the lists of healthy, livable, and entrepreneurial places. The natural beauty and high quality of life in this 25.8-square-mile city of 105,000 have attracted start-ups and established tech firms such as Google and Twitter. The influx has fed a digitally paced lifestyle and “1 percent” housing market in which the median single-family detached house costs over $1 million. 

In the past two years, housing prices overall have risen 31 percent. Factors beyond the tech industry have limited affordability for many years (disclosure: for 23 years, I’ve lived, worked, and raised two kids in a formerly modest Boulder neighborhood that has been largely rebuilt with higher-end homes). The University of Colorado-Boulder, a key economic driver with 38,000 faculty, staff, and students, generates significant housing demand. A jobs-housing imbalance translates to an estimated 60,000 cars arriving and departing daily, despite regional and local bus service. 

State law prohibits rent control, and the state’s “condominium construction defects legislation” has squelched that type of construction for middle-income housing. Boulder is also home to many independently wealthy “trustafarians” and speculative buyers who purchase homes with cash from selling property in other high-end markets. Some are second or third residences; others are reserved for short-term rentals like airbnb. In June 2015, city council voted to restrict short-term vacation rentals, saying they impacted affordability and reduced the number of long-term housing opportunities. 

Development limitations include few residential lots, a 45,000-acre ring of protected open space around the city, and a height limit, to preserve mountain views, capped at between 35 and 55 vertical feet, depending on planned development intensity and location near transit. The city is within sight of a theoretical build-out; a forecast of 6,760 additional units by 2040 is being considered for the current update of the Boulder Valley Comprehensive Plan. A 2015 housing survey conducted for the plan indicated that most residents were willing to increase density and building height to allow for more housing, at least in some parts of the city.

Since 1989, while the percentage of lower-income households has held steady, middle-income households have declined from 43 percent to 37 percent of the populace. The segment disappearing at the fastest rate is households earning between $65,000 and $150,000 as well as families with children. City council, the planning board, and local newspaper op-ed pages field lively debates over the “Aspenization” of Boulder and infill housing options that could slow or reverse the city’s momentum toward greater exclusivity and less diversity. 

Boulder has been working on affordability and inclusivity for some time. Its inclusionary zoning ordinance has produced 3,300 affordable housing units since 2000. Developers of projects with five or more units are required to construct 20 percent as permanently affordable, build off-site, donate land, or make a cash-in-lieu payment to the city’s affordable housing fund. The city’s goal is 10 percent permanently affordable housing; some 7.3 percent of the city’s housing stock now qualifies. 

Part of the affordable program is aimed at middle-income housing: the city has a goal of creating 450 permanently affordable units for households earning 80 to 120 percent of AMI. Since 2000, 107 units for middle-income households have been built in new mixed-income neighborhoods on land annexed in north Boulder. Many are in the Holiday neighborhood, a mixed-use model of 42 percent affordable units integrated within a total of 333 townhomes, row houses, flats, live-work studios, and cohousing. Recently built middle-income units are located in the Northfield Commons neighborhood, where half of the 43 percent of affordable units in duplexes, fourplexes, sixplexes, and townhomes are reserved for middle-income households.​​

YIMBYs Unite in Boulder

On a hot sunny weekend in June, the first-ever YIMBY (“Yes in my back yard”) “unconference,” as the democratically run gathering was called, drew 150-plus young and old urbanists to Boulder from 25 cities, including New York; San Francisco; Sitka, Alaska; and Brisbane, Australia.

“YIMBYTown” drew urban planners, architects, elected officials, and advocates for affordable housing, transportation, public health, the environment, and social justice. It was sponsored by the San Francisco based Open Philanthropy Project and the Boulder Area Realtor® Association and hosted by Better Boulder, a local advocacy group that last November spearheaded a successful campaign to defeat two ballot initiatives intended to limit growth in the city. (Disclosure: The author is a Better Boulder member-volunteer.) Presentations and discussions focused on housing, zoning, gentrification, coalition building, and NIMBY challenges, including titles such as “How F-cked is San Francisco—Lessons From the Worst Housing Market in the Country” and “Reframing the Sacredness of Single-family Zoning.”

The gathering was bookended by references to the social and economic implications of rising housing costs and displacement. In the opening plenary, Sonja Trauss, founder of the San Francisco Bay Area Renters’ Federation (SFBARF), says a key goal of the movement is to “repopulate cities” as “an integrative process to counter the segregation of the suburbs.” In closing remarks, Sara Maxana of Seattle for Everyone noted a growing body of evidence that “exclusionary zoning causes housing shortages in high-demand cities and leads to exclusion by class. It induces segregation by wealth and reduces access to opportunity, good jobs, schools, healthcare, and open space.”

“It’s very expensive to subsidize people making $70,000 to $130,000 per year,” says Aaron Brockett, a city council member and former planning board member, referencing a middle-income housing study prepared for the city that defined Boulder’s middle market as 80 to 150 percent of AMI. He advocates for “market solutions like smaller units as a trade-off in those areas that have amenities and services such as mixed-use areas where people can walk to transit and redeveloping areas.”​

In preparing a comprehensive housing strategy, Boulder is exploring ideas for middle-income infill housing in transit corridors, commercial strips, business parks, and industrial areas that could be rezoned and redeveloped, and in walkable mixed-use neighborhood centers in residential areas. “The 15-minute neighborhood is the Holy Grail for a lot of communities, but it takes a lot of work,” says Jay Sugnet, project manager for Housing Boulder. “Are they in single-family neighborhoods or at the edge of service-industrial areas? Where are you willing to locate those, and what’s appropriate? You also need a concentration of people to support retail. Boulder has lots of commercial corridors, but they need a sufficient number of people to support all of them.”

The city also plans to adjust the ADU ordinance to achieve more middle-income affordability in neighborhoods of mostly single-family detached houses, which comprise about 41 percent of the city’s 46,000-unit housing stock. An ADU ordinance in effect since 1981 has permitted only 186 ADUs and 42 OAUs (owner’s accessory units) because of requirements regarding off-street parking, minimum lot size, and limits on ADU density. “We’d like ADUs for diversity of housing in neighborhoods,” says David Driskell, executive director of planning, housing, and sustainability. “Physically we could put in quite a few here, but, politically, there will be quite a lot of discussion about parking and traffic impacts.”

City council is considering “creative adjustments” to existing housing that could have less impact on the footprint and “character” of residential areas, such as loosening code restrictions on the number of unrelated people who can share a home. In most residential zones, no more than three unrelated people can share a house, even if it has six bedrooms and multiple bathrooms. A ballot measure petition launched recently by University of Colorado graduate students asks Boulder voters to overturn the occupancy limit and adopt a “one person = one bedroom” policy. Allowing higher occupancy is controversial, because, although it would provide more places for students and others to live legally, it could further drive up housing costs for families, as monthly rent in group houses, particularly close to the university, often costs as much as $1,000 per bedroom.

The city is also discussing a revision of its 20-year-old cooperative housing ordinance. No co-op projects have been permitted because the ordinance was “essentially a path to No,” says Driskell. Three affordable rental co-ops were established under other measures. City council is considering a more welcoming ordinance that supporters say would benefit the city by offering a sustainable and community-oriented lifestyle for single residents, young families, seniors, and people who work lower-wage jobs. 

“We tend to be a regulatory city, and we have really embraced deliberative planning,” says Susan Richstone, deputy director of planning, housing, and sustainability. “It hasn’t always been easy, but we’re having the discussions and making changes in planning and zoning levels within a regulatory framework. It’s in our DNA.”

“Density is a bogeyman here, and people are up in arms,” says Bryan Bowen, an architect and planner who is a member of the Boulder Planning Board and the city’s Middle Income Working Group.  Residents are anxious about both modest homes being scrapped and replaced with 5,000 square-foot $1.5 million new homes and the possibility of greater density with more large edgy-looking multifamily apartment buildings. “That’s probably why gentle infill feels good, though it has an interpretive quality. It’s a question of what people find to be compatible and palatable.” There’s no consensus yet about which infill approach will work best, Bowen says. “But frankly, in moderation, some application of all of them might be needed.”

Accessory Dwelling Units (ADUs): A Preferred Infill Housing Approach

Demographic changes such as aging populations, shrinking household size, college-loan-strapped millennials, and cultural preferences are leading many cities to allow home owners to build ADUs, also known as in-law apartments, granny flats, and carriage houses. Advocates say ADUs—built in the interior of a home, rebuilt from a garage, or newly built as a separate cottage—offer affordable options for elderly parents, adult kids, and caregivers. They’re also a source of rental income that can help residents stay in their homes. As older home owners wish to downsize and age in place, some are choosing to live in the ADU and rent out their main house. 

Typically ranging from 200 square feet to more than 1,000 square feet, ADUs are part of a long tradition of modest apartments and multigenerational houses that were common before the era of single-family suburban homes. Many housing advocates are keen on ADUs as a way to add units quickly, with home owners financing the infill of existing neighborhoods, compared to the lengthy and costly process of land acquisition and development of larger-scale multifamily projects by municipalities, nonprofit affordable housing organizations, and private developers. At Denver’s Bridging the Gap housing summit in May, a session on small-scale affordability posed a potential scenario for the city: 70 neighborhoods multiplied by 300 ADUs per neighborhood would equal 21,000 moderately priced housing units.​

At the recent YIMBY conference in Boulder, Susan Somers of AURA (formerly Austinites for Urban Rail Action) in Austin, Texas, described a coalition effort to become “an ADU city” and achieve much greater housing density in the mostly single-family detached city. They accomplished their mission; in November 2015, the Austin City Council passed a resolution relaxing ADU regulations and allowing them on smaller lots. AURA hopes to help home owners entitle 500 new ADUs annually. The units provide “affordable housing and a source of income to allow folks to stay in their homes,” says Somers. In gentrifying East Austin, “this is how families stay together.”

Cambridge: Bridging the Income Gap

Cambridge, located across the Charles River and three miles west of Boston, has the most expensive housing in Massachusetts and bears keen pressure to produce more missing-middle options. The population has increased more than 10 percent since 2000, to 110,000 residents within a compact 6.5 square miles, and is projected to grow by 6,200 homes before 2030, according to the Metropolitan Area Planning Council (MAPC), the regional planning agency for Metro Boston. The city has 117,000 jobs and more than 52,000 housing units, about half of them located in mixed-use commercial areas. The average listed single-family home price in 2015 exceeded $1.2 million. Median monthly rent for a one-bedroom apartment is $2,300.

“Cambridge has become a bifurcated place of very high income and very low income,” says Andre Leroux, executive director of the Massachusetts Smart Growth Alliance. “It’s hard for middle-class people to live there.” Cambridge has the infrastructure to support much greater density and to add significantly more residential development and huge residential towers, “but it doesn’t want to be downtown Boston.”​

The city is in the first year of a three-year comprehensive plan process, its first since 2000 (the state does not require municipalities to develop comprehensive plans). Affordable housing for low, moderate, and middle incomes—a resounding theme through the public process—is the number-one priority, says Iram Farooq, assistant city manager for community development.

“For a lot of working people, there are fewer affordable options in the city,” says Farooq. The greatest population decline has occurred among residents earning between 50 and 80 percent of AMI, she says. Middle-income households earning between 80 and 120 percent of the area’s AMI are also leaving the city for housing options elsewhere in the urban region. She notes that a city program that offered low-interest financing to home buyers earning up to 120 percent of AMI experienced little demand. 

“Just creating the program doesn’t mean people are going to use it. With the same financial commitment, they are able to go three miles down the road and find a nicer or bigger house for the same money. Being able to hold onto the middle is more challenging than at other income levels.”

The city is using regulatory strategies to fund more affordable housing. An incentive zoning ordinance enacted in 1988 required linkage payments to offset the effects of commercial development on the housing market. In 2015, the city updated the ordinance, increasing the rate for developers from $4.58 to $12 per square foot and broadening the requirement to include any nonresidential development, including healthcare and university facilities, labs, and office space. The city is also considering new zoning for infill sites and an expansion of its inclusionary housing ordinance, which now requires 11.5 percent affordability in new projects, to 20 percent affordable units for moderate, middle-income, and low-income households.

Cambridge has been building infill housing, mostly in projects ranging from 50 to 300 units, on larger sites. East Cambridge, for example, has seen the development of thousands of housing units in the past decade, along with millions of square feet of office space and restaurants, on land that was formerly industrial. The city is requiring residential units with all new development; 40 percent of a new commercial project in East Cambridge’s Kendall Square will be dedicated to housing. Some of this new development is subsidized for the middle class. But few parcels exist in residential areas, land costs are high, and residents are pushing back.

For years, housing advocates have been urging the city to add more infill housing and increase density in Central Square, the historic municipal center of the city. Located on Massachusetts Avenue, Central Square has a subway station and a bus-transfer station where eight bus routes converge. The area has some three- and four-story buildings as well as one- and two-story buildings that could be redeveloped for dense mixed-use housing next to transit. The square historically had taller, denser buildings before some third and fourth stories were removed to reduce taxes during the Depression. In 2012, however, some neighbors tried to persuade the city to downzone Central Square. 

“Downzoning is not appropriate in a crisis in which we’re so restricted in our ability to build housing,” says Jesse Kanshoun-Benanav, an urban planner and affordable housing developer who started the civic group A Better Cambridge in response to the downzoning effort, to promote increased density for infill housing opportunities. The city council tabled the downzoning effort and since then has been allowing zoning changes in Central Square and providing incentives such as additional height and density in exchange for the development of more affordable housing.

At the eastern end of Central Square, Twining Properties is developing Mass + Main, a multiparcel mixed-use project with a 195-foot tower and 270 apartments, 20 percent of which will be affordable for low, moderate, and middle-income residents. The project required a zoning variance, notes Farooq. “We’re now hearing political desire to rezone the rest of Central Square. People don’t seem to be as opposed to density as height, so we’ll have to explore what that means in terms of urban form.”

Townhouses, duplexes, and triple deckers are the norm in Cambridge, and only 7.5 percent are single-family detached homes. New rules passed in May that allow the conversion of basements into accessory dwelling units in single- and two-family homes throughout the city could enable 1,000 legal ADUs. The ADUs don’t need a zoning variance, and off-street parking is not required. The square footage of the new units won’t count as gross floor area (ADUs previously were prohibited in most cases due to the existing floor-area ratio and requirements for lot area per dwelling unit). Supporters say the rules won favor because they allow for more efficient use of large homes and won’t alter the look of the neighborhood. 

“It’s important that there are people in the city who are willing to accept trade-offs,” says Farooq, noting that the YIMBY movement has “great political capital” to counter NIMBY pushback against infill housing. “There is a community desire to see more housing, and many young people, including a lot of renters, recognize that it’s important to increase the supply and not have steep increases in rent, to make housing more manageable and accessible.”

Regional Approaches

Leroux from the Massachusetts Smart Growth Alliance and others across the nation say that housing needs should be addressed as a regional issue, and cities and towns should work together to allow urban infill housing and approaches like ADUs under state zoning laws. In June, the Massachusetts Senate passed a bill that would reform 1970s-era zoning laws to permit ADUs and multifamily housing districts in every community. A coalition including the Alliance; the Senate President; mayors; and advocates for the environment, public health, affordable housing, and transportation supported the bill, which is poised to become state law next legislative session. A legal and policy strategy, it includes a fair-housing clause that prohibits communities from making discriminatory land-use decisions, which Leroux and others say increase segregation in many metropolitan areas, as low-income residents, including people of color, get pushed out of redeveloping urban neighborhoods.

Suburban communities also need to do their fair share, he says. Many suburbs are still zoning and building for the auto-oriented market, with “a lot of modest homes being torn down and replaced with McMansions,” he says. “We think there’s a grand bargain to be made between cities and towns and the real estate development community to unshackle development near walkable places, infrastructure, and transportation while curbing sprawl and protecting natural areas.” To allow for more diverse housing growth, he says, the Alliance and others are promoting “as-of-right,” or permitted zoning uses, in walkable areas, commercial centers, villages, town centers, and urban squares, because “that’s where the market is and where we need to let the market do its job.”

Kathleen McCormick, principal of Fountainhead Communications, LLC, lives and works in Boulder, Colorado, and writes frequently about sustainable, healthy, and resilient communities.

Photograph: Meghan Paddock Farrell

“Being a migrant worker for 13 years, I have longed to own a home and live a normal family life here in Shenzhen,” said Mr. Wang, a former farmer from Sichuan Province who now earns 3,100 yuan (US$500) per month in the manufacturing sector of this sprawling city in South China. Wang recently purchased what is known as “small property rights” (SPR) housing—an illegal but widespread type of residential development built by villagers on their collectively owned land in peri-urban areas and urban villages, rural settlements surrounded by modern development in many Chinese cities. While no official statistics are available, the number of SPR units is estimated at 70 million—perhaps one-quarter of all housing units in urban China (Shen and Tu 2014). “Small property rights housing fulfills my need,” continued Mr. Wang. “It’s affordable. It is the best choice for me,” he says.

Sold primarily to individuals without local household registration, or hukou (box 1), SPR housing violates China’s Land Administration Law, which stipulates that only the state, represented by municipal governments, has the power to convert rural land into urban use. Unlike buyers of legally built homes, buyers of SPR housing do not receive a property rights certificate from the housing administration agency of the municipal government; they sign only a property purchase contract with the village committee. Because Chinese laymen often see the state as the “big” institution, housing units purchased from village committees are popularly called “small” property rights housing.

Box 1: China’s Hukou System

China is phasing out its household registration system called hukou, which dates to the 1950s. Hukou identifies a citizen as a resident of a particular locality and entitles the hukou holder to the social security, public schools, affordable housing, and other public services provided by their district, township, or village. Many urban public services are available only to urban hukou holders. Because most migrant workers hold rural hukou, they are ineligible for many public services in the cities where they work and live. Moreover, they have to return to their registered places of residence to apply for marriage certificates, passports, personal ID card renewals, and other documents—a requirement that comes at significant cost and inconvenience.

The widespread development of SPR housing raises a number of legal, political, social, and economic concerns that have prompted academic study and heated public policy debates (Shen and Tu 2014; Sun and Ho 2015). Why has SPR housing emerged in China where administrative control is generally considered tight? What drove the village committees to develop SPR housing in violation of the Land Administration Law? Do SPR housing buyers worry about their tenure security? Why has the government so far tolerated SPR housing ownership? To find answers, one has to look at a number of factors contributing to the rise of SPR housing, including China’s land management system, municipal finance, and public attitudes toward laws and regulations.

The Rise of Small Property Rights Housing

The pace of China’s urbanization is unprecedented. Between 1978 when economic reform began and 2014, the urban population more than quadrupled from 173 million to 749 million, with average annual growth of 16 million. In official counts, the urban population includes residents with hukou and, in recent years, migrants who stay in a city for more than six months. Amid such explosive growth, the government’s institutional capacity to manage urbanization has often lagged behind, at best barely responding to emerging issues.

“The informal development of SPR housing is regarded as an extra-legal practice and a type of spontaneous urbanization,” wrote Dr. Liu Shouying, a senior researcher with the Development Research Center of the State Council, in his newly published book, Land Issues in the Transitional China (Liu 2014).

“There is no law explicitly addressing the emerging issues of SPR housing,” said Peking University Professor Zhou Qiren, a well-known property rights scholar in China (Zhou 2014).

Legal and Economic Factors

Under China’s dual land management system, urban land is owned by the state, and rural land is collectively owned by the villages (figure 1). There is no private ownership. Only the state has the legal power to expropriate rural land and convert it to urban use. Villages have no land development rights. Compensation to villages for expropriated rural land is based on the land’s agricultural production value rather than its higher market value.

When the state expropriates rural land for urban use, it allocates it to residential and commercial uses through concessions to real estate developers, who pay a fee for land use rights. This system allows municipal governments to expropriate rural land for industrial and urban development at low costs, and to generate handsome revenues from land concessions.

The municipal governments’ ability to expand the urban land supply is heavily limited, however, by China’s strict farmland preservation requirements. Under this policy, 1.8 billion mu (equivalent to 1.2 million sq. km) of high-quality agricultural land nationwide must be reserved for food security. The Ministry of Land and Resources annually approves the amount of urban land for each city, and the municipal government then allocates this supply to various purposes, leaving a small fraction (usually around 30 percent) for residential development. Given the limited supply of residential land in the major cities, prices are bid up very high.

By contrast, most cities offer industrial land to manufacturing firms at very low and subsidized prices in order to compete for investment and employment. They expect these firms to yield jobs, economic growth, and tax revenues for the municipality, and then for those new jobs to generate increased demand for housing and services—in turn creating more jobs, economic growth, and tax revenues. As a result, the price for residential land is up to 15 times higher than the price of industrial land (figure 2).

Over the last few years, concession fees from commercial and residential land were typically as high as 40 to 60 percent of municipal tax revenues. With these revenues, municipal governments not only subsidize industrial land, but also fund public investment in infrastructure and other services. Because farmers’ compensation was only a tiny fraction of the value created from the state-monopolized development rights, they were keen to find ways to share in these revenues, setting the stage for SPR housing.

There are three types of rural land in China: one is used for agriculture, one is used for construction, and the third is unused. SPR housing units are usually built on rural construction land, which allows for villagers’ residential plots and public facilities. While strict enforcement of the national farmland preservation policy generally prevents conversion of agricultural land into construction land, villages are not explicitly prohibited from using construction land for village industries, restaurants, hotels, warehouses, rental plants, and rental housing. Indeed, property rental businesses have existed in rural areas for many years. For example, rural households living in urban villages and at the rapidly growing urban fringe have built multi-story housing on their residential plots and rented the units to migrant workers.

When urban housing prices started to soar in the mid-2000s, the villages saw opportunities to make handsome profits from building and selling homes. Each year from 2006 to 2014, house prices climbed about 20 percent in Beijing, 18 percent in Shanghai, 17 percent in Shenzhen, and 11 percent in Chengdu (PLC-HLCRE 2014). The rapidly rising prices of residential land drove part of these increases.

Demand for home ownership in China remains strong, thanks to the growing urban population, rising household incomes, high savings rates among urban households, and lack of alternative household investments. And SPR housing units are much less expensive than comparable formal housing units in the same location. Indeed, their prices are typically 40 percent to 60 percent cheaper, because villages do not pay land concession fees as the urban real estate developers do, and the administrative costs of providing SPR housing are also lower. Thus, SPR units became the rational housing choice for many migrant households, and even for some urban households with hukou in their city of residence.

Social and Cultural Factors

The village committees understood that building and selling SPR housing violated the Land Administration Law and the associated local land regulations, but the lure of profits drove them to test the legal limits. And once a few villages started selling SPR housing, others were quick to follow. The central government responded by issuing a series of administrative circulars calling for a halt, but took little action due to the lack of legally effective and socially acceptable measures to put an end to the practice.

Meanwhile, given the lack of legal protections, one might ask why SPR housing buyers do not opt for rental housing. The answer is that the rental market in urban China is poorly regulated, and contract enforcement is weak. Tenants often face the risk of unexpected rent hikes and premature termination of leases. In addition, participation in the affordable housing programs run by the municipal governments is not an option for most migrant workers because they do not have local urban hukou.

At the same time, Chinese households strongly prefer home ownership for a number of social and cultural reasons. Most households consider a stable home essential to their lives. As Dr. Sun Yet Sen (1866–1925) famously said: “Every household ought to have a home.” The Chinese word for “family” (jia) is literally the same as the word for “home,” both in written form and speech. Most Chinese think that an ideal home is a secure place for the family, and the most secure home is a self-owned one. One SPR housing buyer in Shenzhen said, “With my newly purchased SPR housing unit, I don’t have to worry about being forced out of the rented unit any more, and I could make my own place a real home.”

Because healthcare and educational opportunities are better in cities than in rural areas, many migrant workers purchase SPR housing units so that their families can take advantage of these services. And for young men, buying SPR housing units is a way to improve their chances in the highly competitive marriage market, where men outnumber women by 34 million, according to the National Bureau of Statistics. Moreover, herding behavior—where everyone wants to do what everyone else does—is a significant factor, and the housing purchases of some buyers heavily influence the purchase decisions of others.

As some newspaper interviews and Internet surveys reveal, buyers generally do not worry about being prosecuted for living in SPR housing. They do not believe that the government would attempt to enforce the law on millions of citizens. There is a popular saying in the Chinese legal enforcement tradition: fa bu ze zhong (the law does not punish everyone). If many people violate a law or a regulation in China, people often consider the law itself flawed.

Indeed, over the history of economic reform in China, there are celebrated cases in which mass violation of a law drove change, resulting in legalization of formerly prohibited activities. Based on this history, many SPR housing buyers expressed confidence that the government would not evict them from their homes. This confidence is evident from the fact that SPR housing owners often spend a substantial amount of their incomes, savings, or borrowed money on home improvements such as interior decoration and furnishings.

Many SPR housing owners feel that they are already a large enough group to defy any government actions that penalize them. Eviction is highly unlikely, given that the Chinese government’s top priority is maintaining social stability. One SPR housing owner in Beijing said, “I am sure that the government will not evict us from our homes. If it happens, where should we live? In front of the municipal hall?”

A Major Challenge to Government

Enforcing the law against SPR housing development on millions of households would indeed be politically unwise. Doing so would likely trigger social unrest—the last thing the government wants to see. However, amending the law is not easy, and for some time the central government seemed unable to come up with a land management system suitable for an urbanized China. Without a clear solution, the central government thus tended to tolerate SPR housing.

Local governments, however, were more uncomfortable with the growing numbers of SPR housing units because they reduced demand for government-supplied residential land and therefore revenues from land concessions. But again, the fear of social unrest left most local governments with nothing to do but repeat the central government’s rhetoric about its illegality. Government tolerance also reflects the fact that SPR housing developments afford shelter for many lower- and middle-income groups that the government and the market have been unable to provide. In the public debate, the argument for SPR housing is that it serves an important social function by housing the large number of migrant workers essential to China’s rapid urban economic growth.

Perhaps the bigger concern for government is the impacts of SPR housing development on real estate markets, municipal finance, and future urban forms. As it is, the formal urban housing market is already in over-supply. Additional provision of SPR housing units would further weaken formal market demand and increase bank credit risk. Moreover, China’s city planning efforts do not cover rural land outside designated planning areas. The spread of SPR housing in these areas would therefore lead to undesirable urban development patterns.

Recommended Reforms

In recognition of the root causes of SPR housing development, the Third Plenary Session of the Communist Party of China’s 18th Central Committee issued a document in November 2013 spelling out directions for a set of reforms directly related to land, hukou, and municipal finance.

On land: Integrate the urban and rural construction land markets. Allow the sale, leasing, and shareholding of rural, collectively owned construction land under the premise that it conforms to planning. . . . Reduce land expropriation that does not promote public welfare.

On hukou: Accelerate the reform of the hukou system to help farmers become urban residents. . . . Efforts should be made to make basic urban public services (such as affordable housing and the social safety net) available to all permanent residents in cities, including rural residents who have migrated to cities.

On municipal finance: Improve the taxation system and expand the local tax base by gradually raising the share of direct taxation (mainly the personal income tax and property tax). . . . Accelerate property tax legislation.

These reform efforts aim to dismantle the dual system of land management, allowing villages to share in the benefits of land development and raising the transaction costs of land expropriation. The hukou system will be phased out gradually, starting in the smaller cities. While detailed actions on these two reform fronts are now being worked out or tested in pilot programs, municipal finance reform remains a major concern. If the scope of land concessions is reduced and the hukou system is dismantled, cities will see significant reductions in land sales revenues and increases in public expenditures for providing services to migrant workers and their families.

While residential property taxes are expected to become a new source of municipal revenues, this change will not occur immediately. Indeed, the central government is currently drafting the property tax law, and it may be at least two years before its passage by the National People’s Congress. Since it will also take a few years for cities to establish assessment systems, residential property taxation will not support municipal budgets for some time. Nevertheless, there is hope that this new round of policy reform will properly address the critical issue of SPR housing.

Li Sun is a postdoctoral researcher at Delft University of Technology, Netherlands, and an affiliated researcher with Peking University–Lincoln Institute Center for Urban Development and Land Policy.

Zhi Liu is senior fellow and director of the Lincoln Institute’s China Program, as well as director of the Peking University–Lincoln Institute Center for Urban Development and Land Policy.

References

Liu, Shouying. 2014. Land Issues in the Transitional China. Beijing: China Development Press.

Liu, Zhi, and Jinke Wang. 2014. “An Analysis of China’s Urbanization, Land and Housing Problems.” In Annual Report on the Development of China’s New Urbanization, Li Wei, Song Min, and Shen Tiyan, eds. Beijing: Social Sciences Academic Press (China).

PLC-HLCRE. 2014. “Report on the China Quality-Controlled Urban Housing Price Indices (CQCHPI).” Beijing: Peking University–Lincoln Institute Center for Urban Development and Land Policy (PLC) and Hang Lung Center for Real Estate (HLCRE), Tsinghua University.

Shen, Xiaofang, and Fan Tu. 2014. “Dealing with ‘Small Property Rights’ in China’s Land Market Development: What Can China Learn from Its Past Reforms and the World Experience?” Working paper. Cambridge, Massachusetts: Lincoln Institute of Land Policy.

Sun, Li, and Peter Ho. 2015. “An Emerging Phenomenon of Informal Settlement in China: Small Property Rights Housing in Urban Villages and Peri-urban Areas.” Paper presented at the Annual World Bank Conference on Land and Poverty (March 23–27).

Zhou, Qiren. 2014. “The Reform Should Not Be Self-limited” (in Chinese). http://heschina.org/archives/3211.html

El impuesto sobre la propiedad es un tema tan contencioso en Pensilvania que los residentes de por lo menos 84 grupos de base distintos se han unido para presionar por cambios que incluyen la eliminación del impuesto escolar sobre la propiedad, aunque ello signifique transferir el financiamiento de la educación a otras fuentes que quizá no sean tan confiables.

Una década de reforma fracasada

Especialmente en los últimos años, los residentes y otros propietarios del sexto estado más poblado de los Estados Unidos han acudido a reuniones, han escrito a sus legisladores y han alzado la voz en contra del tributo que los gobiernos locales imponen sobre sus casas, suelo y otras propiedades. Los ciudadanos de Pensilvania soportan una de las cargas tributarias más fuertes del país, y muchos propietarios frustrados se quejan de que el impuesto sobre la propiedad es demasiado alto. Las tasas del impuesto sobre la propiedad han seguido aumentando, a pesar de que la mediana de ingresos de los hogares se ha estancado o reducido en la mayoría de las ciudades del estado. Mientras tanto, la legislatura estatal aprobó una reforma del impuesto sobre la propiedad en 2006 que no ha dado los resultados esperados, en parte por no ceder a los residentes el control que querían sobre la porción más grande de su factura de impuesto sobre la propiedad: la parte que financia las escuelas públicas, que en algunas comunidades supera la mitad de todo el impuesto. Bajo la Ley de Alivio al Contribuyente, cada junta escolar tiene que obtener la aprobación de los electores antes de poder adoptar una tasa tributaria que exceda un cierto límite, actualizado con la inflación. Durante años, sin embargo, docenas de distritos escolares han eludido un referendo electoral mediante la solicitud de exenciones especiales al Departamento de Educación de Pensilvania.

Estas inquietudes son prioritarias para los legisladores. Pero los dirigentes estatales reconocen que un cambio en el sistema del impuesto sobre la propiedad es mucho más complejo de lo que parece. Si se recorta el impuesto a algunos grupos de personas, habrá que aumentarlo a otros, a menos que los líderes puedan encontrar nuevas fuentes de ingresos para generar por lo menos la misma cantidad de dinero necesario para la educación pública, la protección policial, la recolección de basura y otros servicios gubernamentales locales. Hoy en día, los distritos escolares, los condados y las municipalidades de Pensilvania dependen en gran parte del impuesto sobre la propiedad. De hecho, las escuelas estatales dependen del impuesto sobre la propiedad más que las escuelas de la mayor parte del resto del país. Alrededor del 45 por ciento de los fondos que pagan por las escuelas públicas en la mancomunidad de Pensilvania provienen del impuesto sobre la propiedad, según datos de la Oficina del Censo de los EE.UU. para el año fiscal 2013. En todo el país, alrededor del 37 por ciento de los ingresos de los distritos escolares provino del impuesto sobre la propiedad ese año.

Si bien los legisladores de Pensilvania reconocen la necesidad de hacer reformas, no han elaborado aún un plan que cuente con el acuerdo de residentes, gobiernos locales, comunidad de negocios y otras partes interesadas.

Ley de Independencia del Impuesto sobre la Propiedad

En los últimos años han surgido múltiples propuestas que fueron rechazadas una a una. Un proyecto de ley controvertido introducido en 2015 propone unos de los cambios más drásticos de cualquier reforma del impuesto sobre la propiedad en los últimos años. El proyecto de ley 76 del Senado de Pensilvania, también conocido como Ley de Independencia del Impuesto sobre la Propiedad, se propone recortar significativamente el impuesto sobre la propiedad al eliminar la porción destinada a las escuelas. Por una diferencia mínima, la medida no obtuvo los votos suficientes el año pasado para ser aprobado por el Senado de Pensilvania, pero sus patrocinadores quieren forzar otra votación este año. El proyecto cuenta con el respaldo de ambos partidos y también de la Asociación de Corredores Inmobiliarios de Pensilvania, además de grupos como la Campaña Tricondado para la Libertad y la Asociación de Contribuyentes del Condado de Lower Bucks. Bajo el proyecto de ley 76 del Senado, los impuestos escolares sobre la propiedad se irían abandonando paulatinamente. Los distritos con deudas podrían seguir recaudando una pequeña cantidad, pero sólo lo suficiente para financiar los pagos anuales de su deuda, y sólo hasta que la deuda existente se termine de pagar. La legislación permite a los distritos recaudar un impuesto local sobre el ingreso del trabajo o sobre el ingreso personal para programas y proyectos específicos, pero estos planes requerirían la aprobación de los electores.

Los impuestos escolares sobre la propiedad serían reemplazados por un impuesto más alto sobre las ventas, un impuesto sobre el ingreso personal más alto y otros cambios. Los promotores de la ley esperan que estas nuevas fuentes de financiamiento generen los miles de millones de dólares al año necesarios para ayudar a pagar a los maestros y al personal escolar, manteniendo así en funcionamiento los 500 distritos escolares públicos del estado. Este año académico se estima que los impuestos escolares sobre la propiedad recaudarán $13.700 millones de dólares en todo el estado, según proyecciones de la Oficina del Procurador Independiente de la Legislatura publicadas a fines de 2014.

El senador estatal Mike Folmer, que tiene dos hijos y siete nietos, es uno de los más activos defensores de esta ley. Folmer ha dicho que hace falta un cambio drástico porque los impuestos han subido significativamente en partes de Pensilvania, dejando a algunos residentes con dificultades para pagar sus facturas. Las familias quieren ayuda. “Cuando voy a una casa, llamo a la puerta de un residente cualquiera y digo ‘¡Hola! He venido a informarle sobre el proyecto de ley 76 del Senado’, y me hacen pasar a su casa. . . Me dicen, ‘¿Sabe qué? Estoy de acuerdo con usted. Me parece bien’”, dice Folmer, que vive en Lebanon City. “Están abrumadoramente a favor. Pensándolo bien, no recuerdo que nadie me haya dicho que está en contra”.

Los ciudadanos de Pensilvania han expresado su preocupación por el impuesto sobre la propiedad. Una encuesta realizada en la primavera de 2015 por Franklin & Marshall College en Lancaster indicó que el 77 por ciento de los electores cree que hay que reformar el sistema tributario. La mayoría de los participantes de esa encuesta —el 60 por ciento— dijo que favorecería un plan para aumentar el impuesto estatal sobre el ingreso del 3,07 por ciento al 3,7 por ciento, si con eso se redujera su impuesto sobre la propiedad en US$1.000.

Entre los que defienden este tema firmemente está Kelly Sharp, de Grantville, quien dice que casi perdió su casa hace algunos años porque estaba desempleada y no podía pagar su impuesto sobre la propiedad. En ese momento tenía dinero suficiente para cubrir el pago de su hipoteca, pero no para cubrir también su impuesto sobre la propiedad. Después de batallar con el banco por varios meses, finalmente pudo negociar pagos mensuales al alcance de su bolsillo. Actualmente, esta madre de cinco hijos es gerente de la cantina de base local de veteranos de guerra. Si bien ella y su esposo ahora tienen trabajos de tiempo completo, seguirá siendo un problema conseguir los US$6.814,80 dólares que tienen que pagar de impuesto sobre la propiedad este año por su casa de cinco dormitorios. Sharp dice que se quiere mudar a un estado menos caro. “Simplemente ya no podemos quedarnos”, dice. “Este impuesto es una locura a muchos niveles. No sólo por la cantidad, sino por el poder y la autoridad que la gente tiene para destruirnos con estos impuestos”.

Hay muchas razones por las que el proyecto de ley 76 del Senado ha obtenido el respaldo de decenas de miles de propietarios en todo el estado, dice David Baldinger, vocero de la Coalición de Asociaciones de Contribuyentes de Pensilvania, una organización que representa los grupos de base que están luchando contra los impuestos para la educación. Si bien muchas personas mencionan su frustración por el aumento del impuesto sobre la propiedad y el miedo a perder sus casas, otras creen que es más justo financiar las escuelas usando impuestos sobre las ventas y el ingreso, porque hay una mayor proporción de gente que paga esos impuestos, dice Baldinger. Señala que los residentes pueden controlar lo que pagan en impuestos sobre las ventas, que también pagan decenas de millones de visitantes que viajan a Pensilvania todos los años.

“Sin lugar a dudas, [los propietarios] saben que ahorrarán dinero si se libran del impuesto escolar sobre la propiedad”, dice Baldinger, un jubilado de Reading cuya factura del impuesto sobre la propiedad asciende a alrededor de US$8.000 por año, de los cuales alrededor de US$6.500 corresponde al distrito escolar local. Sin embargo, no se ha efectuado ningún análisis legislativo reciente para calcular si los propietarios ahorrarían dinero en caso de que el estado reemplazase el impuesto escolar sobre la propiedad con un mayor impuesto sobre las ventas y sobre el ingreso, y cuánto ahorrarían.

Oposición al proyecto de ley 76 del Senado

A pesar del apoyo de muchos propietarios, el gobernador de Pensilvania Tom Wolf se opone al proyecto de ley 76 del Senado, y docenas de organizaciones se han movilizado también en contra de la medida. Entre ellas están los grupos de defensa de los niños y los pobres, como la Asociación de Educación Estatal de Pensilvania, Ciudadanos Públicos para los Niños y la Juventud, el Consejo Eclesiástico de Pensilvania y la Coalición contra el Hambre. Algunos opositores objetan porque la ley aumentaría el impuesto sobre el ingreso personal del 3,07 por ciento actual al 4,34 por ciento. El proyecto de ley propone aumentar el impuesto sobre las ventas del 6 al 7 por ciento, así como también ampliar la lista de bienes tributables para incluir algunas prendas de vestir, ciertos tipos de comida, servicios de guardería y medicamentos de venta libre.

La comunidad empresarial también se ha manifestado en contra de la medida. La Cámara de Negocio e Industria de Pensilvania ha expresado su preocupación de que un mayor impuesto sobre las ventas afectaría a las empresas locales, sobre todo a las tiendas minoristas en comunidades que limitan con Delaware, que no tiene impuesto sobre las ventas, y Maryland, donde la tasa es del 6 por ciento.

Kathy Swope, presidenta de la Asociación de Juntas Escolares de Pensilvania, criticó el proyecto de ley porque permite que las grandes corporaciones y otras empresas dejen de pagar el impuesto escolar sobre la propiedad. Una porción significativa de los impuestos escolares sobre la propiedad se recauda de propiedades comerciales e industriales del estado. En el distrito escolar de la ciudad de Filadelfia, por ejemplo, más del 44 por ciento de la propiedad se clasificó como comercial o industrial en 2012, según un análisis del Centro de Presupuesto y Política de Pensilvania. “La tributación funciona mejor cuando se distribuye entre muchos contribuyentes”, dice Swope. “No estoy seguro de que la mejor manera de resolver este problema sea eximir a las empresas de su obligación de contribuir”.

En noviembre de 2015, se realizó una votación preliminar sobre el proyecto de ley 76 del Senado y casi fue aprobado. Después de más de una hora de debate, el voto de los legisladores terminó empatado 24 a 24. El vicegobernador estatal, Mike Stack, como presidente del Senado, emitió un voto de desempate en contra, hecho que ocupó la primera página de los periódicos en todo el estado. Pero los patrocinadores del proyecto van a intentarlo de nuevo. El senador David G. Argall, que es el patrocinador principal, ha dicho que un resultado tan estrecho de la votación demuestra la importancia de recortar los impuestos en Pensilvania.

Un vocero de Argall dice que el Senador piensa presentar la medida a consideración de sus pares en los próximos meses. Y el proyecto de ley 76 del Senado puede tener una mayor posibilidad de ser aprobado esta vez. Uno de los copatrocinadores estuvo ausente en la última votación, y también faltó un senador recién electo que probablemente esté a favor de la ley, según las noticias locales. “En cada sesión seguimos recibiendo respaldo de todos los rincones del estado”, dijo Argall, un republicano que representa a 95 municipalidades en los condados de Berks y Schuylkill, en una declaración preparada de antemano. “Tengo noticias para el gobernador y para el vicegobernador que votó en contra de nosotros: No nos vamos a dar por vencidos”.

No se sabe bien cuánto apoyo tiene el proyecto de ley 76 del Senado en la Cámara de Representantes. Pero el gobernador Tom Wolf ha dicho que está preocupado por que el proyecto de ley 76 del Senado no recaudaría el dinero suficiente, dijo su secretario de prensa, Jeffrey Sheridan. Si bien Wolf quiere ofrecer a los residentes alivio en el pago del impuesto sobre la propiedad, también quiere mejorar el financiamiento de las escuelas, más allá de lo recaudado por medio del impuesto sobre la propiedad. El gobernador ha pasado el último año tratando de aumentar el financiamiento de la educación, en un esfuerzo por revertir el recorte de mil millones de dólares que se hizo en el presupuesto escolar cuando asumió sus funciones a comienzos de 2015. Sheridan dice que estos recortes del presupuesto fueron en gran medida la razón por la que los distritos escolares tuvieron que aumentar las tasas del impuesto sobre la propiedad, además de aumentar el tamaño de las clases y reducir los puestos docentes.

En marzo del año pasado, Wolf presentó una propuesta de presupuesto para 2015–2016 que aumentaba la participación del financiamiento estatal de las escuelas públicas al 50 por ciento por primera vez desde la década de 1970, según un comunicado de prensa de su oficina. Hoy el estado paga mucho menos, alrededor del 36 por ciento, según los datos recopilados en el año fiscal 2013, los más recientes disponibles del Centro Nacional de Estadísticas Educativas. Un informe conjunto publicado el verano pasado por la Asociación de Administradores Escolares de Pensilvania y la Asociación de Funcionarios de Empresas Escolares de Pensilvania indica que la participación del estado en el financiamiento de la educación se ha reducido desde 2008–2009, a pesar de que los distritos escolares tienen que cubrir aumentos en el costo de la educación especial, las pensiones de los empleados y las prestaciones de salud, entre otros rubros. “La razón por la cual no podríamos simplemente eliminar el impuesto sobre la propiedad en Pensilvania es que la participación estatal es inadecuada”, dice el vocero del gobernador. “Esto es algo que hemos heredado. Es desafortunado que los distritos se vean obligados a aumentar el impuesto sobre la propiedad, y eso es lo que estamos tratando de arreglar”.

El plan de gastos original para 2015–2016 de Wolf incluía cambios en el impuesto sobre la propiedad que hubiera recortado la tasa específicamente para los propietarios residenciales. Proponía reducir el impuesto sobre la propiedad en US$3,8 millones en todo el estado y reducir el impuesto escolar sobre la propiedad para el propietario promedio en más de la mitad. Casi 300.000 hogares de personas de la tercera edad no tendrían que pagar el impuesto escolar sobre la propiedad. Como el proyecto de ley 76 del Senado, la propuesta de Wolf se hubiera basado en un aumento del impuesto sobre las ventas y sobre el ingreso para cubrir el costo del cambio. Ese plan de gastos, sin embargo, fue descartado en medio de las tensas negociaciones presupuestarias en curso con la legislatura. Wolf introdujo un segundo presupuesto estatal en febrero que no incluía cambios en el impuesto sobre la propiedad.

La confiabilidad del impuesto sobre la propiedad

Mientras los dirigentes de Pensilvania discuten sobre la mejor manera de reformar el sistema del impuesto sobre la propiedad, funcionarios de otras partes del país están lidiando con problemas similares. Por ejemplo, un comité del Senado de Texas está organizando reuniones en todo el estado para examinar opciones para aliviar la carga del impuesto sobre la propiedad antes de efectuar recomendaciones a los legisladores. El gobernador Pete Ricketts de Nebraska propuso recientemente un paquete de alivio del impuesto sobre la propiedad que, entre otras cosas, trata de limitar cuánto puede crecer el valor del suelo agrícola y hortícola. A fines del año pasado, el Comité de Finanzas e Impuestos de la Cámara de Representantes de Florida consideró brevemente un plan para reemplazar el impuesto sobre la propiedad por un impuesto mayor sobre las ventas.

A medida que sigue el debate, economistas y otros expertos se han puesto en contacto con los dirigentes estatales para ayudarles a comprender las investigaciones realizadas sobre estrategias tributarias y advertirles sobre las consecuencias de recortar el impuesto sobre la propiedad como una fuente clave de recaudación, sobre todo para las escuelas públicas. Andrew Reschovsky, economista y fellow del Instituto Lincoln de Políticas de Suelo, dice que el impuesto sobre la propiedad es generalmente una fuente de financiamiento mucho más estable y confiable durante una recesión que los impuestos sobre las ventas y el ingreso. Está en contra de desvincular el financiamiento de la educación del impuesto sobre la propiedad.

Reschovsky, que también es profesor emérito de la Universidad de Wisconsin–Madison, ha escrito extensamente sobre el impuesto a la propiedad. En un informe publicado en 2014 explora la dependencia de los estados del impuesto sobre la propiedad para financiar la educación pública y concluye que los datos de recaudación tributaria demuestran “la estabilidad duradera del impuesto sobre la propiedad”. Además, él y la consultora de finanzas Daphne A. Kenyon, también fellow del Instituto Lincoln, coeditaron un número especial de la revista académica Education Finance and Policy sobre el impuesto a la propiedad y el financiamiento escolar, que incluyó varios artículos enfocados en los cambios en el impuesto sobre la propiedad en estados como Michigan, Massachusetts, Nueva York y Iowa.

Por ejemplo, en 1996 Michigan reformó su sistema de finanzas escolares reduciendo su dependencia del impuesto sobre la propiedad residencial al tiempo que aumentó los ingresos estatales principalmente por medio del impuesto sobre las ventas. El nuevo sistema de financiamiento de la educación está altamente centralizado a nivel estatal, y los fondos estatales se distribuyen de forma relativamente equitativa entre los 540 distritos escolares locales del estado. En los últimos años, sin embargo, el 20 por ciento más rico de los distritos ha estado recibiendo alrededor de US$600 más por alumno en fondos del estado que otros distritos. Sigue habiendo problemas de financiamiento sustanciales. En septiembre del año pasado, un miembro principal del Consejo de Investigación Ciudadana de Michigan informó de grandes diferencias en los gastos de educación especial entre distritos, e inequidades importantes en los gastos de construcción de escuelas.

Carolina del Sur es otro estado que cambió su sistema tributario en respuesta a las demandas de los propietarios. La Ley 388, promulgada en 2006, eliminó el impuesto estatal escolar sobre las propiedades ocupadas por sus dueños y lo reemplazó por un nuevo impuesto del 1 por ciento sobre las ventas. Laura Dawson Ullrich, profesora de economía de Winthrop University, dice que el cambio no ha sido favorable para el estado. “El aumento en el impuesto sobre las ventas nunca compensó la reducción en el impuesto sobre la propiedad”, dice Ullrich. “Las jurisdicciones han aumentado los impuestos sobre las empresas y los propietarios de casas no ocupadas por sus dueños para compensar la brecha”. Según The Greenville News, los legisladores echan la culpa a una combinación de factores, como la Gran Recesión, proyecciones de ingresos excesivamente optimistas, y la dependencia de una fuente de ingresos que no es tan estable como la que reemplazó.

Fusibles y otras soluciones

Reschovsky dice que en vez de abandonar el impuesto escolar sobre la propiedad, los legisladores de Pensilvania deberían hacer el impuesto más atractivo para los propietarios. Una manera de hacerlo es por medio de “programas fusible”, que ofrecen reducciones impositivas a personas individuales con cargas tributarias elevadas en relación a sus ingresos. “Pensilvania tiene un modesto programa fusible que está disponible sólo para los contribuyentes mayores de 65 años de edad y los discapacitados”, dice Reschovsky (figura 1, pág. 14). “Si se pusiera el programa fusible a disposición de todos los contribuyentes que tienen una alta carga tributaria, independientemente de su edad, la oposición al impuesto sobre la propiedad probablemente se reduciría”.

La expansión de los programas fusible de Pensilvania es una de las recomendaciones del Centro de Presupuesto y Políticas de Pensilvania, un proyecto progresivo de investigación política con sede en Harrisburg que ha dicho que la eliminación del impuesto escolar sobre la propiedad es una “respuesta extrema a un problema limitado”. Ha estado urgiendo a los legisladores a que reformen el sistema tributario realizando cambios específicos que no causen daño a las escuelas. El Centro también sugiere obligar a los condados a revaluar las propiedades periódicamente.

Esto es importante porque el impuesto sobre la propiedad depende tanto de las tasas tributarias fijadas por los gobiernos locales como por la valuación del suelo, las estructuras y otros bienes sobre los que se impone el tributo. Un informe del Centro de Presupuesto y Políticas de Pensilvania publicado en 2014, cuando los legisladores estaban considerando una versión anterior de la Ley de Independencia del Impuesto sobre la Propiedad, indicó que el 43 por ciento de los condados no había actualizado las valuaciones desde hacía más de 20 años y que sólo un tercio las había revaluado en la última década.

El informe del Centro de Presupuesto y Políticas de Pensilvania también sugirió que los impuestos altos sobre la propiedad son la excepción en el estado. El análisis del Centro demuestra que en la mayoría de los condados el impuesto total sobre la propiedad es menor de US$2.000 por año, desde un mínimo de US$850 por año en el condado rural de Forest, que incluye parte del Bosque Nacional Allegheny, hasta un máximo de US$4.364 en el condado de Chester, un suburbio rico de Filadelfia. Los datos de la Encuesta Comunitaria Americana del Censo de 2014, sin embargo, indican que hay una mayor proporción de propietarios que tiene que pagar impuestos altos sobre la propiedad en Pensilvania que en el resto de los Estados Unidos. En el ámbito nacional, alrededor del 34 por ciento de los propietarios pagó US$3.000 o más en impuestos sobre la propiedad por ano. En Pensilvania, este porcentaje asciende al 41 por ciento.

Pero las facturas de cobro del impuesto no son siempre la mejor medida de la carga tributaria sobre la propiedad. Muchos economistas prefieren medir el impuesto sobre la propiedad como un porcentaje del ingreso personal. En Pensilvania, el impuesto sobre la propiedad ascendió al 3,0 por ciento del ingreso personal en 2013, apenas por debajo del promedio nacional del 3,1 por ciento, según los datos del último censo disponible. Los impuestos se consideran altos en 30 de los 500 distritos escolares del estado, donde el impuesto sobre la propiedad excede el 4 por ciento del ingreso personal tributable total del distrito. Mientras tanto, un análisis publicado en diciembre de 2015 por el Centro de Datos Estatales de Pensilvania reporta que la mediana del ingreso de los hogares se redujo o se mantuvo igual en 55 de las 57 ciudades de Pensilvania analizadas por la Oficina del Censo de los EE.UU. entre 2005–2009 y 2010–2014.

Sarah Cordes, una profesora de Políticas en liderazgo educativo de la Universidad Temple de Filadelfia, afirma que el problema más urgente en el financiamiento de la educación no es la fuente de financiamiento. El hecho es que Pensilvania es uno de los pocos estados que no tienen una fórmula de financiamiento educativo que asigne fondos estatales en función de las características actuales de un distrito, como su riqueza, características de los estudiantes y cambios en las distintas categorías de matriculación. Cordes dice que el sistema de Pensilvania para distribuir el dinero del estado a las escuelas es “básicamente una asignación automática” que depende principalmente de cuánto dinero recibieron las escuelas el año anterior. Un informe de 2015 del Centro para el Progreso Americano señaló que los distritos de mayor pobreza de Pensilvania reciben hasta más de un 30 por ciento menos por estudiante que los de menor pobreza. Pero cuando se compara a Pensilvania con el resto del país, el informe La calidad cuenta de Education Week de 2016 dio a Pensilvania una calificación de B en gastos de educación y equidad de financiamiento, usando una escala de A a F. Mientras tanto, le dio una calificación de C en el desempeño estudiantil desde el jardín de niños al 12° grado. Dice Cordes: “Si el objetivo es mejorar el desempeño educativo y hacerlo más equitativo para todos los niños del estado, entonces… lo más importante es que el estado encuentre una fórmula para financiar la educación”.

Kenyon, la consultora de finanzas públicas, recomienda que los dirigentes de política aborden el problema del financiamiento escolar y la reforma del impuesto sobre la propiedad como dos temas separados. Sugiere ofrecer ayuda estatal a los distritos escolares necesitados para afrontar los problemas mayores de rendimiento escolar. Mientras tanto, urge a los legisladores que brinden reducción tributaria a los propietarios que tienen una carga tributaria alta del impuesto sobre la propiedad. “El consenso entre los investigadores de finanzas públicas es que la reducción del impuesto sobre la propiedad se debe otorgar a hogares de ingresos bajos a moderados por medio de un mecanismo como un programa fusible estatal del impuesto sobre la propiedad”, escribió Kenyon en un informe de 2007 que resume algunas de las conclusiones más pertinentes sobre el impuesto a la propiedad y las finanzas escolares.

Kenyon, que integró la Junta de Educación Estatal de Nueva Hampshire y la Comisión de Educación de los Estados, urgiría a los legisladores de Pensilvania que reconsideraran el problema del impuesto sobre la propiedad. “Yo diría que piensan que tienen que eliminar el impuesto sobre la propiedad porque no han tomado la medida más prudente y precisa, que yo recomendaría con entusiasmo: expandir los programas fusible”, dice.

Denise-Marie Ordway tiene una larga trayectoria como periodista educativa y es fellow de la Fundación Nieman de Periodismo de Harvard en 2015. En la actualidad es editora de Journalist’s Resource, un proyecto del Centro Shorenstein sobre Medios, Política y Política Pública de la Universidad de Harvard, Cambridge, Massachusetts. Se la puede contactar en denisemordway@gmail.com o vía Twitter en @DeniseOrdway.

Fotografía: Oficina del gobernador de Pensilvania, Tom Lobo

Referencias

Center for American Progress. 2015. A Fresh Look at School Funding. Mayo.

Education Week. 2016. Quality Counts 2016: Report and Rankings.

Kenyon, Daphne A., y Andrew Reschovsky. 2014. “Special Issue: Property Tax and the Financing of K–12 Education”. Education Finance and Policy 9(4). Otoño de 2014.

Kenyon, Daphne A. 2007. The Property Tax-School Funding Dilemma. Cambridge, MA: Lincoln Institute of Land Policy.

National Center for Education Statistics. 2013. National public education financial survey.

Pennsylvania Budget and Policy Center. 2014. Reform Not Repeal: Pennsylvania Can Provide Property Tax Relief and Protect Public Schools. Octubre.

Reschovsky, Andrew. 2014. “The Future Role of the Property Tax in the Funding of K-12 Education in the United States”. Documento de trabajo. Cambridge, MA: Lincoln Institute of Land Policy.

Significant Features of the Property Tax. 2014. Lincoln Institute of Land Policy and George Washington Institute of Public Policy.

Property taxes have become such a contentious issue in Pennsylvania that residents from at least 84 different grassroots groups have banded together to push for changes that include eliminating the school property tax—even if it means funding education through other sources that might not be as reliable.

A Decade of Failed Reform

Especially in more recent years, residents and other property owners in the nation’s sixth-most populous state have filled meetings, written their legislators, and spoken out loudly against the tax that local governments levy on houses, land, and other property. Pennsylvanians shoulder one of the largest overall tax burdens in the country, and many frustrated home owners there complain that property taxes are too high. Property tax rates have risen even as median household incomes have remained stagnant or declined in most cities in the Keystone State. Meanwhile, a property tax reform bill passed by the state legislature in 2006 has failed to live up to expectations, partly by failing to give residents the control they wanted over the largest portion of their property tax bills—the part that funds public schools and, in some communities, makes up more than one-half of the total tax bill. Under the Taxpayer Relief Act, each school board is required to get voter approval before it can adopt a tax rate that exceeds a cap tied to inflation. For years, however, dozens of school districts have avoided a voter referendum by asking the state Department of Education for special exemptions.

These concerns are priorities for lawmakers. But state leaders acknowledge that changing their property tax system is much more complex than it seems. Cutting taxes for some groups of people means boosting them for others, unless leaders can identify new sources of revenue able to generate at least the same amount of money needed for public education, police protection, waste management, and other local government services. Today, Pennsylvania school districts, counties, and municipalities rely heavily on property taxes. In fact, schools in the commonwealth rely on property taxes more than schools in most other parts of the United States. About 45 percent of the funds that pay for public schools in the commonwealth come from property taxes, according to data from the U.S. Census Bureau for fiscal year 2013. Nationwide, about 37 percent of school district revenue came from property taxes that year.

While Pennsylvania lawmakers acknowledge the need for reforms, they have not yet developed a plan that residents, local governments, the business community, and other stakeholders can agree upon.

Property Tax Independence Act

During the last several years, multiple proposals have come forward and then been rejected. A controversial bill introduced in 2015 offers some of the most drastic changes of any property tax reform measure to come before a state legislature in recent years. Pennsylvania Senate Bill 76—also known as the Property Tax Independence Act—aims to slash property tax bills by eliminating school property taxes. By a very narrow margin, the measure failed to garner enough votes last year to get through the Pennsylvania Senate, and its sponsors plan to push for another vote this year. The bill enjoys bipartisan support as well as backing from the Pennsylvania Association of Realtors and groups such as the Tri­County Campaign for Liberty and the Lower Bucks County Taxpayers Association. Under Senate Bill 76, school property taxes would be abandoned over time. Districts with debt would be able to continue charging a small amount, but only enough to finance the annual payments on their debt service, and only until that existing debt is paid off. The legislation does allow districts to levy a local Earned Income Tax or Personal Income Tax for specific projects and programs, but those plans would require voter approval.

School property taxes would be replaced by a higher sales tax, a higher personal income tax, and other changes. The bill’s sponsors expect these new funding sources to generate the billions of dollars a year needed to help pay teachers and staff and otherwise keep the state’s 500 public school districts running. This academic year, education property taxes will raise an estimated $13.7 billion statewide, according to projections that the Legislature’s Independent Fiscal Office released in late 2014.

State Senator Mike Folmer, a father of two and grandfather of seven who is among the bill’s most vocal proponents, said a drastic change is needed because taxes have risen sharply in parts of Pennsylvania, leaving some residents struggling to pay their bills. Families want help. “When I go to houses and knock on everyday folks’ doors, and I say ‘Hi! I’m here to educate you about Senate Bill 76’, and I go into it with them . . . they say, ‘You know what? I’m with you. I get this,’” says Folmer, of Lebanon City. “They’re overwhelmingly in favor. Actually, I cannot remember a ‘no.’”

Pennsylvanians have indicated property taxes are a key concern. A spring 2015 poll conducted by Franklin & Marshall College, in Lancaster, found that 77 percent of voters think the tax system needs to be overhauled. Most Pennsylvanians who participated in that poll—60 percent—said they would favor a plan that would increase the state income tax from 3.07 percent to 3.7 percent if it meant their property tax bill was chopped by $1,000.

Among those who feel strongly about the issue is Kelly Sharp, of Grantville, who says she almost lost her house a few years ago because she was unemployed and could not pay her property taxes. At the time, she had enough money to cover her mortgage but not enough for her mortgage and property taxes. After battling her bank for months, Sharp finally was able to negotiate monthly payments she could afford. Today, the mother of five is manager of the canteen at her local VFW Post. Although she and her husband now work full-time, it still will be tough, she says, to come up with the $6,814.80 she owes in property taxes this year on her five-bedroom home. Sharp says she wants to move to a less expensive state. “We just can’t afford it anymore,” she says. “These taxes are just crazy on so many different levels. Not just the amount, but the power and authority people have to destroy you with these taxes.”

There are multiple reasons why Senate Bill 76 has gained support among tens of thousands of property owners statewide, says David Baldinger, a spokesman for the Pennsylvania Coalition of Taxpayer Associations, an umbrella organization representing the grassroots groups that are fighting education taxes. While many people cite frustrations over rising property taxes and fears about losing their homes, a number of people also think it is more fair to fund schools using sales and income taxes—because a larger share of individuals pay those taxes, Baldinger says. He points out that residents can control the amount they pay in sales taxes, which are paid by the tens of millions of visitors traveling to Pennsylvania each year as well.

“Without question, [property owners] know they will save money by getting rid of education property taxes,” says Baldinger, a retiree from Reading who said his total property tax bill is about $8,000, with about $6,500 levied by the local school district. No recent legislative analysis has been done, however, to gauge whether and how much property owners would save if the state were to replace education property taxes with a higher sales and income tax.

Opposition to Senate Bill 76

Despite support from many property owners, Pennsylvania Governor Tom Wolf opposes Senate Bill 76, and dozens of organizations have rallied against the measure as well. Among them are advocacy groups for children and the poor, such as the Pennsylvania State Education Association, Public Citizens for Children and Youth, Pennsylvania Council of Churches, and Coalition Against Hunger. At least some opponents object because the bill would raise the personal income tax from the current 3.07 percent to 4.34 percent. The bill calls for increasing the state sales tax from 6 percent to 7 percent, as well as expanding the scope of taxable goods to include some clothing items, some types of food, child care services, and nonprescription medications.

The business community has spoken out against the measure, too. The Pennsylvania Chamber of Business and Industry has expressed concerns that increased sales taxes will affect local businesses, especially retail stores in communities that border Delaware, which has no sales tax, and Maryland, where the tax rate is 6 percent.

Kathy Swope, president of the Pennsylvania School Boards Association, criticized the bill for allowing large corporations and other businesses to stop paying education property taxes. A significant portion of school property taxes come from commercial and industrial property in the state. In the Philadelphia city school district, for example, more than 44 percent of property was assessed as either commercial or industrial in 2012, according to an analysis from the Pennsylvania Budget and Policy Center. “Taxation works best when it is spread across many contributors,” Swope says. “Completely relieving businesses of the obligation of any contribution—I’m not sure that is the best way to approach this.”

In November 2015, Senate Bill 76 came up for a preliminary vote and almost passed the Senate. Following more than an hour of debate, legislators cast a tie vote of 24 to 24. The state’s lieutenant governor, Mike Stack, in his role as Senate president, broke the gridlock by casting an opposing vote, which made front-page news across the commonwealth. But the bill’s sponsors will try again. The primary sponsor, Senator David G. Argall, has said the close vote demonstrates how important tax cuts are to Pennsylvanians. A spokesman for Argall says Argall hopes the Senate will vote on the measure again in the coming months. And Senate Bill 76 might have a better chance of passing this time around. One of the cosponsors was absent for the last vote, as was a newly elected senator who is likely to favor the bill, according to local news reports. “Each session, we continue to pick up support in all parts of the state,” Argall, a Republican representing 95 municipalities in Berks and Schuylkill counties, says in a prepared statement. “I’ve got news for the governor and the lieutenant governor who voted against us: We are not giving up.”

It was not immediately clear how much support Senate Bill 76 has in the House. But Governor Tom Wolf has said he is concerned that Senate Bill 76 would not bring in enough money, said Wolf’s press secretary, Jeffrey Sheridan. While Wolf wants to offer residents property tax relief, he also wants to improve school funding—beyond the revenue raised through property taxes. The governor has spent the past year pushing to increase education funding in an effort to reverse the $1 billion in cuts that were made to school budgets before he took office in early 2015. Sheridan says those budget cuts were, in large part, the reason why school districts have had to boost property tax rates as well as increase class sizes and cut teaching positions.

Last March, Wolf unveiled a budget proposal for 2015­–16 that called for boosting the state’s share of public school funding to 50 percent for the first time since the 1970s, a press release from his office states. Today, the state pays considerably less—about 36 percent, according to data collected in fiscal year 2013, the most recent available from the National Center for Education Statistics. A joint report issued last summer by the Pennsylvania Association of School Administrators and the Pennsylvania Association of School Business Officials indicates that the state’s share of education funding has slipped since 2008–­09, even as school districts must cover increases in the cost of such things as special education and employee pensions and health benefits. “The reason that, in Pennsylvania right now, we couldn’t just eliminate property taxes is because the state’s share is inadequate,” the governor’s spokesman says. “That’s something we inherited. It’s unfortunate that districts are being forced to raise property taxes, and that’s what he is trying to fix.”

Wolf’s original 2015–­16 spending plan included changes to property taxes that would have resulted in tax cuts specifically for home owners. He had aimed to reduce property taxes by $3.8 million statewide and shrink the average home owner’s school tax bill by more than half. Nearly 300,000 senior citizens’ households would not pay school property taxes. Like Senate Bill 76, Wolf’s proposal would have relied on increases in sales and income taxes to cover the cost of the change. That spending plan, however, was taken off the table in the midst of tense, ongoing budget negotiations with the legislature. Wolf introduced a second state budget proposal in February that did not include changes to property taxes.

The Dependability of the Property Tax

While Pennsylvania policy makers debate the best ways to revamp the state’s property tax system, officials in other parts of the country are wrestling with similar issues. For example, a Texas Senate committee is holding meetings statewide to examine options for property tax relief before making recommendations to legislators. Nebraska Governor Pete Ricketts recently unveiled a property tax relief package that, among other things, aims to limit how much the value of agricultural and horticultural land can grow. Late last year, Florida’s House Finance and Tax Committee briefly considered pursuing a plan to replace property taxes with a higher state sales tax.

As debates take place, economists and other experts have reached out to state leaders to help them understand the research behind tax strategies while also warning them of the consequences of cutting back on property taxes as a key revenue source, especially for public schools. Andrew Reschovsky, an economist and fellow at the Lincoln Institute of Land Policy, says the property tax is generally a much more stable and reliable funding source during a recession than sales and income taxes. He advises against decoupling education funding and property taxes.

Reschovsky, who also is professor emeritus at the University of Wisconsin­–Madison, has written extensively about property taxes. In a report published in 2014, he explores states’ reliance on property taxes to fund public education and concludes that tax revenue data demonstrate “the abiding stability of the property tax.” In addition, he and public finance consultant Daphne A. Kenyon, who is a Lincoln Institute fellow as well, co­edited a special issue of the academic journal Education Finance and Policy on the property tax and school finance, which included several papers focusing on property tax changes in states such as Michigan, Massachusetts, New York, and Iowa.

For example, in 1996, Michigan reformed its school finance system by reducing reliance on residential property taxes while raising new state revenue primarily from the sales tax. The new system for financing education is highly centralized at the state level, with state revenue distributed relatively evenly across the state’s 540 local school districts. In recent years, however, the richest 20 percent of districts have been receiving about $600 per pupil more in state revenues than other districts. Substantial funding problems remain. Last September, a senior associate from the Citizens Research Council of Michigan reported that wide disparities exist in special education spending among the districts and that there are significant inequities in school construction spending.

South Carolina is another state that changed its tax system in response to demands from property owners. Under Act 388, passed in 2006, the state eliminated the school property tax on owner-occupied homes and replaced it with a new penny sales tax. Laura Dawson Ullrich, an economics professor at Winthrop University, says the trade has not been good for the state. “The sales tax increase has never made up for the reduction” in property taxes, Ullrich says. “Jurisdictions have increased taxes on businesses and owners of non­-owner-occupied homes to make up for the gap.” According to The Greenville News, lawmakers blame a combination of factors, including the Great Recession, overly optimistic revenue projections, and reliance on a revenue source that is not as stable as the one it replaced.

Circuit Breakers and Other Solutions

Reschovsky says that instead of abandoning school property taxes, Pennsylvania legislators should try to make the tax more attractive to property owners. One way to do that, he says, is through “circuit breaker” programs, which offer relief to individuals with high tax burdens in relation to their income. “Pennsylvania has a modest circuit breaker program that is available only to taxpayers over the age of 65 and to the disabled,” Reschovsky says (figure 1, p. 14). “Making the circuit breaker available to all taxpayers, independent of age, who are facing high tax burdens would likely reduce opposition to the property tax.”

Expanding Pennsylvania’s circuit breaker program is one of the recommendations made by the Pennsylvania Budget and Policy Center, a progressive policy research project based in Harrisburg that calls the elimination of school property taxes “an extreme response to a limited problem.” It has been urging legislators to reform the tax system by making targeted changes that will not hurt schools. The center also suggests requiring counties to reassess property regularly.

This is important because property taxes are based both on the tax rates set by local governments and an assessment of the value of the land, structure, or other property on which the tax is being imposed. A report that the Pennsylvania Budget and Policy Center released in 2014, when lawmakers were considering an earlier version of the Property Tax Independence Act, found that 43 percent of counties had not conducted reassessments in more than 20 years and that only one-third had reassessed property within the past decade.

The Pennsylvania Budget and Policy Center report also suggests that high property taxes are the exception in the commonwealth. The center’s analyses show that, for most counties, total property taxes average less than $2,000 a year, with tax bills ranging from a low of $850 annually in rural Forest County, which includes part of the Allegheny National Forest, to a high of $4,364 in Chester County, a wealthy suburb of Philadelphia. Data from the 2014 Census’ American Community Survey, however, indicate that a larger proportion of home owners pay high property taxes in Pennsylvania compared to the United States as a whole. Nationally, about 34 percent of home owners paid $3,000 or more in property taxes. Meanwhile, about 41 percent did in Pennsylvania.

But tax bills are not always the best measure of property tax burden. Many economists prefer to look at property taxes as a percentage of personal income. In Pennsylvania, property taxes made up 3.0 percent of personal income in 2013—just below the national average of 3.1 percent, according to the latest available Census data. Taxes are considered high in 30 of the state’s 500 school districts, as property taxes exceed 4 percent of the districts’ total taxable personal income. Meanwhile, an analysis released in December 2015 by the Pennsylvania State Data Center reports that median household income declined or stayed the same in 55 of the 57 Pennsylvania cities surveyed by the U.S. Census Bureau between 2005–2009 and 2010–2014.

Sarah Cordes, a professor of educational leadership policy at Temple University in Philadelphia, asserts that the most pressing problem in education finance is not funding sources. It is the fact that Pennsylvania is one of the few states that do not have an education funding formula that allocates state funds based on the current characteristics of a district—for example, a district’s wealth, student characteristics, and changes in different categories of enrollment. Cordes says Pennsylvania’s system for distributing state money to schools is “basically an automatic allocation,” based primarily on how much money schools received in the previous year. A 2015 report from the Center for American Progress notes that Pennsylvania’s highest-poverty districts spend more than 30 percent less per student than the lowest-poverty ones. But when comparing Pennsylvania to the rest of the country, Education Week’s Quality Counts 2016 report assigned Pennsylvania a grade of B in education spending and funding equity. Meanwhile, it gave the state a C in K–12 student achievement. Says Cordes: “If the goal is to produce better and more equitable educational outcomes for children across the state, then . . . the most important thing that needs to happen is that the state needs to come up with an education funding formula.”

Kenyon, the public finance consultant, recommends that policy makers address school funding and property tax reform as two separate issues. She suggests targeting state aid to needy school districts to tackle the biggest student achievement challenges. Meanwhile, she urges lawmakers to target property tax relief to those property owners with hefty property tax burdens. “The consensus among public finance researchers is that property tax relief should be targeted to low- and moderate-income households through a mechanism such as a state-funded property tax circuit breaker program,” Kenyon wrote in a 2007 report that summarizes some of the more pertinent research findings related to property taxes and school finance.

Kenyon, who served on New Hampshire’s State Board of Education and on the Education Commission of the States, would urge Pennsylvania lawmakers to reconsider their property tax problem. “I’d say that they feel the need to eliminate the property tax because they haven’t taken the more sober and precise measure, which I would highly recommend, of expanding their circuit breaker,” she says.

Denise-Marie Ordway is a longtime education reporter and 2015 fellow of Harvard’s Nieman Foundation for Journalism. Currently, she is an editor at Journalist’s Resource, a project of Harvard’s Shorenstein Center on Media, Politics and Public Policy in Cambridge, Massachusetts. She can be reached by e­mail at denisemordway@gmail.com or via Twitter at @DeniseOrdway.

Photograph: Office of Pennsylvania Governor Tom Wolf

References

Center for American Progress. 2015. A Fresh Look at School Funding. May.

Education Week. 2016. Quality Counts 2016: Report and Rankings.

Kenyon, Daphne A., and Andy Reschovsky. 2014. “Special Issue: Property Tax and the Financing of K–12 Education.” Education Finance and Policy 9(4). Fall 2014.

Kenyon, Daphne A. 2007. The Property Tax-School Funding Dilemma. Cambridge, MA: Lincoln Institute of Land Policy.

National Center for Education Statistics. 2013. National public education financial survey.

Pennsylvania Budget and Policy Center. 2014. Reform Not Repeal: Pennsylvania Can Provide Property Tax Relief and Protect Public Schools. October.

Reschovsky, Andrew. 2014. “The Future Role of the Property Tax in the Funding of K-12 Education in the United States.” Working paper. Cambridge, MA: Lincoln Institute of Land Policy.

Significant Features of the Property Tax. 2014. Lincoln Institute of Land Policy and George Washington Institute of Public Policy.