West Philadelphia Rental Inventory Expected to Surge in 2025

Tyler Keough, New Age Realty Group, Inc.

January 27, 2025

In 2025, owners of residential investment properties throughout the city may struggle to fill vacancies due to an excess of rental inventory. West Philadelphia especially has seen a noticeable increase in new residential construction projects, and this trend is not coincidental; it stems largely from changes to Philadelphia’s 10-Year Tax Abatement program.

Changes to Philadelphia’s 10-Year Tax Abatement

The 10-Year Tax Abatement is a program originally designed to incentivize development and revitalization across Philadelphia. Established in 2000, the program allowed property owners to avoid paying taxes on the value of new construction or significant improvements for a full decade. Only the value of the land was taxable during this period.

The abatement was particularly appealing to developers because it reduced operational costs for years after a project’s completion. For homebuyers, the abatement provided a significant reduction in property tax burdens, making new homes more affordable relative to older properties without abatements.

In 2020, Philadelphia City Council approved changes to the 10-Year Tax Abatement program, shifting its structure. Under the revised rules, the abatement for new, residential construction no longer offers full tax relief for the first ten years. Instead, the benefit is now front-loaded.

In the first year, property owners receive a 100% tax abatement on the value of improvements. The abatement decreases by 10% each subsequent year until it expires after ten years.

This change was implemented to address concerns that the original abatement disproportionately benefited wealthier areas while depriving the city of tax revenue. By restructuring the program, city officials aimed to maintain its appeal for developers while ensuring a gradual return of tax dollars to the city budget.

Why Developers Are Rushing in West Philadelphia

Developers of rental properties were keen to secure permits under the original abatement structure before the changes took effect in 2022. According to city data, there was a significant uptick in building permit applications in 2021, with many developers choosing to focus on areas like West Philadelphia due to its combination of affordability, proximity to Center City, and expanding institutions like the University of Pennsylvania and Drexel University.

Developers recognized an opportunity to cater to the student demographic by building modern, high-amenity apartments and multifamily housing.

The neighborhood’s extensive public transit network—including access to SEPTA’s Market-Frankford Line, trolley services, and multiple bus routes—makes it highly desirable for renters and homebuyers seeking convenience. This accessibility has encouraged mixed-use developments and transit-oriented projects that align with broader city planning goals.

Compared to other parts of the city, West Philadelphia has historically offered more affordable land. Additionally, West Philadelphia’s zoning laws in certain areas have allowed for higher-density developments. Combined with rezoning initiatives and variances approved by the city, developers have been able to construct larger buildings, further incentivizing projects in the area.

These changes not only reduced the residential abatement value, but the commercial abatement by 10%, making the distinction between residential and commercial property classifications more significant. This change to the commercial abatement is estimated to bring in an additional $83 million in tax revenue for the city.

Under the new rules, mixed-use properties can only qualify for one type of abatement—either residential or commercial. The regulations provide that a mixed-use property “shall be considered residential property . . .if fifty percent (50%) or more of the newly constructed assessable square footage is dedicated to residential use.” The same is true of commercial uses. This is a reversal from the previous practice, where rental residential properties were often treated as commercial due to business tax licensing requirements.

The Impact of New Construction in West Philadelphia

This new wave of new construction in West Philadelphia has left a noticeable mark on the neighborhood. This boom will produce much-needed housing options, with many modern apartment complexes and multifamily buildings addressing some of the city’s overall housing shortages. However, most of these new developments target higher-income renters and professionals, raising valid concerns about affordability and the potential displacement of long-time residents.

Mixed-use developments have added new businesses and amenities, especially along commercial hubs like Baltimore Avenue and 52nd Street. At the same time, the rapid pace of development has strained infrastructure, increasing traffic and putting pressure on public transit and city services. It’s clear that better planning and investment are needed to support this kind of growth.

Long-time residents and community groups worry about the neighborhood losing its unique character, with older buildings being replaced by sleek, modern designs. These concerns have amplified calls for developers to include affordable housing and prioritize community benefits in their plans.

Even though the new tax abatement rules have slowed the pace of construction, projects started before the changes will continue to shape West Philly for years. With institutions like Penn and Drexel expanding, demand for housing and commercial space will remain strong.

What Happens Next?

The momentum created by the pre-2022 surge will likely continue to influence West Philadelphia for years to come. Developers are increasingly integrating commercial and residential spaces, creating vibrant, walkable communities. Additionally, programs such as Low-Income Housing Tax Credits (LIHTC) and partnerships with non-profits could play a significant role in ensuring equitable development.

While the revised abatement reduces short-term tax relief, it promises increased tax revenue for the city in the long run. These funds could be reinvested into public services and infrastructure improvements, benefiting residents across Philadelphia.

As the neighborhood continues to evolve, stakeholders—including developers, policymakers, and community members—must work together to strike a balance between progress and preservation. For residents and investors alike, West Philadelphia remains a dynamic and promising area to watch.

Our advice for owners of West Philly residential investment properties—get a gauge on which of your tenants are staying and which are leaving NOW, so you can start marketing your property ASAP and avoid vacancies in 2025. If you need help finding qualified tenants, contact us here.