Policy - LOOP

Introduction

In 2024, the Pennsylvania General Assembly passed the Longtime Owner-Occupant Property Tax Relief Act, which allows municipal governments in Allegheny County to provide an exemption or deferral if homeowners experience property tax increases due to the growing value of their home, if that homeowner has owned and lived in the home a long enough period of time (usually 10 years).

The motivation at the time was that homeowners in certain neighborhoods, primarily in the City of Pittsburgh, were experiencing rapidly growing home values as the city was revitalizing. While this is overall a financial boon for a homeowner, the owner may theoretically experience a shock increase in their tax bill when the home is reassessed. If it did occur and the homeowner does not have the income to afford the increased tax bill, they may be financially forced to sell their home sooner than they would have otherwise, potentially leading to neighborhood displacement.

Allegheny County Councilmember Dan Gryzbek introduced legislation for the county’s version of Long-time Owner Occupant Property Tax Relief Program (‘LOOP’), which was recently approved by county council. Legislation has been introduced in the city of Pittsburgh to implement the city’s version of Long-time Owner Occupant Property Tax Relief Program (‘LOOP’), which would permit certain homeowners to claim an exemption. Additionally, the Pittsburgh Public School District may also consider participating in the future with their own similar LOOP programs. 

Reassessments

While we are overall quite favorable towards using tax policy to help improve housing in Pittsburgh, LOOP is a program that we believe must be treated with care. Before dealing with the implications of LOOP, however, we should set some basic understandings about what happens during a reassessment. 

Let’s address the most common misconception up front: just because your home increases in value during a reassessment does not mean your property taxes will go up. The vast majority of homes in Pittsburgh have increased in value dramatically since the last reassessment in 2012, with the median home likely being worth roughly double what it was then. Under state law, when a reassessment occurs, the property tax rate (called the millage rate) must be automatically adjusted so that the overall amount of property taxes collected remains the same. So while you might expect your property taxes to double if your home value doubles, in reality, if everyone’s home doubles, then your taxes will stay the same. In order for a homeowner to experience a shock property tax increase, their home value needs to have grown even more dramatically than everyone else's. 

So if we now return to the purpose of LOOP, we can now see that it isn’t simply about people’s homes being more valuable, but rather about homes whose value has increased dramatically more than that of their neighbors. This is a rarer circumstance, and is likely confined to just a few neighborhoods that have become disproportionately much more popular.

Our Recommendation

At its crux, we believe that the most important element of this program is to make it a deferral rather than an exemption. While we’re sympathetic to the goal of the program - to ensure owner-occupants in neighborhoods experiencing increases in value don’t get displaced - we must also acknowledge that these owner-occupants also own an extremely valuable property, for which they might one day sell and receive a windfall. This is a great outcome for the homeowner - they chose to live in an area that rapidly increased in value, and now own a home that is far more valuable than what they originally paid! If we made LOOP a tax exemption we would be providing substantial property tax relief to these homeowners, which then everyone else’s property taxes will need to rise to cover the difference. It seems hard to justify that these homeowners in particular should be receiving some kind of subsidy. 

That being said, there is a legitimate problem we believe LOOP is trying to address: when a homeowner is in this situation, but is cash poor. As an example, if there is a couple who are retired and on fixed income, the fact that they now live in a valuable home doesn’t make paying the increased property taxes any easier. Presumably in recognition of this, the legislation introduced by the city has an Area Median Income (AMI) requirement of 120% for homeowners to participate. With a tax deferral, it resolves this core problem of residents being unable to pay their taxes before the home is sold, while not handing a huge subsidy to a family that is more likely than not to come out very well off in the end. When the home is eventually sold, the owner now has all of the cash necessary to pay these property taxes and still gets to walk away with a substantial windfall, and everyone else isn’t left holding the bag.