# Is it better to have a higher value house on lower value land or vice versa?

I, US citizen with a single family home in Philadelphia, was doing a bit of investigating regarding my property taxes. My home was purchased for \$400k. At the Philadelphia property tax rate of 1.399%, I would expect my annual property taxes to be \$5,596 (based on the calculation). However, my home has a tax abatement, because of Philadelphia Ordinance 1456-a. This abatement means that I only pay taxes on the land value, and not the improvements (ie the property itself). As a result of the abatement, I pay \$2,453 annually (based on my escrow statement). Given these two numbers, it suggests that the land/property values are 44/56%. 1. Am I calculating these right? Who made this assessment? 2. Outside of payment towards taxes, what does this ratio mean for me? Would it be better to be 5/95 land/property? 95/5? Why?

Your wording is confused, land is property, most commonly people talk about improvement or building value to distinguish from land value, but all of it together is your property value.

1. Am I calculating these right? Who made this assessment?

Looks right to me, (2,453/0.01399)/400,000 = 43.8%. In most states it's county level tax assessors that determine land value for property tax purposes.

1. Outside of payment towards taxes, what does this ratio mean for me? Would it be better to be 5/95 land/property? 95/5? Why?

One thing is that your homeowners insurance would be higher if the improvements were a higher percentage of the property value, since that would cover repairing/rebuilding them, so tax and insurance would offset each other to some extent at each end of the spectrum (of course property tax rate could be increased to offset this in any case).

The ratio is not something I've ever paid much attention to in evaluating properties, and in isolation tells you very little outside of property tax (and not all areas base tax on land value). It could have some value when comparing to other houses in the area. If you build a very expensive house on cheap land and hit that 5:95 land to building ratio while your neighbors are all near 50:50 then you'll likely see your value decline and have a hard time selling. In general, I'd say outside of property taxes it's pretty much an irrelevant ratio.

There is a risk this question will be closed as "opinion". We'll see.

The tax as it's written, is trying to influence behavior. In effect, it promotes building big houses on the smallest legal parcel of land. Yes, from a monetary standpoint, you are correct, buy the smallest footprint of land that has a house you wish to live in. Depending on the area, this may mean having neighbors close enough to hear them. In some row houses, you are able to hear their TV through your shared wall. You also might have issues parking on the street if the house doesn't have its own driveway and/or garage. Little or no land, may also mean no backyard for kids to play in, a future pool, or room for a deck to barbeque.

I realize you are really asking after the fact. You already live in the house, and are analyzing your tax situation. In my area, it's full value, and your house/land combo would cost me closer to \$8000/yr in local tax. Yes, your observation is correct, externalities aside, the big house, less land combination is preferred.

You don't need to infer the land assessment from values in your escrow statement. The city property assessment does this already. You can also review if they are accurately applying the abatement or the homestead exemption.

https://property-beta.phila.gov/#/

Look up your address, click on it, and scroll into the valuation history table.