• Learn about the conditions that led to Frank Furness' most incredible masterworks, including the Pennsylvania Academy of the Fine Arts seen here, on Wednesday.
      Learn about the conditions that led to Frank Furness' most incredible masterworks, including the Pennsylvania Academy of the Fine Arts seen here, on Wednesday.

Adopt Housing Trust Strategy to Preserve Neighborhood Balance

Community Contributor and former Philadelphia Housing Director John Kromer offers some ideas about how Philly can preserve housing affordability for low- and moderate-income families in ways other than inclusionary requirements for new developments and subsidy-heavy construction projects.


Debates about gentrification and inclusionary housing in Philadelphia began in the mid-20th century, during years in which the city was losing population and neighborhood real estate markets were steadily weakening. At that time, the discussion was kind of academic. Back then, the city’s biggest problem wasn’t gentrification, it was gentrification’s opposite—depopulation and economic disinvestment.

A lot has changed in Philadelphia since then. Construction on “ultra-luxury” condos is scheduled to begin in Center City next year, and, according to Fels Institute of Government economist Kevin Gillen’s most recent analysis of the city’s sales housing market, the average house value in Philadelphia increased by 6.3 percent citywide, with the highest increase in North Philadelphia (8.6 percent). So now it’s time to move from talk to action—to decide how best to implement strategies for creating and sustaining communities that offer a diversity of housing types for households at a range of income levels.

Council President Darrell Clarke has proposed a “2000 New Affordable Housing Units Initiative” (up from the 1,500-unit goal announced in March) through which new sales and rental housing units would be produced in “Workforce Housing Development Opportunity Zones.” Some affordable housing advocates support inclusionary housing policies that would require certain “market rate” housing ventures to contain a number of sales or rental units priced to be affordable to low and moderate-income families.

But neither of these approaches will produce the outcomes we need. Constructing large numbers of publicly subsidized units, at a cost of a quarter of a million dollars and up, is too costly. Council President Clarke’s approach would work well in Detroit, which is receiving substantial federal and state funding awards that aren’t available to Philadelphia.

Mandating the inclusion of lower-priced units in some market-rate development ventures is worth exploring, but this approach won’t produce a critical mass of affordable housing and wouldn’t be sustainable without the addition of annual subsidies to offset rising housing expenses in the downtown and riverside locations where much of this inclusionary housing would probably be built. The housing advocates’ approach would work well—and has worked--in cities such as Boston, New York, and San Francisco, that are far wealthier and have much stronger real estate markets than Philadelphia has or can achieve in the foreseeable future.

The approach that would work best for Philadelphia would be to use available resources to support the preservation and improvement of existing housing that’s currently occupied by low and moderate-income households in “changing” neighborhoods where property values are rising. This approach would begin with the creation of an independent, city-supported (but not government-controlled) entity—a housing trust--that would focus on two activities within a neighborhood where property values are increasing rapidly.

  • Using straw buyers, buy or get options to purchase any available apartment buildings with existing low/moderate-income tenancy. Retain ownership and place them under contract with a reliable property management firm.
  • Working in coordination with community-based organizations and housing counseling agencies, offer owners of single-family homes reverse mortgage financing or options to purchase that would take effect when each owner passed away or decided to move. In addition to securing properties that would add to the housing trust’s inventory, this approach would provide homeowners with funds that could be used for home repairs or other expenses associated with remaining in place in a changing neighborhood. Participation in these programs would be voluntary, and reverse mortgages would only be offered to households for which this financing is appropriate.

The housing trust would be different from a community land trust, which leases land to parties that want to occupy, maintain, and/or develop it. Instead, the housing trust would own both land and buildings and would sell some of the properties it acquired—single-family row houses, for example--with a provision for reversion of title back to the housing trust. In this way, an existing affordable housing base could be stabilized and reinforced indefinitely.

Because the areas that are most influenced by nearby real estate investment are relatively small, it would not be difficult to communicate with rental property owners and homeowner-occupants on a one-on-one basis in order to promote these initiatives over a period of years. For example, the Mantua/Powelton neighborhood areas in which housing prices are likely to be affected by the implementation of Drexel University’s master plan are relatively compact. Drexel, the Philadelphia Local Initiatives Support Corporation, People’s Emergency Center, Rebuilding Together Philadelphia, and other parties are already participating, individually and together, in various assistance programs within these areas. A housing trust approach would be consistent with their goals in many respects.

And, once it’s up and running, the Philadelphia Land Bank could support this approach by acquiring properties listed for Sheriff Sale that are located in the target area where the housing trust is active, then conveying them to the housing trust after clearing the title of liens and other encumbrances.

Implementing this approach would cost money—but the overall budget would be much smaller than the amount needed to implement, for example, Council President Clarke’s plan for producing new affordable units in “Opportunity Zones.” The cost per affordable unit associated with the housing trust approach would be orders-of-magnitude smaller than the cost per unit associated with the “Opportunity Zone” approach.

If an inclusionary housing mandate were to be adopted in Philadelphia, then it would make sense to offer some downtown and riverfront developers (but not all developers) the option of contributing to the housing trust rather than consistently requiring set-asides of affordable units in all major market-rate ventures.  Neighborhoods such as Mantua/Powelton have access to job centers, service resources, and social networks that is at least as good—and, in some cases better--than comparable resources available in the vicinity of some of the high-end developments now being planned or produced.

Much of the debate about gentrification is based on “lessons learned” from past experiences in which residents were displaced from their homes after property values rose to a level that made affordable housing strategies infeasible. If we can get organized now, we can avoid replicating past failures and create strong communities in neighborhoods that have not yet reached the “tipping point,” beyond which interventions become prohibitively expensive or politically unworkable.


 

Got something to say? Have bright ideas or insights to share? You too can be a Community ContributorDrop us a line at EOTS@planphilly.com with your ideas for a guest post.

About the author

John Kromer, Senior Consultant, Fels Institute of Government at University of Pennsylvania

John Kromer's research and work focuses on strategic planning and policy development for disinvested metropolitan-area communities. He is an adjunct faculty member at the Fels where he teaches a course on “The Politics of Housing and Urban Development.” As the City of Philadelphia’s Director of Housing from 1992 to 2001, Kromer organized and implemented a program for the rebuilding of Lower North Philadelphia, where major development activity had not occurred since the 1960s. He also supervised the creation of a citywide network of nonprofit housing counseling agencies and financed innovative homeless and special-needs housing ventures. Subsequently as a consultant, Kromer has participated in the design and implementation of revitalization plans for the cities of Allentown, Reading, and York, Pennsylvania and Camden, New Jersey.He is the author of "Fixing Broken Cities: The Implementation of Urban Development Strategies."


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