Philadelphia’s housing market is red-hot. Building permits issued from 2013 through 2016 exceeded the previous seven years combined, and thousands of new rental apartments have been added downtown in the last two years. A “sellers’ market” in for-sale homes has meant fast-rising prices, and rents are soaring, too, having increased 13 percent from September 2016 to August 2017. This new growth represents a historic turnaround for the city in just a few years.
But the rising tide of prosperity is not lifting up all families. Instead, it has helped to make life even more difficult for the city’s low-income and working-class residents. As prices go up, people are priced out of neighborhoods and economic segregation grows.
There is a way to help. At least 500 diverse municipalities – the nation’s biggest cities among them, as well as small towns, suburban communities, and entire counties – have adopted mixed income housing programs as one way to create affordable housing in market rate developments. Research shows that these policies, also known as inclusionary zoning, have had little or no impact on housing starts, rents or home prices, and have provided low- and moderate-income families with opportunities to live in great neighborhoods. Philadelphia has an opportunity to create a similar program if Bill No. 170678 passes City Council and is signed by Mayor Jim Kenney.
The legislation – introduced in June by Councilwoman Maria Quiñones-Sánchez, and co-sponsored by Council President Darrell Clark and Council members Jannie Blackwell and Kenyatta Johnson – would require developers to set aside one of 10 units in a project for renters or buyers with incomes below 50 – 80 percent of the area median income. Amendments offered to the bill in November restrict its applicability to zoning districts that allow for multi-family properties and commercial/residential mixed use, primarily located in Center City, along the Delaware River waterfront, portions of North and South Broad Streets, portions of University City on or near Market Street, and other scattered parcels throughout the city.
To offset developers’ added costs, they could take advantage of offsets such as “density bonuses,” allowing them to build more housing on the sites than current zoning allows. On top of that, developers already benefit from a very generous ten-year property tax abatement. Mixed income housing is one way developers can begin to offer a return on investment to Philadelphians who have been footing the bill on that subsidy for almost two decades.
Developers also could choose to fulfill the law’s requirements by making a payment in lieu to the Philadelphia Housing Trust Fund, which provides grants to non-profit organizations to prevent homelessness, repair existing affordable homes or build new affordable homes. The Housing Trust Fund primarily benefits the lowest income Philadelphians in neighborhoods across the city.
The lack of affordable housing in the city is a crisis: From 2000 to 2014, the city lost 23,000 affordable ($750-a-month or lower) rental units and is at risk of losing thousands more in the near future. In 2016, more than half of Philly renters paid too much of their income (more than 30 percent) on rent. Right now, about 85,000 extremely low-income households are paying at least 50 percent of their incomes for shelter.
When families spend a too-large percentage of income on housing, they don’t have enough for food, clothing, transportation, child and health care. When living that close to the economic edge, just one emergency can result in missed rent or mortgage payments, which in turn can lead to eviction or foreclosure – and homelessness. The lack of affordable housing is a major contributing factor to intergenerational poverty, and Philadelphia continues to have the highest poverty rate of the nation’s ten largest cities.
And affordable housing, when it exists, often is concentrated in low-income areas with fewer amenities. This economic segregation (which often correlates with racial and ethnic segregation) makes it even harder to break out of the cycle of poverty. But research does show that when low-income kids attend schools in mixed-income neighborhoods, they do better in reading and math. Poor kids that grow up in mixed-income communities also have a greater chance of economic mobility, according to recent research.
Many of those struggling to afford decent housing in the city are the same people (or their descendants) who suffered from unfair, racially-influenced housing policies of the past like the redlining of neighborhoods. In addition, urban renewal programs demolished whole neighborhoods, turning the land over at low cost to developers to build hotels, shopping centers, and higher-end housing and new highways. In the process, thousands of people were uprooted. Philadelphia must correct for these mistakes by looking at how we’re developing the city now. We simply can’t have an equitable city unless we embrace equitable development policies.
If a mixed income housing program similar to the amended Bill No. 170678 had been in place in Philadelphia from January 2014 through August 2017, 355 affordable homes could have been created or in-lieu fees as high as $79 million would have been paid to the Philadelphia Housing Trust Fund. That obviously is inadequate to the need, but it’s only one of many tools Philadelphia needs to create and preserve affordable homes.
The bill isn’t perfect and represents significant compromise. By restricting applicability to certain zoning districts, neighborhoods that are seeing significant high-priced development where neighbors face displacement are not covered. Developers could also avoid the requirements by simply building in a zoning district not covered by the bill. Council must pay attention to those concerns, and upon further study of neighborhood economic conditions, can adjust the policy over time.
Some have argued that Philadelphia isn’t like other cities that have such policies that have much higher rents and sales prices. They are correct; Philadelphia isn’t like San Francisco, New York City, or Washington D.C., and we shouldn’t want to be. Rather than waiting until our real estate market is so expensive that you have to be wealthy to live here, we can act now to build in affordability. As Philadelphia grows, we should grow for all Philadelphians.