What drives city development: A "chicken-egg" examination

In the space tagged either "The Build" or "The Art of the Deal" in this section, I try to strike a balance between market-rate and affordable-housing developments in the city and the suburbs.

I find the projects that are rising in the "edge" neighborhoods the most interesting ones.

Because I have been writing about real estate here since 1989, I have seen these neighborhoods in various stages of decline and development.

Although you might have issues with some of the ramifications of development, it's safe to say that most of us prefer it to continued decline.

On June 26, "The Build" focused on Eastern Lofts, a project at the northern edge of Brewerytown that turned a former American Railway Express garage into 37 apartments, an early-child-care center, offices, and a coffee shop.

I talked to the developer, Greg Reaves of Mosaic Development Partners, about Eastern Lofts and asked him whether the influx of for-profit developers was the catalyst for his project.

Prompting my question was the fact that only a couple weeks before, I'd written about St. Francis Villa in East Kensington, which will provide affordable one-bedroom apartments to 40 seniors, with community rooms, laundry facilities, and an outdoor gardening area.

In the same neighborhood, just a quick walk from the York-Dauphin El stop, there are $600,000 townhouses sprouting like wildflowers among the weed-filled vacant lots.

St. Francis Villa is a response to the declining fortunes of the elderly in these former industrial neighborhoods, as well as encroaching development. In the case of Eastern Lofts, Reaves said, "we think we are the catalyst because we are at the edge of Brewerytown, and since we started there are three market-rate developers behind us, working on warehouses. "You look to see what others are doing and then assess the risk," he said.

For the longest time, remember, there was little market-rate housing under construction in these neighborhoods, let alone in the city outside of Chestnut Hill and Center City. I turned first to Kevin Gillen, chief economist for Meyers Research and senior research fellow at Drexel University's Lindy Institute for Urban Innovation, for an answer to the "chicken or egg" question.

"It's rather a tautology to say that development in these neighborhoods wouldn't be happening if it weren't for the developments that developers are developing," Gillen said.

"But seriously, folks," he added, "the two things that I think are driving investment to more peripheral neighborhoods are the increasing unaffordability of Center City and the 10-year tax abatement.

"Rents are up sharply in Center City, and this is driving demand outward from downtown to seek more affordable options," Gillen said.

Meanwhile, on the supply side, the tax abatement gives a break to promote investment in these neighborhoods that both improves and increases the housing stock, he said.

Westrum Development Co. has been in Brewerytown since the housing boom. These days, it is building multifamily rental rather than for-sale properties.

"Today's consumer predominantly wants a more urban experience, whether in the city or in inner-ring suburbs," John Westrum said. "Affordability is still a driver, while technology has made people feel safer, and as developers we will go where our customers are willing to go, and where we can find a competitive price advantage.

"The more that abandoned and derelict properties are taken away from city responsibility, the more the tax revenue of the city can be used for intended purposes," Westrum said.

aheavens@phillynews.com
215-854-2472
@alheavens

Real Estate Tools
Looking for a new home? Search Philadelphia real estate »
Browse Recent Home Sales »
Compare Philadelphia mortgage rates »