Updated: Thursday, June 2, 2016, 12:51 PM
One Water Street, the first project built under Philadelphia's Delaware waterfront master plan, isn't quite finished, but the luxury apartment house already towers over Columbus Boulevard. At 16 stories, it promises residents spectacular views of the river, from the Ben Franklin Bridge to the sailboats bobbing in the marina next to Morgan's Pier. One-bedroom apartments are listing for an impressive $1,875 a month.
One Water owes its statuesque proportions and fabulous panorama to a new provision in Philadelphia's zoning code that was intended to boost the supply of affordable housing in fast-gentrifying neighborhoods. In exchange for making 25 units available at subsidized rents, the developer, PMC Property Group, was allowed to add 48 feet - roughly five stories - to the height of the building.
But as One Water prepares to welcome its first tenants, it seems unlikely any low-income renters will ever get to enjoy the stunning river views. The developer wants out of the deal.
The problem, of course, is that One Water Street can't exactly return the five extra floors it's already built.
PMC's executive vice president, Jonathan Stavin, declined to discuss the company's decision to renege on its affordable-housing obligation, but two city officials confirmed the builder was in talks to substitute another public amenity in place of the subsidized units. Among the proposals: public art.
Talk about a bait and switch.
This wasn't how things were supposed to work when Philadelphia introduced an affordable-housing bonus into the zoning code in 2012. At the time, the provision, officially known as inclusionary zoning, was hailed by city officials as a progressive, market-based strategy to help booming neighborhoods retain a degree of income diversity. One Water Street was the first to sign up for the bonus.
The approach may be new to Philadelphia, but the nation's reviving cities have been turning to inclusionary zoning as a way to cushion the impact of skyrocketing rents. Cities like San Francisco and Boston, with stratospheric housing costs, have even moved to make inclusionary zoning mandatory for all large apartment projects. New York just approved set-asides of 20 percent to 30 percent. At a time when the federal government has virtually cut funding to city housing authorities, inclusionary zoning is one of the few means left to pay for affordable housing.
Philadelphia's rents aren't nearly as high as they are in those cities, so officials here decided to make the inclusionary housing voluntary, and to offer compensation. Developers who offer subsidized units can qualify for a substantial height bonus.
On paper, the One Water Street bonus looked like a perfect test case. PMC agreed to rent 25 apartments at below-market rates. The city, in turn, let PMC construct a taller building - with space for 30 more full-priced units. That way, the developer came out ahead in the bargain, with a total of 250 units.
Though 25 subsidized units aren't going to solve Philadelphia's housing problems, they did promise to inject a bit of economic diversity into a hot real estate market. Instead of paying $1,875 a month for a one-bedroom unit at One Water, a qualified renter - say, a single person earning less than $32,000 a year - could lease the apartment for $940.
But that didn't count on having the developer build and balk.
So what happens now?
PMC is scrambling to come up with another bonus option to justify One Water's extra 48 feet. According to Karen Guss, a spokeswoman for the Department of Licenses and Inspections, PMC will have to start the zoning process from scratch. That means the changes will have to be vetted by the Planning Commission and Civic Design Review.
"I'm a bit concerned about doing the swap after the fact, after the building is essentially built," said Gary Jastrzab, head of the city planning department.
That's a nice way of saying zoning One Water retroactively won't be easy. In addition to the 48-foot bonus for affordable housing, PMC received a 24-foot height bonus for providing public open space, bringing One Water's total height to 190 feet.
Of course, if you visit the site, you might be hard-pressed to identify the "public open space" that PMC created to satisfy the bonus requirement. Is it the planted berm in front of the building? The generous driveway? Or maybe the row of concrete benches along Columbus Boulevard? Whichever it is, it's a pretty stingy contribution to the public realm.
Jastrzab suggested one way PMC could make up for the 25 affordable units is by retrofitting One Water to include ground-floor retail. The irony is that PMC was excused the first time around from that obligation, a key requirement of the Delaware waterfront master plan, because the city felt the market was still too weak to support retail uses on the river.
Whatever happens, the city needs to keep a sharp eye on PMC's next project, a massive overbuild for the former Marketplace Design Center on the Schuylkill. Through the use of various zoning bonuses, PMC claims it can legally increase the project's size by 20 percent, to 860,000 square feet. Let's hope someone checks the math.
Gaming the zoning system, unfortunately, is a time-honored practice in Philadelphia. Dockside, an apartment building a few blocks south of Penn's Landing, also attempted to wriggle out of its obligations under the Percent for Art program. It got away with building a reduced-scale version of the art installation, and the piece has never looked quite right.
The excuse we always hear is that Philadelphia's construction costs far exceed the rents developers can charge. But with the median rent now topping $1,250 for a one-bedroom apartment - up 3.1 percent over last year - how much longer can the city's developers cry that they are the ones too poor to follow the rules?