City: Luxury apartments will sit empty until developer complies with zoning deal

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One Water Street stands 190 feet at its highest point. The developer, PMC Property Group, wants to renege on the affordable-housing option that allowed it bonus height.

A top Philadelphia zoning official said Monday that tenants will not be allowed to move into a luxurious new Delaware waterfront apartment building unless the developer includes 25 affordable units as promised - or offers a suitable alternative, such as ground-floor retail, public art, or a contribution to the city's Housing Trust Fund.

The developer of One Water Street, PMC Property Group, took the Kenney administration by surprise recently when it asked to be released from an inclusionary housing deal that it cut with the city in 2014. In exchange for a promise to incorporate the below-market rentals into the 250-unit building, the city gave PMC a 48-foot height bonus, allowing the developer to add nearly five floors - and 30 full-priced units - to the design.

Because the apartment house, which towers 190 feet over the Delaware River next to the Ben Franklin Bridge, is virtually finished, the proposed change has put the city in a bind.

The news that PMC was seeking to renege on its affordable housing obligation, first reported on Friday, sparked dozens of outraged comments on local social media sites. Market-rate one-bedroom units would start at $1,795 per month. Subsidized units would go for about half that.

Seeking to clarify the city's position, David Perri, who heads the Department of Licenses and Inspections, said Monday that PMC would be excused from the low-income housing deal only if it could provide other amenities of equal value to compensate for the 48-foot height bonus. Under the waterfront zoning rules, PMC could potentially gain 24 feet for ground-floor retail and 12 feet for public art.

PMC officials declined Monday to discuss their request to alter the bonus agreement, and have given no explanation for their last-minute change of heart.

While such bonus deals are typically arranged before construction starts, a retroactive swap is not illegal. But to make the changes, the developer would have to start the zoning process from scratch.

"They're going to have to apply for a permit all over again," Perri said.

That means One Water Street will have to undergo public hearings with full-dress presentations to the Planning Commission and the Civic Design Review board. While that lengthy process is playing out, Perri said, no certificate of occupancy will be issued for One Water Street. The white-and-orange-plaid building could sit empty for months.

But the decision to abandon the 25 subsidized units for low-income residents has already incensed city's affordable housing advocates.

Beth McConnell, policy director for the Philadelphia Association of Community Development Corporations, said that if the city gives in to PMC's request, "we'll see more developers using this excuse to renege on their commitments."

The high-rise development at Second and Race Streets called the Bridge, scheduled to be completed next year, also received a height bonus for affordable housing.

On Monday, McConnell's group sent a strongly worded letter to Mayor Kenney, urging him not to compromise with PMC unless it agrees to make a substantial payment to the Housing Trust Fund, which provides construction financing for low-income housing. That payment, she suggested, could run as high as $5 million - $200,000 for each of the 25 subsidized units.

One Water Street is not merely the first project constructed on the central Delaware since the city completed its waterfront master plan. It is the first project to take advantage of the inclusionary housing law adopted as part of Nutter-era zoning code reform. The provision was created to encourage the construction of affordable housing in gentrifying neighborhoods.

"The clearly stated objective of the Mixed Income Housing ordinance is to increase the supply of housing available to moderate- or lower-income Philadelphians," the letter from the community development association argued. It noted that PMC would save more than $400,000 a year under the city's 10-year property tax abatement.

"PMC is getting a very good deal from the city and should be held to its promises," the letter argued.

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