Because developers would be required to reserve 10 percent of their units for low-wage workers, the bill promised a steady supply of good-quality housing for low-income residents. As compensation, developers would get to put up significantly larger buildings than the zoning code normally allows. Because the new, subsidized housing would be scattered throughout the city, the bill offered hope that Philadelphia could preserve a modicum of income diversity, no matter how upscale its once-blighted neighborhoods become. Best of all, the program wouldn’t cost the city a dime.
It turns out that solving Philadelphia’s housing needs is way more complicated than anticipated.
Opposition to the bill has come from all corners, including some nonprofits that specialize in affordable housing. Though it was always expected that market-rate developers would resist the proposal, known as inclusionary housing, the most intense push-back has actually been from neighborhood groups, such as the Crosstown Coalition, who worry — not unreasonably — that the density trade-off would undermine the zoning code. Even Planning Commission director Anne Fadullon, ordinarily a strong supporter of affordable housing, cautioned that the bill could backfire, stifling development for everyone.
Facing a possible defeat, the bill’s main sponsor, Councilwoman Maria Quiñones-Sánchez, called off a planned vote this week in order to try to work out a deal with the bill’s opponents. She scheduled a new vote for Tuesday.
That doesn’t leave much time to come up with a compromise that works for Philadelphia, where many neighborhoods still struggle with blight and depopulation. At this point, the bill is so mangled it is unlikely to achieve its original economic diversity goal or succeed in salting affordable units into high-priced areas. And, even if a few low-price units do get built in the fancier neighborhoods, they will probably be too expensive for really poor people, who constantly teeter on the precipice of homelessness.
Whatever happens at Monday’s vote, Quiñones-Sánchez’s effort already has produced one significant result: It has put affordable housing on Philadelphia’s radar. Virtually every witness who testified at this week’s hearing — developers included — agreed that Philadelphia needs to produce more housing for the kind of workers who keep the city humming: waitresses, janitors, schoolteachers, bus drivers. Maybe because wages have been stagnant for so long, both in Philadelphia and nationally, it seems affordable housing has become a middle-class issue.
So, if people think Quiñones-Sánchez has the right idea but the wrong approach, then what would make affordable housing work in Philadelphia? To answer that question, I surveyed a range of housing specialists for alternatives to inclusionary zoning. Here are their best suggestions.
1) Revise the 10-year property tax abatement. What was most astonishing about this week’s five-hour hearing on Quiñones-Sánchez’s bill was how infrequently people acknowledged the elephant in the room: the property tax abatement. The lucrative incentive has fueled the current housing boom and is a key reason low-income people are being displaced from gentrifying neighborhoods like Point Breeze and South Kensington. While they struggle, the abatement is subsidizing more and more luxury units. Just recently, the city approved abatements for multimillion-dollar condos at One Riverside and 500 Walnut, not to mention developer Bart Blatstein’s new Rittenhouse Square mansion.
One way the city could create a fund for affordable housing is to impose a cap on the abatement, let’s say $500,000 for discussion’s sake. The additional taxes collected on the more expensive homes would be set aside for programs that help low-income homeowners pay for costly repairs to keep their homes livable. As Fadullon noted at this week’s hearing, “the most affordable house is one people are already living in.”
Advantage: It makes the abatement fairer for everyone.
Disadvantage: The city would be tempted to spend the extra revenue on other pressing needs.
2) Impact fees. Because the affordable housing bill compensates developers by allowing more density, some fear the proposal would lead to massively scaled buildings that would ruin the character of rowhouse neighborhoods. The city could take zoning out of the conversation by levying a small impact fee on all new construction, both residential and commercial. If the fee were a modest $2 per square foot, the Philadelphia Coalition for Affordable Communities estimates the city could raise $6.8 million annually for subsidized housing and repair programs. Some advocates jokingly refer to it as a tax on the tax abatement.
Advantage: Unlike the “in lieu” fees that developers can pay to get out of their inclusionary housing obligations, these would be decoupled from zoning and have no effect on neighborhoods. It’s not a zoning change, it’s a tax.
Disadvantage: It’s a tax.
3) Eliminate parking requirements for affordable housing. Given that many low-income people can barely afford housing, it’s frustrating that the city still requires parking in subsidized housing projects (or any housing project, for that matter). By getting rid of the parking requirement, affordable housing developers could reduce costs by 10 percent to 15 percent and build more units. Ironically, Council President Darrell Clarke is pushing a bill right now to double parking requirements in some areas, a move that runs counter to the stated goal of creating more low-priced housing.
Advantage: Fewer garage-fronted rowhouses. Less wasted land.
Disadvantage: Old-school Philadelphia will complain about the competition for on-street parking.
4) Increase the transfer tax. Unlike some other cities, Philadelphia is a city of homeowners. Yet it also suffers from a high poverty rate, especially among the elderly. A sudden emergency, like a bad heater or a leaky roof, can be disastrous. To help keep poor homeowners in their homes, Clarke introduced a measure last year to beef up the city’s fund for critical home repairs. It raised the realty transfer tax by 0.1 percent.
John Landis, who teaches city planning at the University of Pennsylvania, said the city could easily increase the transfer tax another notch to raise money for affordable housing.
Advantage: Because the city would collect the payment at settlement, when sellers are reaping big gains, Landis argues the pain would be minimal. Although Philadelphia’s transfer tax is high in comparison to other cities, he argues the actual sale prices are low.
Disadvantage: It’s a tax. A mechanism would be needed to keep the city from diverting the money to other purposes.
5) Make inclusionary housing a requirement for any residential project built on property sold by the city. This sounds like a no-brainer, as the city can set the price to account for the extra cost of building subsidized units. Yet when city unloaded several dozen shuttered schools in 2014, it imposed no conditions on buyers, even though many planned to turn the old schools into apartment buildings. Given that vast sums of public money had been invested in those schools — like the 14-acre site where University City High School stood — it seems reasonable to require affordable units in such cases.
Advantages: More units would be produced.
Disadvantages: The requirement would reduce the sale price. It would also be hard to attract tenants in some neighborhoods.
Maybe the best solution, however, would be to delay a decision for now. The Planning Commission is about to hire a consultant to study the city’s housing needs. Once that work is done, we should have a lot more ideas about how to ensure that Philadelphia remains an economically diverse city as its old neighborhoods change and gentrify.