FOR IMMEDIATE RELEASE
New report examines housing development in Greater Center City, outlines potential challenges to Philadelphia’s still limited revival and proposes solutions to create more affordable housing
PHILADELPHIA (March 8, 2018) – Greater Center City experienced another record-setting year in 2017 with the construction of 2,650 new apartments, single-family homes and condominiums with developments more widely dispersed throughout the city’s extended neighborhoods than in previous years.
But in a report entitled Housing Development in Perspective, the Center City District suggests that Philadelphia not exaggerate or over-react to the impact of these trends by making major policy changes that could retard development in a city that is still recovering from job and population loss in many neighborhoods. With many residents facing the challenge of housing affordability, the report suggests that rather than counter-pose the interests of market rate and affordable housing, Philadelphia should align them in a way which encourages and harnesses the positive market trends in Center City and University City and commits the City’s share of revenues from expiring tax abatement to renovate and support affordable housing.
“By Philadelphia standards we are experiencing a housing boom. Nationally, we are far back in the pack as other cities are adding far more jobs and residents. Given the diminishing redistributionist function of the federal government, Philadelphia increasingly has to depend locally on growing our tax base to fund public services. But the city is competing to attract residents, workers, and businesses with surrounding counties that all have lower wage and business taxes,” said Center City District President and CEO Paul R. Levy. “We should remain cognizant of the fragility of the current revival, how limited our growth is compared to peer cities, and not add further costs to the construction process, especially since we may be approaching the end of an economic cycle.”
Using data from city, state, federal sources along with extensive, original research, the report notes that after the passage of the 10-year tax abatement Philadelphia expanded from a 3% share of regional housing permits in the early 1990s to a 25% share from 2010 to 2017 with Greater Center City counting for more than half of all new units in the city. Since 2000, 23,178 new residential units have been added in Greater Center City (defined as the area between the two rivers and from Girard Avenue to Tasker Street).
Seventy-one percent of the 2,650 units of housing that were completed in 2017 were rentals, single-family housing constituted 19.6%, and condominiums jumped to 10% of new units from just 5% one year before. Unlike 2016, which saw a significant rise in new apartment construction concentrated in the downtown core, major developments were more widely dispersed in 2017 across Center City’s extended neighborhoods.
Throughout Greater Center City, large scale projects, as well as in-fill housing, are continuing at a strong pace, with 5,151 units under construction and scheduled for completion in the next two years. As a result of the expanded supply, rents have moderated across nearly all the neighborhoods of Greater Center City. By contrast, the number of existing and new single family homes and condominiums that sold in 2017 rose by 6%, their average price climbed 12% to $512,691 and the number of days from listing to sale dropped by 7%.
Beyond the good news in Greater Center City, University City and the Navy Yard, the balance of Philadelphia has continued to lose jobs at the rate of 0.4% per year since 2005 and many neighborhoods are still losing residents who follow their jobs to surrounding suburbs. While 25% of the working residents of each neighborhood outside of Greater Center City commute to work downtown, every day, another 211,000 Philadelphia residents (40% of the workforce from these communities) reverse commute to jobs located in the suburbs. Philadelphia’s wage tax is structured so that regardless of where a city resident works, their employer is obligated to withhold the full city wage tax. Thus, the commute to the suburbs carries with it an incentive to move to the suburbs.
As a counterpoint to the success stories of downtown and University City, 62,000 more residents of city neighborhoods decamped for the suburbs since 2010 than moved in. Twice as many made the move to Montgomery County as came our way. This weakens demand for housing in many neighborhoods and has resulted in continuing population decline in many areas of the city
In neighborhoods with declining population, there is often an ample supply of housing that is affordable, but in need of repairs. The problem is that so many remaining Philadelphia residents have inadequate incomes to support the costs of renovating and occupying that housing either as owners or renters. Philadelphia also experienced a reduction of nearly 23,000 affordable units citywide between 2000 and 2014 due to market-driven renovation, the removal of deteriorated public housing units through the HOPE VI program, as well as continuing federal cutbacks.
To address this problem, Philadelphia must focus long-term on raising neighborhood incomes through citywide job growth, improved education and job training. For the short-term, the most feasible strategies are preserving existing affordable housing units in and adjacent to Greater Center City and not placing additional constraints on the construction of new housing. For example, a proposed mandatory inclusionary zoning provision introduced in City Council could have the opposite effect of its intention, making construction more expensive and limiting the creation of new housing.
Philadelphia’s 10-year tax abatement has become another flashpoint for debates about housing affordability. Opponents of the abatement argue that too much revenue is being given away; proponents insist that curtailing the abatement would significantly slow construction of not only higher priced housing downtown, but moderate and lower income developments citywide.
Ten-year abatements for 10,672 properties expired between 2010 and 2017, cumulatively adding $4.8 billion in value to the property tax base, translating to an additional $31 million in real estate tax revenue to the city and $37 million to the School District of Philadelphia. Based on current rates, $186 million in new revenues from formerly abated properties will flow to the city and school district by 2026.
“Our national politics are consumed by extremes - a tendency to pit one group against another. Philadelphia needs to avoid falling into that trap and seek far more pragmatic solutions that work locally. Suppose the city decided to harness some or all of this revenue from expiring abatements and direct it to affordable housing,” Levy added. “With a simple budgeting decision, rather than a controversial new tax, a curtailment of the abatement, or a new zoning code requirement, a revenue stream could be created to extend expiring rental subsidies and create more affordable housing. Instead of pitting the interests of market rate development against the needs of lower income residents, this would align the two.”
To see the 20-page report, accompanied by a wealth of statistics, charts and graphics, visit, click here.
The Center City District, a private-sector organization dedicated to making Center City Philadelphia clean, safe and attractive, is committed to maintaining Center City’s competitive edge as a regional employment center, a quality place to live, and a premier regional destination for dining, shopping and cultural attractions. Find us at www.centercityphila.org and on Facebook and Twitter.